US whiskey market ‘easier’ to enter than Scotch

The chief executive of the Scotch Whisky Association (SWA) has said that growth in the American whiskey industry started “sooner” and has “gone much further” compared to Scotch whisky.

David Frost, CEO of the SWA, said its “not a question of ‘either / or'” with regards to American whiskey and Scotch

Speaking at the Whiskies and Spirits Conference in New York last week, David Frost, chief executive of the SWA, noted that six new Scotch whisky distilleries opened last year, with plans for an additional 30 in the coming years, while new producers in the US numbered “in the hundreds”.

Frost said it is “certainly possible” that difference in regulation may have made it “easier for new entrants to get into the industry in the US”, since rules around the production of Scotch are “famously strict”.

He noted that US definitions of whiskey permit “a little more experimentation” in the industry, while straight American whiskies must be aged for two years, compared to three years for Scotch.

However, Frost also claims that “critical mass” helps new entrants establish themselves in the US, since its domestic market – at £2bn – is twice as big as the UK’s for Scotch whisky.

“Moreover, the tax burden is significantly lower,” he said. “In the UK, nearly 80% of the price of a bottle of Scotch Whisky is taxation, while in the US it is 54%,” added Forst.

“The SWA argues that the heavy excise duty on Scotch whisky is part of the reason why the domestic market has shrunk consistently over the last 20 years.”

For Frost, Scotch whisky’s “rigour in definition” has helped build the industry’s market, combat fake products, develop different styles and contributed to an “unrivalled reputation for quality”.

“There is room in the global market for whisky for different products to evolve in slightly different ways,” he said. “There are many great whisky industries and this is not an ‘either / or’ question.

“We welcome the buzz around global whisky as a category and we have certainly seen the interest and enthusiasm this is generating. We are confident that Scotch whisky will ride this boom, but equally that there is room for others to do so too.”

Recently, Frost said the SWA was “concerned” over the growth of “geopolitical risk”, predominantly due to the consequences of the crisis in Russia and the Ukraine.