The Scotch whisky industry finally returned to growth in 2016 – showing producers have managed to navigate the stormy seas of economic volatility, political strife and cross-category competition.

Scotch whisky’s global export volume grew by 3.1% to 533 million bottles in H1 2016

According to HMRC figures released by the Scotch Whisky Association (SWA), Scotch whisky’s global export volume grew by 3.1% to 533 million bottles in H1 2016 – the first time the category has recorded growth since H1 2013. Value shipments dropped by 1% to £1.70 billion, but industry players hailed an improved performance.

“In F16 (year ended 30 June 2016), performance of our Scotch portfolio improved significantly, moving from a 5% decline last year to a bit better than flat this year,” said Nick Morgan, head of whisky outreach at the world’s largest Scotch producer, Diageo. “Net sales improved in the majority of regions.”

However, Chivas Brothers, the Scotch whisky unit of Pernod Ricard, continued to struggle. The Glenlivet and Ballantine’s maker was hit by a double-digit loss for its Scotch portfolio in China in the first half of this year, with sales of blend Chivas Regal falling 4% globally. Alexandre Ricard, CEO of the group, had previously expressed a need to build a more resilient market for Scotch whisky in Asia.

Fresh look

Anecdotal evidence suggests that consumer interest in innovative Scotch offerings continued to flourish in 2016. “[We] have become known for our rare and vintage categories, but we are also seeing real demand for our Black Bull blends because they are 100 proof, 50% malt and 50% grain, and are hitting a real sweet spot with consumers,” said Moji Shand, CEO of Scotch whisky merchant Duncan Taylor, which experienced “one of its best years” in 2016.

This year, the industry also saw the launch of Compass Box’s Scotch Whisky Transparency campaign, which challenged European Union regulations of the sector and called for producers to be given the “freedom to offer information on the age of every component used in their whiskies”.

Jonathan Gibson, head of marketing for the company, said that while Compass Box found difficulty “converting consumer interest into industry momentum”, it had discovered an “imperfect solution” to its transparency grievances.

Looking ahead

Despite its perceived shortcomings, Gibson is “very optimistic” for Scotch whisky in 2017, yet predicts ongoing competition from world whisky categories.

“[Scotch] whisky has a long way to go to be more competitive with American, Japanese and the better of the burgeoning world whiskies,” Gibson said.

The category will also face challenges after the UK’s exit from the EU, the process of which is set to begin by March 2017. Scotch whisky’s regulations are largely embedded in EU law and Brexit generates uncertainty for the sector, which could experience tariff surges in markets such as Korea, South Africa and Colombia.

Click through the following pages to discover which brands and trends we have predicted will dominate the Scotch whisky sector in 2017.

BenRiach Distillery Company

Brown-Forman, producer of Jack Daniel’s, re-entered the Scotch whisky market with the acquisition of The BenRiach Distillery Company and its three Scotch brands – Benriach, Glendronach and Glenglassaugh – for £281 million (US$405 million) in June this year. It will be interesting to see how this once independently-owned company continues global growth under its new parent.

Compass Box

After the Brexit vote, Compass Box said industry support for its transparency campaign was “unlikely”. As such, the blender and bottler said it would take advantage of a regulatory “loophole” by giving information about its blends when approached by “interested consumers”. Will consumer demand for transparency increase as a result, prompting other brands to follow suit?

Chivas Regal

After experiencing a lacklustre few years, Chivas Brothers has predicted that full year 2017 sales of its core Chivas Regal will improve in China, boosting its global volumes. Expect to see additional NPDs and increased marketing efforts.

Key trends in 2017

• While the ‘hybrid’ trend cannot legally apply to Scotch whisky, Scotch producers are increasingly inspired by the styles, ingredients and production techniques of overseas distillers. Expect to see more of this in 2017.

• A number of new distilleries are set to open up outside of the established heartlands of Speyside and the Highlands and Islands – resulting in the creation of a new set of local Scotch whisky ‘regions’.

• To capitalise on consumers’ growing desire for knowledge, Scotch whisky producers will most likely re-evaluate how they communicate their liquid’s credentials through packaging and marketing messages.