The big interview: Mark Kent, SWA
Mark Kent, chief executive of the Scotch Whisky Association, says his members have weathered many challenges in the past few years, and there are more to come.
Scotch whisky has a long and storied past. Its centuries-old history is a mix of light and shade, filled with a combination of challenges and success.
But arguably, there have been few years that have delivered such a heady mix of both triumphs and tribulations as 2022. The sector had to contend with recovering from the Covid-19 pandemic, and also faced supply-chain pressures and rising energy costs.
Yet for all these headwinds, 2022 was a record year for the industry.
Exports of Scotch whisky broke the £6 billion (US$7.3bn) barrier for the first time, topping £6.2bn (US$7.5bn) last year, the Scotch Whisky Association (SWA) confirmed.
The value of Scotch whisky exports grew by 37% in 2022, while the number of 700ml bottles shipped jumped by 27% to 1.67bn.
“As we were receiving the figures at the office,” tells Mark Kent, chief executive of the SWA, “there were raised eyebrows and a lot of happy people. The industry has bounced back so successfully from Covid. The figures grew across the piece, so you can’t really put your finger on one particular market.”
By value, the US remained the number one export market for Scotch, worth £1.053bn in 2022.
France placed second, with £488 million worth of exports and Singapore was the third most lucrative market at £316m.
In terms of volume, there was a notable shift as France was toppled from the top spot for the first time since 2000.
India’s export volume rose by 60% to reach 219m bottles, surpassing the 205m bottles shipped to France (an increase of 17% compared with 2021).
The US was the third biggest market by volume, reporting 9% growth to reach 137m bottles last year.
“Even established markets grew,” Kent stresses. “In Europe, we saw 17% growth – we have three of the biggest top 10 markets for Scotch in Europe: France, Germany and Spain. But we also saw, for the first time, Asia Pacific producing our biggest market. And why is that? Well, I think Scotch is an aspirational drink and has iconic products. As you see economies grow and there’s more disposable income, particularly in the middle class, the market grows.”
The rise of exports to India has been an exciting development, Kent says. India has been a country the Scotch sector as a whole has been eager to expand in – but triple-digit import taxes have limited the spirit’s growth in the world’s biggest whisky-drinking market. A mooted UK-India free trade deal could be incredibly lucrative for the Scotch whisky category if it is agreed.
“Scotch is something around 2% of the total whisky sales in India,” says Kent, “so there’s huge potential to continue growing. India’s economy is growing, and the country has a lot of knowledge about whisky. It’s a very informed market.”
The job prospects that would come from the category’s ability to expand in India are also huge, Kent notes. And not just in India, but also in the UK.
“On our modelling, we think over four years that could lead to a £1bn increase. That will lead to more jobs in Scotland, in the UK; we provide 10,000 jobs in Scotland, 42,000 in the wider UK, and obviously to increase production to meet demand across the world, those numbers will have to increase. It would be a win-win story,” Kent enthuses.
Scotch whisky is exported to 190 countries worldwide; and yet, it has also managed to maintain its local charm. Not only is this a global, multi-billion-dollar industry, but Scotch whisky tourism also has the allure to draw two million visitors to Scotland every year.
“The nearest industry I would say is a parallel to Scotch would be the Premier League,” Kent says.
“The Premier League is English, but it has this global reach. Scotch whisky is absolutely global while being quintessentially Scottish. It’s such a powerful emotion that people feel connected with the product.”
However, it has not been plain sailing for the sector. As a membership organisation, the SWA is well placed to ascertain an overview of the challenges facing the Scotch industry. Over the past year, Kent has seen “a common theme of rising costs”, made more taxing by bottle and label shortages.
“There has often been uncertainty about when your delivery’s going to arrive, and whether you’re going to get the quantity you asked for,” he explains.
“Coming out of Covid presented some challenges. Producers have had to adapt to that, and glass is no exception. In a lot of cases with these very premium products, a bottle is not just a receptacle, it’s actually part of the image of the whisky itself.”
But glass presents a bigger challenge than supply struggles, Kent adds.
“Producing glass is energy intensive, so it’s not just about ensuring the industry is meeting its carbon ambitions; it’s ensuring the process, from grain to glass, is meeting those carbon ambitions. We’re working closely with the glass manufacturers to make this progress throughout the chain so that we are a carbon-neutral process.”
The SWA’s sustainability strategy is striving for the Scotch whisky sector to reach net-zero emissions by 2040 – five years earlier than the Scottish government’s 2045 goal, and 10 years sooner than the UK government. Since 2008, Kent confirmed the Scotch sector has cut its carbon emissions by more than half (53%).
“It’s not just about setting the ambition, it’s doing the difficult stuff,” Kent insists.
“We fought for Cop 26. We’re committed to making the industry carbon neutral by 2040. But we’ve gone further this year by working with supply chains to ensure that we are making that progress together across the piece, from the farmers, the maltsters, the glass manufacturers, transport – we have to do it. It’s going to be difficult. But the one thing we can’t do is just seem to be making grand declarations and not pushing it through the industry. You’ve got to show progress.”
There are 93 SWA member companies, ranging from small independent producers to larger distillers. As a result, members’ needs can vary vastly. But Kent praises how the industry is “very collegiate” in sharing knowledge, meaning support is forthcoming to help companies reach the “ambitious” sustainability targets.
“If you’re a bigger company, you have more resources and more potential to trial new schemes, whereas smaller companies are more limited,” Kent says.
“With our SWA committees, we draw on expertise around the industry and spread that brand data. That happens even outside the SWA. That’s one of the things that struck me in my first year, the collegiality. Once the product gets on the shelves, then the companies are in competition. But before then, it’s a community-based industry that wants to support each other for the good of the category.”
At the time of writing, the deadline for companies to register for Scotland’s deposit return scheme (DRS) was just days away.
The planned DRS is due to come into effect on 16 August 2023, and would make Scotland the first country in the UK to implement a DRS.
The initiative will see consumers pay a 20p deposit when buying a drink in a single-use container made from polyethylene terephthalate (a type of plastic), glass, steel, or aluminium, sized between 50ml and three litres.
The 20p deposit will be refunded by the drink’s producer when the container is returned for recycling at one of 30,000-plus return sites.
The initiative has divided opinions, and in early February, the SWA teamed up with several trade bodies to pen an open letter to Lorna Slater, Scotland’s minister for green skills, circular economy and biodiversity, to call for an 18-month legal grace period for smaller producers.
They argued by rushing to meet the August launch date, many drinks products would no longer be available in Scotland from 16 August, and prices “will substantially increase”.
“We obviously share the ambition on sustainability, we understand why the government wants to make progress on sustainability, and we want to be a partner on that,” says Kent.
“In my experience, dialogue with industry is so important in matters like this. It’s like I was saying earlier on, it’s not just about making grand statements, it’s about how you implement it to ensure you walk the talk – and DRS is no different.
“All members want certainty and a stable regulatory environment; you need certainty, you need clarity, and you need, as far as possible, to make things as simple as possible to get the best chance of success.”
Kent is keen to stress this is an issue not just pertinent to Scotch, but to the wider drinks industry in Scotland – including soft drinks manufacturers.
“At the moment, there is this lack of clarity; we see it in the Scotch whisky industry, but it’s far wider,” he adds. “You’ve seen a whole range of people voicing concerns over the past few weeks, and we are no different in that respect.”
There was industry chatter that the resignation of Scotland’s first minister, Nicola Sturgeon, might trigger a delay in the DRS. So far, the scheme is set to go ahead as planned, but Kent sees no correlation between Sturgeon stepping down and the DRS development.
“We recognise and are grateful for [Sturgeon’s] role in public service over such a long period of time,” he notes. “Like any project, the important thing is to make it a success. It’s better to have a successful scheme that takes longer to implement than a quick scheme that is a failure.
“If the delay is needed to get us to that place, we need to do that; that is far, far better. Drinks companies are having to make big decisions very quickly, and decide whether to make big investments, or say, ‘Actually, I can’t gamble with my business, so I’m not going to continue selling into Scotland’. That has serious effects for economy and for consumer choice.”
Kent is also busy lobbying for Scotch whisky distillers to be eligible for support to manage rising energy costs.
“Rising energy costs are a serious concern across the industry because we are quite energy intensive,” stresses Kent.
However, distillers have been excluded from the Energy Bills Discount Scheme, which will replace the Energy Bill Relief Scheme from 1 April 2023.
The new initiative will offer businesses a discount on their gas and electricity unit rates – but not for spirits producers.
“The scheme is targeted at energy-intensive industries,” explains Kent. “For some reason, which nobody in government has been able to explain to me, if your business is wine, beer or cider, you are eligible for that. But if you are a seller of spirits, of whatever size, you are not.
“We have been talking with government about ensuring this anomaly is corrected, and that our members, distillers are able to benefit in this way, the same as other alcohol producers. We haven’t yet received a reply – that’s an example of how we work as a trade association to support our members, and the Scotch industry.”
Consumers have also felt rising energy bills bite as they grapple with the cost-of-living crisis.
Could this result in a slowdown of the premiumisation trend that pushed Scotch past the £6bn threshold?
“The premiumisation trend is very strong – we’ve seen that coming out of Covid, and it goes back to that experience,” Kent says confidently.
“People want to have freedom, experiences, and they want to enjoy a fantastic product. Covid brought that out of us, this realisation that we want to have moments of happiness. And if that means drinking a premium Scotch, then that’s a fine example. It was great to have that ray of positivity coming out of the industry, despite all the challenges that we’ve had over the last year.
“To see the industry rise to that and continue to grow is nothing short of amazing.”