As it’s World Whisky Day tomorrow, we have been reflecting on the importance of Scotch whisky, our national drink, to the Scottish economy (£5.3bn contribution in 2023) and to our firm itself.

We look after a number of clients who are associated with this important industry sector, both directly and indirectly, giving us a privileged insight on day-to-day operational and contractual matters as well as strategic projects. From large scale global drinks producers to independent bottlers and Scotch whisky start-ups, we have extensive experience in advising on the whole lifecycle of Scotch whisky production, sales and distribution.

We are very much in a boom period for the sector with a number of new distilleries coming on stream, including in our major business centres of Glasgow and Edinburgh as well as across all parts of rural Scotland. There are nearly 150 active whisky distilleries spread across our country. That is not to say that the industry has not been without its challenges, particularly Covid and trade pressures in the US (tariffs and a trend towards Tequila consumption). However, this has been offset by a huge spike in sales to China, an important and growing export market. Effective global protection of the valuable intellectual property created by the whisky sector – protecting the reputation of scotch whisky as a whole, as well as the individual distillers - is an ever increasing challenge as new markets develop.

On the employment law side of things, the trade union movement continues to target the whisky sector - both in pay disputes through collective bargaining in response to the cost of living crisis and recruiting membership for trade union recognition. Business pressures have also sadly meant some redundancies in production, bottling and even, for some of the newer distilleries, their visitor experience.

However, the HR community in the Scotch whisky sector remains as buoyant as ever. We were proud to sponsor the “Spirited Careers Conference”, a recent event hosted by the Scotch Whisky Association which covered a range of employment-related topics. There was a huge energy of positivity in the room as delegates participated in panel sessions covering a range of issues, including equality and diversity, the advent of artificial intelligence, recruitment/apprenticeships and industrial relations.

As the drive for environmental sustainability grows, the industry faces increasing pressure to address its environmental footprint. Issues such as energy consumption, water usage, waste and carbon emissions are key areas of focus, as they are for our own business. In addition to the business challenges mentioned above, climate change is also now having an impact on “tomorrow’s whisky” (as the common saying about “today’s rain” puts it) in some places, even in this sometimes driech land.

Mergers & acquisitions are relatively uncommon in the Scotch whisky world, with highly-prized assets not changing hands all that often. When distilleries and businesses do change hands, they command increasingly impressive values – a function of their rarity as well as their potential for profit. Older, established distilleries may change hands as the big players really focus in on the global brands in their portfolios and channel investment and exertion towards those, divesting non-core brands for others to successfully develop.

However, many in the industry are expecting to see a particular uptick in consolidation activity among the many smaller, start-up distilling operations that have flourished in recent years.  Synergies and potential economies of scale are as apparent here as in any industry. Private equity funds, with significant capital to deploy to grow profitable businesses to profit, have been showing an increasing interest in Scotch whisky.  As a firm, we have been involved in the majority of the headline deals of recent years, as well as investments in smaller, new distilleries – experience we will continue to draw on and develop as whisky-related deal activity increases.

As an investment category, individual casks and bottles of Scotch whisky remain on the ascendancy, and our litigation teams have been involved in a number of disputes over damaged or lost whisky casks purchased by high net worth customers. Valuing what could be an expensive asset class is not without its difficulties.

Ultimately, the Scotch whisky industry is a proud jewel in our crown as a leading independent law firm in Scotland and for brand-Scotland food and drink as a whole. We’ll certainly be raising a toast to that tomorrow, on World Whisky Day 2024. David will be enjoying Bruichladdich’s Port Charlotte expression in a New York Sour at his favourite Kelvingrove Café in Glasgow and Tom will be looking for Glenglassaugh Sandend or (as always) an interesting Old Pulteney at The Malt Room in Inverness.

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