My career in whisky, which started in 2003, has coincided with one of the biggest surges in growth the Scotch whisky industry has ever seen. Beginning in the first years of the new millennium, the sector grew seemingly exponentially for more than two decades until things started getting wobbly in 2023. It may still be too early to know whether we are in the midst of a post-boom bust or merely a market correction. One thing is certain, however; we are not where anyone thought we’d be just three or four years ago, and – in retrospect – we should have seen this coming!
Scotch whisky has a proud history that reaches back centuries. The first record of distilling in Scotland was Friar John Cor’s famous “eight bols of malt…wherewith to make aqua vitae” in 1494. This was not the water of life’s inception, but merely the first recorded reference to it in Scotland. For the next three centuries, whisky making in the country was largely local, small scale, and illicit.
The oldest commercial distilleries in Scotland date from the 1760s and 1770s, and a few from that time, such as Glenturret (1763), Bowmore (1779), and Strathisla (1786), are still operating today. It wasn’t until 1824, the year after the passage of the Small Stills Act, that the first boom in whisky production truly took off. In the decade that followed more than 250 distilling licenses were issued, and by 1836 there were 230 legal distilleries operating. A quarter of these would close by 1843, and only 25 from the era are still around today.
The Victorian whisky boom took place at the tail end of the 1800s. It was fueled by the global expansion of Blended Scotch whisky and saw at least 50 distilleries open their doors between 1865 and 1901. The vast majority of them opened in the last decade of the era. Blended Scotch surged into the void left by phylloxera’s devastation of European grape vines, which had caused a massive drop in wine production. Spotting what looked like an opportunity for quick profit, banks and investors pumped money into the Scotch whisky industry which funded expansions and new distilleries. This speculation caused the volume of malt whisky stock maturing in warehouses to surge to a nearly 7-fold increase in the 1890s, until the bubble burst in 1901.
The hangover from two World Wars and the Great Depression delayed the industry’s recovery until the mid-1950s when the next big boom began. Over the next twenty years, exports surged 500 percent, 28 new distilleries were opened, and most of the existing distilleries were modernized and expanded. The Tomatin Distillery alone added 21 new stills between 1956 and 1974 to the two it had made do with since opening in 1897. It went into liquidation in 1985 but was saved the following year when it was acquired by a Japanese firm. In the early 1980s, with the global economy reeling, 4 times more whisky was sitting in bond than two decades earlier. Twenty-three distilleries locked their gates, twenty of them forever.
The 21st century whisky boom, the fourth in the Scotch industry’s commercial history, has run out of steam in recent years.
And there are some interesting historical parallels with the three earlier growth cycles, not least the fact they have all lasted roughly 20 years. Beginning in the late 2000s the industry began cranking up production considerably. Many distilleries began producing 24/7, adding capacity and cutting production times. In the early 2000s, the two largest single malt brands, Glenfiddich and Glenlivet, had the ability to produce 10M and 6M litres a year. Today they are both able to produce a staggering 21M litres. And over the same period, 52 new malt whisky distilleries have opened in Scotland alone, with still more to come, and many hundreds more around the world.
As with the Victorian boom, the 21st century boom was fuelled by easy credit and no shortage of speculation. Like the post WWII boom, which left Scotland with a Whisky Loch in the 1980s, the industry has grossly overproduced for the last two and a half decades. Are we facing another bust, or will things be different this time? What does the future hold for Scotch whisky?
Although the demand for Scotch whisky has slowed globally in the last couple of years, the industry had broader and deeper roots today than it has at any time in its history. I believe the interest in single malt whisky, which has grown organically for more than two decades, will ensure the industry has a bright future. But, in my opinion, prices have risen too high, there are too many distilleries, and too much production. In the next few years, we can expect most distilleries to slow down, and sadly, many others to close. Retail whisky prices will also need to come down to counter this economic slump.
While filling yet another proverbial loch of whisky over the last twenty years, the captains of this iconic industry have forgotten two of the immutable principles which govern our Universe: what goes up must come down, and nearly all booms are followed by a bust. ~ By Andrew Ferguson
Leave a Comment