"Ruin" Scotch Whisky? I Don't Think So.

Almost 3 years ago, someone asked me about the requirement to bottle Scotch Whisky in Scotland.

I told them that there was, at that time, no requirement for Scotch Whisky to be bottled in Scotland. That was a true statement then and it is a true statement now.

Even at that time, the SWA was working on some legislation to ensure that Single Malt Scotch Whisky would have to be bottled in Scotland, but that would not affect the bottling of other categories of Scotch Whisky overseas. That legislation has never made it to law.

David Williamson of the SWA expanded:

As you are aware, there has never been a requirement in the legal definition of Scotch Whisky for it to be bottled only in Scotland. As Scotch Whisky has grown in popularity around the world over the last century, we have therefore seen Scotch Whisky, principally Blended Scotch Whisky, shipped for local bottling in certain export markets.

Over the years, overseas bottling developed in some markets because it was the only way in which imported spirits, such as Scotch Whisky, were allowed to operate on a level playing field with domestic spirit drinks. In contrast, bottled imported spirits would face tariff or tax discrimination, distorting competition in the market and denying local consumers choice. In other markets, Scotch Whisky has been imported in bulk for blending with domestic whiskies.

While it is likely that there would therefore be considerable legal difficulties in requiring that all Scotch Whisky now be bottled in Scotland, the situation is very different for Single Malt Scotch Whisky, as only very small quantities have been exported for local bottling in the past and any requirement to bottle in Scotland would only impact on trade to a limited extent. SWA members are therefore supportive of introducing such a requirement as part of the wider package of proposals that are currently being brought forward.

Wednesday, November 1st, 2006

But all of a sudden, Diageo’s VERY REASONABLE, if not happily accepted, plan to move bottling operations from Kilmarnock to Fife is being attacked.

Yes, jobs will be lost in Kilmarnock…But new jobs will be created elsewhere. And Fife isn’t exactly China, is it?

In this economy*, lost jobs are not often replaced in other areas of the same country, are they?

When written as “DIAGEO’S plan to end Johnnie Walker’s historic links with Kilmarnock could be the beginning of a process that will destroy the Scotch whisky industry,” it sounds quite alarmist, doesn’t it.

“A spokesman for Diageo accused the MPs of overreacting. “We fully appreciate that emotions are running high, but we reserve our right to have undertaken a major review of our business in Scotland,”

I whole-heartedly agree.

As Douglas Fraser, business and economy editor at BBC Scotland, correctly states

Already, between 10% and 20% of Scotch Whisky – leaves Scotland in bulk rather than bottles. Diageo sends less than half that proportion.

So articles such as Diageo plans ‘could ruin Scotch whisky’ are alarmist and unnecessary – and fueled by a political over-reaction to the necessity of consolidating jobs in a down economy – which is ANY employers prerogative.

I am sure Diageo has been dreaming of moving more bottling “off-shore” and has a perfect excuse In this economy*. And nothing in the existing OR PLANNED law prevents them from doing so. But they aren’t doing that here, are they?

The politicians got caught with their pants down and the people whom they represent who may be losing jobs will not be happy – but when the only argument the opposition has is that Diageo is laying the ground-work for ruining Scottish historical significance of a whisky brand, they’ve already lost the battle.

When will people realize that Diageo isn’t a foundation of Scottish culture – it’s a large multi-national company – that exists to bring share-holder value. And while I have been an outspoken commenter against a number of their marketing practices, as a Diageo shareholder, business consultant and MBA, I understand and accept operational review and elimination of redundancies.

That’s Business, folks.
* Vastly overused term.

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Comments (4)

  1. Well said, Kevin. Of course it is a sad day when anyone loses their job through no fault of their own. However, it is a business reality, in good times or bad, that sometimes costs have to be cut and parts of a business that cannot be made more efficient have to be rationalised.

    Most of these articles seem to have chosen to ignore or gloss over the massive investment Diageo is in the process of making in Scotland. Diageo have done many things I don’t like, but I do think the response to this has been a bit over the top.

    Fife and Cameronbridge can be expanded, Port Dundas and Kilmarnock cannot, therefore they have had to lose out. Unfortunately in the straitened financial reality we are all facing, the decision has been made that these job losses are required for the long-term health of the business.

    Ultimately Diageo are beholden to their shareholders. No-one is trying to belittle the human cost of this decision, but it is possible to see why this has happened without being a heartless bastard. Those of us not in possession of all the facts of the matter should think carefully before rushing to judgement.

    It’s a shame that Scotland’s insular, self-serving politicians have seen fit to commence their usual hysterical shitfight in an attempt to score points off each other instead of working to secure new investment and jobs for the affected areas.

  2. Glad someone is seeing some sense in all of this.

  3. […] Is Diageo’s decision to move their bottling plants from Kilmarnock to another part of Scotland going to ruin Scotch whisky? There’s a great discussion happening now at the Malt Advocate blog on the subject.  Personally, I agree with Kevin Erskine (The Scotch Blog)’s assessment. […]

  4. Not Blinkered

    The Diageo steam train will roll on, in spite of any criticism from press, public or politician. As a multinational drinks company, their bottom line is profit.

    The opening comments about no loss of jobs do transpire into a typical PR exercise from a large company. 700 jobs will go, net 400 jobs will start. They fail to mention that 700 jobs will not be replaced for the same people, or that 70% of the new jobs will be temporary workers.

    Diageo have said this move “guaranteed” the future for workers at Shieldhall bottling plant for 5 years. Reading between the lines, and if you speak to the workers at Shieldhall, that means another plant will close in 2014.

    I confidentally predict Diageo will move all Scotch whisky production post-distilling abroad. They are already in negotiation with Korea

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