ANNUAL
REVIEW
2015-16
www.scotch-whisky.org.uk
Contents
Page
Chairman’s Report, from Pierre Pringuet,
Vice President, Pernod Ricard SA
3
Foreword from David Frost, Scotch Whisky Association
Chief Executive
4
The SWA works to build strong relationships
and impact public debate 6
The SWA works to be a trusted voice in the debate
on alcohol and society 8
The SWA works to support a competitive,
sustainable and fairly-taxed industry
10
The SWA works to protect the Scotch Whisky
category around the world
12
The SWA works to ensure Scotch Whisky
has fair access to all markets worldwide
14
Annual Review – Management
18
2015 Export Statistics
19
2
Scotch Whisky Association ANNUAL REVIEW 2015-16
Chairman’s Report, from
Pierre Pringuet,
Vice President, Pernod Ricard
I am delighted to have had the responsibility, and pleasure, of chairing
the Scotch Whisky Association for the last 18 months. The Association
goes from strength to strength, is well connected within Government
both in Edinburgh and London, and makes a big contribution to the
success of our industry.
its conclusion. And it works to sustain a competitive
environment within the UK, notably on taxation, where
for a third year in a row excise duty has not increased,
very much thanks to the efforts of the Association in
promoting the broader benefits to Britain of a fairer
excise duty policy.
Scotch Whisky continues to be hugely popular around
the world and to make a major contribution to the
British economy. It adds £5 billion to UK GDP every
year, constitutes nearly a quarter of Britain’s food
and drink exports, and indeed in 2015 was the single
product that contributed most to the UK’s success in
trade in goods. It is true that exports declined again
slightly in 2015, but the rate of decline is slowing and
we believe growth will resume soon. Exports of Single
Malts and premium blends continue to progress well
and the world’s taste for Scotch Whisky, in more than
200 markets, remains strong.
Finally, I am delighted to see the changes put in place
by SWA CEO David Frost beginning to bear fruit.
There is a great new top team at the Association and
highly dedicated and expert staff, in both Edinburgh
and London. The move to the new headquarters
in Edinburgh symbolises the new SWA and I am
confident that it will allow the Association to project
our industry even more effectively. New contacts
with Government, both in the UK and beyond, are
developing, and I am confident that the Association is
becoming even more effective and efficient, as shown
by the fact that for a third year in a row subscription
payments remain flat in cash terms. Thank you from
me, and all the Council, to all at the SWA for their
continued commitment to our industry’s achievements.
The Association represents the industry’s interests
in many different ways. It improves market access
around the world and works with many different
governments with this in mind. It protects our
geographical indication and the Scotch Whisky
category more generally. It promotes responsible
consumption of alcohol while standing up for our
interests, notably with the long-running legal case on
minimum unit pricing of alcohol, now coming close to
3
www.scotch-whisky.org.uk
Foreword from David Frost,
SWA Chief Executive
After two and a half years at the helm of the SWA, I am confident the
Association is in good shape for the future.
countries. It was not because of any reduction in
the attractiveness of Scotch Whisky and indeed the
sustained growth of Single Malts shows that Scotch
remains as exciting and as aspirational as ever.
Politically, 2015 was shaped by the General Election
and, in Scotland, by the political debate that followed
the independence referendum. The advent of a
majority Conservative Government has required us
to put new effort into working with a wider range of
political figures, in England as well as in Scotland, to
ensure the benefits our industry brings to the whole of
the UK are well understood.
We also saw three new distilleries open in 2015, with
more in the pipeline. These new entrants to the Scotch
Whisky sector are a sign of our continued vitality and
attractiveness as an industry. We are developing a
close working relationship with the Scottish Craft
Distillers’ Association and I am confident that there will
be benefits to all of us from working collectively and
collaboratively behind some common objectives.
At the same time we had a large number of new SNP
MPs to get to know and work with, and this has of
course brought a new dynamic into Parliament. One
beneficial effort has been the reinvigoration of the
All-Party Group on Scotch Whisky, which will be a
powerful voice for our industry in Westminster.
Against this background, we have had to work hard
to ensure that the fiscal environment supports our
sector. After the duty cut in 2015, it is very welcome
that the UK Government froze duty again in 2016,
meaning that the price of an average bottle of Scotch
Whisky is now 87p lower than it would have been if
the duty escalator had continued. I am confident that
the economic benefits of this reduced taxation are well
communicated and are well understood. We must now
try to encourage a more rational, more predictable,
and fairer framework for excise taxation in the future.
Internationally, 2015 was a tricky year. Exports
continued to fall though less rapidly than in 2014.
This was largely because of international political and
economic developments – stronger sterling in many
markets, poor governance and economic decline in
others, and the fall in the oil price affecting producer
4
The social aspects of alcohol policy remain central
to our work too. The European Court of Justice
finally ruled on our case on Minimum Unit Pricing in
December, and delivered a clear view that minimum
pricing significantly restricts the market and is
unjustified when other less trade restrictive measures
are available to government. We now await a ruling
from the Scottish Courts later in 2016.
More broadly in this area, we remain determined to
work closely with the Scottish and UK governments,
and with all those with an interest in the debate,
including the public health community. In that context
the new guidelines on responsible drinking, produced
by the Chief Medical Officers, raise significant
questions, and we will be continuing to argue that
moderate consumption can be compatible with a
healthy lifestyle. More encouragingly, our own Scotch
Whisky Action Fund, supporting innovative projects
across Scotland dealing with alcohol-related harm, is
Scotch Whisky Association ANNUAL REVIEW 2015-16
going well and is attracting significant interest.
In 2015 the Association also completed its
change programme. This was symbolised
by our move to our new headquarters at the
Quartermile development in Edinburgh, which
offers us the chance to showcase the industry
much more effectively than in the past. Our
London office, with five staff, is now up and
running, and showing its worth by developing
a new and broader range of contacts, under
the leadership of our new global affairs
director, Sarah Dickson, who is, like me,
another former ambassador.
We said goodbye to Magnus Cormack, our
legal affairs director, who worked for the
Association for over 30 years. His expertise
and in-depth knowledge have been vital in
developing the reputation of our legal team.
Strategic Priorities
for SWA
Be a trusted voice
in the debate on
alcohol and society
Support a
competitive,
sustainable &
fairly-taxed industry
We wish him all the best for the future, and we
welcome his successor, Alan Park, who has
been with the SWA for 13 years.
Finally, our Council’s membership also
changed during 2015. I am delighted that
the CEOs of our two biggest members, Ivan
Menezes of Diageo and Alexandre Ricard of
Pernod Ricard, have come onto the Council,
as has the CEO of Glenmorangie, Marc
Hoellinger. A Council of this level of seniority
and expertise is important in ensuring the
authority and impact of the Association with
government and the business community. I
and all of us at the SWA are grateful for the
support and advice we receive not just from
the Council but from all of our members.
By building strong relationships
with all levels of government and
opinion-formers and by making
a visible impact on the public
debate......
Safeguard the
Scotch Whisky
category
Ensure fair access
to all markets
world-wide
Manage ourselves professionally so that everyone can make a contribution
Ensure an in-depth understanding of members’ businesses and needs
“In 2015 the Association also completed its
change programme. This was symbolised
by our move to our new headquarters”
5
www.scotch-whisky.org.uk
We work to build strong
relationships with all levels of
government and opinion-formers
and to make a visible impact on
the public debate
Nothing we achieve could be done without an effective public
affairs and communications operation and it runs through all of
our work. Our aim is to advance the global interests and profile
of Scotch Whisky, of our member companies and the industry,
by engaging with the full range of industry stakeholders and all
levels of government, at home and abroad.
At UK level, building on the historic excise duty cut in 2015, we secured a further freeze in spirits
duty in the March 2016 Budget after a wide-ranging public affairs and media campaign. The
Chancellor’s decision is very welcome, and HM Treasury assesses that a typical bottle of Scotch
Whisky is now 87 pence lower than it otherwise would have been since the ending of the spirits duty
escalator in 2014.
Following the 2015 General Election, we worked hard to develop relationships with the large
number of new MPs and Ministers, in Scotland and beyond. Our new London office, allowing more
regular interaction with politicians and officials of all kinds, has helped support this. We have had
regular meetings with Ministers; have helped establish an energetic All Party Scotch Whisky Group
at Westminster; and took part in our first ever collective briefing of Ministerial special advisers at
Downing Street. Lord Dunlop, the Scotland Office Minister, held the first cross-Whitehall roundtable
on Scotch Whisky.
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Scotch Whisky Association ANNUAL REVIEW 2015-16
Scotch Whisky Association
and Scotland Food & Drink
Export Collaboration Charter
Top left: John Swinney at our new HQ, Quartermile, Edinburgh. Bottom left: Fiona Hyslop addresses SWA event on Latin America.
industry’s expertise at the service of Scottish food and
drink exporters more generally, an initiative described
by the Scottish Government as a ‘potential game
changer’. Within Holyrood, we continued to support an
active Cross Party Group on Scotch Whisky.
In Scotland, we continued to work closely with the
Scottish Government on a range of shared priorities.
We had a formal meeting with the First Minister, and
the Deputy First Minister opened our new Edinburgh
office. We played a role in developing the new Scottish
trade and investment strategy, and also actively
promoted the benefits of open markets through events
with the David Hume Institute and Canning House. We
developed a unique “Export Collaboration Charter”
together with Scotland Food & Drink, to put the
On the media front, there was also a regular flow of
activities throughout, raising awareness of key issues,
highlighting the sector’s economic importance, and
responding to enquiries.
“a typical bottle of Scotch Whisky is now 87 pence
lower than it otherwise would have been”
7
www.scotch-whisky.org.uk
The SWA works to be a trusted
voice in the debate on alcohol
and society
We collaborate closely with other trade bodies and member companies
to promote responsible attitudes to alcohol. We work where we can to
create a less polarised and more constructive debate in this area.
Within Scotland, we continue to aim at a tangible impact in promoting
responsible drinking by supporting a range of initiatives that tackle the
harmful use of alcohol.
A cornerstone of this work is the Scotch Whisky Action Fund, now in its third
year of operation. Fourteen projects across Scotland have received financial
support from the Fund. In November, over 50 delegates attended an event to
learn more about the success of the projects in tackling misuse.
Although the Scottish Government Alcohol Industry Partnership was brought
to an end in 2015, we played an active role in establishing a new looser
Forum between government and industry to continue to take forward
responsible drinking initiatives, such as the award-winning proxy purchase
scheme in Motherwell.
Tackling
alcohol-related
harms
We want to support
and develop a range of
projects and initiatives
tackling alcohol misuse
in Scotland
Action Fund event: Dame Joan Stringer addresses the audience.
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Scotch Whisky Association ANNUAL REVIEW 2015-16
“Fourteen projects across Scotland have received
financial support from the Fund.”
At UK level, revised ‘low risk’ consumption guidelines published by
the UK Chief Medical Officer in early 2016 brought welcome clarity in
some areas but also introduced areas of real concern. In particular,
the suggestion that there is ‘no safe level of drinking’ has been widely
challenged as not reflecting well-established scientific and medical
evidence. We will support efforts to communicate the guidelines,
but believe it is important to make clear that moderate alcohol
consumption is compatible with a healthy lifestyle.
In the EU, the European Court of Justice issued its long-awaited
ruling in relation to the SWA’s challenge to the Scottish Government’s
Minimum Unit Pricing legislation. In a clear ruling confirming previous
case law, the Court concluded that the Scottish legislation significantly
restricts the market, impacting trade and competition, and that such a
measure is not justified when other less trade restrictive measures are
available to government. The matter has now been referred back to
the Scottish Court of Session for a final ruling, expected in 2016.
Finally, given the importance of exports to the country’s economy,
we have worked with the UK Government to argue for a balanced
approach to alcohol policy issues in international fora, such as the
EU, World Health Organisation, and United Nations. We worked with
multinational organisations such as spiritsEUROPE to share best
practice on tackling alcohol misuse more widely, and we became
a founder member of the new Partnership Council established
by the Washington-based International Alliance for Responsible
Drinking. We introduced an updated SWA Code of Practice for
Responsible Marketing of Scotch Whisky in July, for the first time
applying worldwide to our members, and reflecting in particular digital
marketing developments.
9
The Scotch Whisky Association
CODE OF PRACTICE
FOR THE RESPONSIBLE
MARKETING AND PROMOTION
OF SCOTCH WHISKY
THIRD EDITION
March 2015
www.scotch-whisky.org.uk
The SWA works to support a
competitive, sustainable and
fairly-taxed industry
Our mission is to ensure that Scotland is at least as competitive a place
to do business as anywhere else in the UK, and hence an environment
where the Scotch Whisky industry can flourish, to the benefit of all.
Our report in 2015 on the Economic Impact of the Scotch Whisky Industry, refreshed in February
2016, reinforced the major contribution Scotch Whisky makes to the Scottish and broader UK
economies and supply chain.
Resilient infrastructure is vital to maintaining this economic contribution. In 2015 we worked to
identify infrastructure challenges for members. In particular, we managed an in-depth review of the
industry’s ferry requirements for the Islay route as part of the tender process involving conversations
with the relevant Minister and politicians, Scottish Government, the ferry operator and the competitive
bidders for the route. More broadly, we called for a more integrated Scottish Freight Strategy that
better links road, rail and sea routes. We have engaged with Transport Scotland’s rail freight review
and we have presented the Scotch Whisky industry’s needs to the rail freight industry and other
stakeholders. And we have pressed for further and faster road upgrades.
We work closely with HMRC on a range of issues. In particular, we helped ensure that, as changes
to the European Union Customs Code take place, exporters of alcohol from the UK are not penalised
with additional unintended burdens; agreed a Memorandum of Understanding with HMRC on
exchanging information of mutual interest; and ensured smooth implementation of the Alcohol
Wholesaler Registration Scheme, the Scotch Whisky Verification Scheme and a more flexible
approach to HMRC approvals.
The Association and Scotch Whisky Research Institute
with HMRC
Julie Hesketh-Laird, SWA deputy chief executive
speaking at the Scottish Craft Distillers First Annual
Dinner in 2015
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Scotch Whisky Association ANNUAL REVIEW 2015-16
A fair and easily navigated regulatory environment is central
to competitive businesses. We work to remove regulatory
barriers where our industry is disadvantaged. The Scotch
Whisky industry has long understood the value of its byproducts and used them sustainably as animal feed and
more recently as a source of energy. A long-standing barrier
to further renewables use was removed when the European
Commission, in its Circular Economy package, confirmed
that industry ‘by-products’ be recognised as such rather than
‘wastes’ as they had previously been viewed as by law. This
change in definition puts our by-products in line with other
raw materials for energy production and should help unlock
investment in renewable energy using industry by-product as
feedstock.
We continue to manage the Scotch Whisky industry
Environmental Strategy, helping members deliver on their
goals and communicating their success and challenges. We
published the 2014 progress report, showing that the industry
is on track to meet its targets. In 2014 only 2% of waste from
industry packaging operations went to landfill, down from
13% in 2008. And Scotch Whisky industry use of non-fossil
fuels to generate energy was at 17% in 2014, up from 3% in
2008. We have worked to share industry good practice to
bolster individual company efforts so these achievements
may continue. We will refresh the voluntary targets for the
Industry Environmental Strategy later in 2016 and establish
ways to help the industry meet them. Some targets, including
our packaging ambitions, remain challenging and delivery will
require further supply chain engagement.
The industry relies on the world-class capabilities of our
people, from procurement to production and from logistics to
sales. Attracting new talent and maintaining the workforce’s
skills remains critical to long-term sustainable growth. In 2016
we published our report ‘Scotch Whisky, Skilled Workforce’
which shows the level of commitment across the industry to
invest in skills and development. It highlights the challenges
we face and makes recommendations to address these.
Partnership between industry, government and learning
providers is vital and we will play our part.
We have continued to lead the UK spirits industry through the
first reporting process for the new UK Government Climate
Change Agreement scheme. All companies have been
recertified to receive the Climate Change Levy rebate. We
welcome the Government’s decision to continue the scheme,
though we are disappointed that the industry’s bottling
operations continue to be ineligible, and we will continue to
press for their inclusion. We will also assess the impact of the
abolition of the UK CRC scheme and the rebalancing of the
Climate Change Levy rates. We will continue to support the
UK and Scottish Government in developing ‘Low Carbon and
Energy Efficiency Roadmaps’.
11
SCOTCH WHISKY
SKILLED WORKFORCE
Embargo to 00.01 on 28 January
The Economic Impact
of Scotch Whisky
Production in the UK
January 2015
Scotch Whisky Industry
Environmental Strategy Report 2015
www.scotch-whisky.org.uk
The SWA works to protect
the Scotch Whisky category
around the world
The Association has continued its constant efforts to
safeguard the description “Scotch Whisky” and to prevent
unfair competition against the category.
We rely heavily on members to report promptly any instances of misleading marketing
from around the world. If problems cannot be resolved by negotiation, further action may
be necessary. The type of action taken depends on the most effective procedure available
in the country concerned, and may take the form of civil court proceedings, criminal court
proceedings or administrative proceedings. This results in a heavy workload, and some
cases may take years to resolve. In 2015, 19 cases were successfully resolved, but 22 new
proceedings were authorised, bringing the total number of current cases to 60.
One unusual case concerned the brand “Scolen” which was being passed off in China
as Scotch Whisky. The brand itself is a phonetic representation of how a Chinese person
might pronounce “Scotland”, and there were several references to “Speyside” and
“Edinburgh” on the packaging. UK Speyside Wine Group Ltd, a Scottish registered
company with an office address in Edinburgh, was named on the label, but had no
connection with any established Scotch Whisky company. The sole director was a Chinese
national, and the main purpose was apparently to create a connection between the
Chinese product and Scotland. We obtained an injunction preventing the company from
passing off Scolen as Scotch Whisky. As the company had no connection with Speyside or
Scotch Whisky, it was also ordered to change its name. When it failed to do so, we applied
to have the company struck off the register and are awaiting the outcome.
Another unusual case concerned the sale in Switzerland of a Swiss Whisky, described
as “Swiss Highland Single Malt”. We objected to the use of the “Highland” Geographical
Indication for Scotch Whisky to describe a Swiss Whisky distilled and matured in the
Berner Oberland. Following the institution of proceedings in the Swiss Courts, we reached
a settlement resulting in the cancellation of trade marks and the phased withdrawal of the
product.
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Scotch Whisky Association ANNUAL REVIEW 2015-16
“During the year, we raised
objections to over 200 trade
mark applications in over
50 countries”
Over and above this case load, we also monitor trade
mark applications worldwide with a view to identifying
suspect brands at an early stage. During the year, we
raised objections to over 200 trade mark applications
in over 50 countries, bringing the total number of
current trade mark cases to approximately 500.
We maintain good links with international enforcement
agencies such as Interpol and Europol.
Finally, the Verification Scheme for Scotch Whisky,
required under EU legislation, completed its first two
year cycle at the turn of the year. Arrangements for
the planned public register of Scotch Whisky brands
are still being finalised. One of the purposes of the
scheme is to ensure the authenticity of Scotch Whisky
brands bottled outside Scotland, and we were able
to use the scheme to demonstrate that the bottlers of
three brands of whisky sold in India, which referred on
their labelling to “Scotch”, were not in fact registered
with HMRC as importers of bulk Scotch Whisky.
A more detailed report on a range of specifically legal
issues is available in the separate Legal Report at
www.scotch-whisky.org.uk
13
www.scotch-whisky.org.uk
The SWA works to ensure
Scotch Whisky has fair access
to all markets worldwide
Barriers to access remain in many markets around the world and we
have been kept busy tackling issues as diverse as unusual labelling
requirements, unnecessary analytical tests, high or discriminatory tax
regimes, or measures based on spurious public health grounds.
Our new global affairs director, Sarah Dickson, began
her work with a review of global affairs activities, aimed
at finding ways for the SWA to use our resources to
the maximum to make a bigger impact overseas. This
exercise looked at where we could actually make a
difference: what the SWA could do and the likelihood
of real progress in both the short and the long term.
For 2016, the categorisation exercise has led to
the identification of two ‘top priority’ countries
- India and Colombia - and six ‘high priority’
countries - Thailand, China, Turkey, South
Africa, Sweden and Brazil. Medium priorities
are Mexico, ASEAN markets, Nigeria, Taiwan,
Angola, Hungary, and Serbia.
We also identified a range of cross-cutting issues
and activities: World Trade Organisation and
Free Trade Agreements; Geographical Indication
registration; whisky definitions; the EU regulatory
agenda; labelling; tax; and public health.
Key activities during 2015 and the start of 2016
in most of these priority areas are set out on the
following pages.
Top priorities
India: The EU-India FTA talks made little
substantive progress in 2015. However, there
have been recent informal contacts suggesting an
appetite to explore resuming negotiations later in
2016. Wines and spirits are an “end game” issue
in the FTA negotiations, so we continue to press
for liberalisation of the 150% Basic Customs Duty,
which would be in the interests of both the Scotch
Whisky industry and of Indian spirits producers. We
will continue to engage actively in Europe and India
to press the industry’s case.
Meanwhile, other major market access barriers
remain across India and the trend toward
prohibition is worrying. We take opportunities
to engage in the detailed policy debate though
inevitably this is slow burn work. One example
is our work with KPMG Australia to develop an
econometric model on the likely revenue impact
of tax policy changes in four key Indian States.
We updated this project in 2015 and successfully
used it in industry engagement with the Excise
Commissioner of Maharashtra. We aim to expand
the model’s coverage to other States in 2016 and
it should become a robust and authoritative source
of information on the likely revenue impacts of the
policy changes we advocate.
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Scotch Whisky Association ANNUAL REVIEW 2015-16
“Internal tax reform is desirable in a number of markets
including Brazil, Malaysia, Thailand and Vietnam”
not fully resolved, the discrimination gap is not as
substantial as previously proposed. Progress on
the registration of Scotch Whisky as a Geographical
Indication continues to be challenging. The issue
was raised bilaterally between Trade and Economy
Ministers at the UK-Brazil Joint Economic and Trade
Committee in October. We hope further progress
can be made in 2016.
Colombia: Under EU-FTA commitments, the
deadline for Colombia to reform its discriminatory
excise tax system and anti-competitive practices of
its alcohol monopolies came and went in summer
2015. We continued to raise concerns with the
European Commission regarding Colombia’s failure
to meet its FTA and WTO obligations, leading
them to request consultations with Colombia in
January 2016 under the WTO’s Dispute Settlement
Mechanism. These took place in March and the
process is likely to continue through 2016.
South Africa: We continue to argue against the
unwelcome and discriminatory introduction of a
tax rebate of 10% for pot still and vintage brandy in
the 2016 Budget. Now that the proposal to make
manufacturers liable for offences committed under
the influence of alcohol has been dropped, we will
seek further improvements to the draft National
Liquor Policy Proposal, and work closely with others
on the onerous Health Warnings bill which emerged
in 2014.
High Priorities
Thailand’s National Alcohol Beverage Policy
Committee’s latest labelling notification entered
into force in October 2015. In spite of our best
efforts to establish unequivocally in advance which
statements would and would not be permitted,
much uncertainty remained over the use of
expressions such as ‘finest’ and other descriptions
of product quality or characteristics. This has
been somewhat alleviated by the commitment in
February from the Vice-Minister for Public Health
that the notification will be amended to bring it
into line with WTO requirements and that it will not
be implemented in its present form. While this is
very welcome news, we remain concerned that
the government may revive a proposal for Graphic
Health Warning Labels.
In China, the State Administration for Quality
Standards, Inspection and Quarantine (AQSIQ)
has at last accepted the Ministry of Health and
Family Welfare’s recommendation on completion
of a risk assessment that imported spirit drinks
are low risk products as regards their phthalate
residue content. Accordingly, AQSIQ has instructed
its local branches that imported spirits no longer
require certificates or test reports and may be
tested against the higher limits applying to domestic
spirits instead of the lower ones initially introduced
in 2013. This brings to an end an unnecessary cost
and administrative burden on exporters.
Brazil: Excise tax reform in Brazil led to joint
trade association action against discrimination
between cachaça and imported spirits. Though
15
Sweden: In autumn 2015 the Swedish alcohol
retail monopoly Systembolaget announced plans to
introduce a penalty fee for glass bottles exceeding
a certain weight limit, ostensibly on environmental
grounds. The proposed measure creates a barrier
to trade within the Single Market and penalises the
most recyclable and recycled form of packaging.
We swiftly built a coalition with other players in
Europe and beyond and as a result Systembolaget
has agreed to postpone the measure by one
year and to consider, together with the industry,
alternatives to reduce its climate impact.
Turkey: Despite a challenging regulatory
environment, Scotch Whisky exports to Turkey
saw double-digit growth in 2015. This is due both
to the ongoing tax harmonisation between whisky
and the local spirit raki and the consumer trend
towards premiumisation. The political situation
meant issues relevant to the industry hardly moved
forward during 2015. With a new government now
in place, 2016 is likely to see more activity. We have
met the Finance and the Agriculture Ministries in
Ankara, and we are hosting a Turkish delegation to
Scotland as part of efforts to reduce the sampling
requirement for Scotch Whisky and to improve
market access.
www.scotch-whisky.org.uk
Cross-cutting issues
Medium priorities
As Mexico drafts legislation on the definition of
alcoholic beverages, we have been working with
the Mexican authorities in the hope of securing an
appropriate quality definition for whisky. An SWA
visit led to some beneficial discussions with the
Mexican authorities who lead on the legislation. The
draft legislation is likely to be finalised in late 2016.
ASEAN markets: Thanks to the hard work of British
Ministers and EU officials the EU-Vietnam FTA
should deliver on all our objectives, including the
elimination of the tariff on spirits, though we need
to watch to ensure that changes to the internal
taxation arrangements do not simply offset this. We
are also working to help prepare the EU’s position
on the proposed FTA with the Philippines.
In Nigeria, a ban on access to Foreign Exchange
has applied to 40 sectors since June 2015, and the
Government is considering expanding the list to
include alcoholic beverages. We continue to seek
new and effective ways to persuade the Nigerian
Government that a combination of lower tax and
better control of the illicit market could lead to
substantial increases in Government revenue.
We have worked to maintain relations with key
interlocutors in Taiwan, an important market
especially for Single Malt Scotch Whisky, and seek
enforcement of the lot code requirement.
Angola surprised importers by introducing explicit
and high level excise tax discrimination in late 2015.
Progressing this matter has been challenging,
and an official request to Angola by the EU Trade
Commissioner, Cecilia Malmstrom, has not yet been
answered. We continue to pursue all avenues to
remove these measures, which clearly breach WTO
law in our second largest market in Africa.
Hungary: The key issue of concern remains the
discriminatory ‘health tax’ which protects domestic
products and breaches EU law. The Commission
has opened infringement proceedings.
Serbia: We have continued to work closely with
the Commission to remove the tax discrimination
against Scotch Whisky and other imported spirits,
and as a result the EU has agreed that negotiations
on the taxation chapter can only take place once
Serbia has addressed the issue.
WTO negotiations: We have actively engaged with
the World Trade Organisation (WTO) for many years in
three main capacities: as a stakeholder in multilateral
trade negotiations; through participation in eight trade
disputes; and as a frequent user of the low profile
but crucially important standing mechanisms of the
WTO system, such as the Committee on Technical
Barriers to Trade. The WTO’s role as the source of
international trade rules and a forum to settle disputes
is of fundamental importance to the Scotch Whisky
industry.
The December WTO Ministerial Conference in Nairobi
made useful progress, notably in heralding a change
in focus for the WTO’s negotiating function, away
from the ‘Round’ approach to negotiations, where
nothing is agreed until everything is agreed, to a forum
where smaller agreements between coalitions of the
willing are negotiated and their benefits are extended
to all WTO Members. One example is the expanded
Information Technology Agreement, finalised at
Nairobi. There is also an appetite to look at technical
regulatory issues within the WTO Committees, where
best practice can be promoted and experience shared
between traders and regulators.
FTAs: For now, however, the significant trade
liberalisation negotiations are taking place primarily
bilaterally, between the EU and key third country
markets. These Free Trade Agreements (FTAs) offer
the chance to secure tariff elimination, recognition
of Scotch Whisky as a ‘geographical indication’ and
enhanced regulatory co-operation. They can also be
a lever to secure improvements in particular market
access issues. The successful conclusion of the EU/
Vietnam FTA delivered on all four fronts in 2015, while
negotiations continue in various other key markets
for the Scotch Whisky industry. Despite political and
economic difficulties in Brazil, there is some optimism
that we may see progress in the EU-Mercosur
negotiations in the year ahead, particularly with the
significant political changes in Argentina. Overall we
continue to work closely with the UK government and
Commission to secure the best deal for the industry.
Quality definition of whisky: We also seek to promote
a quality definition of “whisky” worldwide and in 2015
the Council reaffirmed its mandate to us to continue
16
Scotch Whisky Association ANNUAL REVIEW 2015-16
requirements. We broadly support this exemption
remaining intact, although, with an eye on the
sensitivity of the obesity debate in the UK, we want to
see a solution on the specific issue of calorie labelling
that allows members who wish it to carry on providing
calorie information either online or on the label itself.
in this work. We contributed in depth to discussions
on proposals to introduce new definitions of “whisky”
in Mexico and the Dominican Republic, and we have
ongoing dialogues in other major markets as they
refresh their definitions. A Scotch Whisky definition
in line with the Scotch Whisky Regulations 2009 has
been accepted in Ghana. We continue to work on
introducing a similar definition in the East African
Community (EAC) and hosted a visit by standards
officials from Tanzania, Kenya and Uganda in July.
Tax: Internal tax reform is desirable in a number of
markets including Brazil, Malaysia, Thailand and
Vietnam as well as a number of Indian States. In
conjunction with the SWA economist, members
and others, we regularly analyse which countries
have similar tax issues and explore opportunities to
resolve them. This is also true within the EU where
discriminatory tax sometimes needs to be tackled. In
Greece, for example, the Commission had to issue a
reasoned opinion formally requesting the Government
to amend its excise duty rates for tsipouro and
tsikoudia and remove the illegal tax measures.
GI Registration: We also seek to have “Scotch
Whisky” recognised overseas in local laws or
registered as a Geographical Indication (“GI”). Since
last year we have secured GI registrations in Ecuador,
Botswana, and Mozambique and in the 17 West
African countries of the African Intellectual Property
Organisation. This brings the total number of countries
where Scotch Whisky is registered as a GI to 69,
including the 28 members of the EU.
EU Regulation: Scotch Whisky exports to Europe have
long benefitted from a meaty EU rulebook that helps
remove trade barriers and prevent new ones from
emerging. But constant vigilance is required to ensure
that the single market actually operates in practice
as a single market, and that balanced EU legislation
developed over many years to protect the reputation
of Scotch Whisky is maintained. We have been in
constant touch with European Commission officials on
their plans to revise the 2008 EU spirit drinks regulation
(110/2008), stressing that the current rules in general
work very well from a Scotch Whisky perspective. This
will be a high priority issue throughout 2016 as we
assess the impact of proposed changes.
Public health reasons are often put forward to justify
onerous measures, such as trade barriers, across
the world. We are committed to helping people
reduce harmful consumption of alcohol. In Botswana
for example responsible consumption campaigns
proposed by the industry assisted the government
in keeping the Alcohol Levy rate stable, instead of
doubling it, as expected. In contrast, in Ireland, the
proposed Public Health (Alcohol) Bill was developed
without industry consultation and contains many
contentious measures, ranging from minimum unit
pricing for alcohol and general health warning labels,
to advertising and selling restrictions. If implemented,
these would create a barrier to trade and set an
unwelcome precedent.
Labelling: We are also awaiting a Commission
report assessing the current exemption of alcoholic
beverages from EU nutrition and ingredient labelling
17
www.scotch-whisky.org.uk
Annual Review – Management
2015 was a year of significant change for the SWA, moving HQ in
Edinburgh and opening a new London office, as well as welcoming
several new staff and moving to a new structure and working methods.
We have achieved all this significant change with no increase to our
subscriptions budget.
Our 32 Edinburgh-based staff moved into our new HQ
at Quartermile in Edinburgh in October. It provides a
top-class modern working environment for our teams,
enables us to showcase the industry and its products
more effectively, and allows us to host events which help
us network more systematically. We were delighted that
the Deputy First Minister, John Swinney MSP, formally
opened the office in January.
The SWA’s new London office opened in September.
The objective was to have a permanent team
based in London who could engage more quickly
and immediately with London-based contacts and
institutions, particularly those in the international field.
It is that international focus which explains why our
new Global Affairs Director, Sarah Dickson, is based in
London and runs our Global Affairs team from there. The
office is already showing its value with a big range of
extra contacts among Parliamentarians, senior officials,
and diplomats. It was formally opened in November
by the DEFRA Secretary of State, the Rt Hon. Liz Truss
MP, at a launch event attended by Parliamentarians,
government officials, Ambassadors and members of
the diplomatic community, academics and media, and
covered on the BBC’s main evening radio news.
Finance
All these changes, and others, have been accomplished
within a flat subscriptions budget and we will operate
once again within a zero increase for subscription
income in 2016.
The SWA’s accounts for the year ending 31 December
2015 were recommended by the Council for approval at
the members’ General Meeting in May 2016.
The income of the Association in 2015 from membership
subscriptions was £6.8 million. There was also a small
amount of further income from legal recoveries and
sundry sales income.
The Association is a non-profit-making organisation.
Income is matched to expenditure targeting the smallest
possible surplus. Very broadly, 50% of our expenditure
is on salaries and related costs, 20 to 25% on legal
protection of Scotch Whisky, 15% to 20% on other
campaigning, government relations, and operational and
technical affairs, and 10% on finance and administration.
The SWA’s Departmental structure, and full team
with roles and responsibilities, can be found on our
website at
http://www.scotch-whisky.org.uk/who-we-are/swa-team/
Left to right: Sarah Dickson, David Frost and Liz Truss.
John Swinney at our new HQ, Quartermile, Edinburgh.
18
Scotch Whisky Association ANNUAL REVIEW 2015-16
2015 Export Statistics
The value of Scotch exports was more than £3.8 billion in 2015.
In volume terms, exports amounted to 324 million litres of pure alcohol (LPA),
equivalent to over 90 million cases.
EXPORTS OF SCOTCH WHISKY IN 2015
70.0
by VOLUME
324,000,000
LPA
21.1
70.3
TOTAL
EXPORTS
6.0
by VALUE
£3,800,000,000
8.9
KEY:
Bottled Blended
QUICK FACTS
Total exports equal:
23.8
Single Malt
More than 1 billion
bottles of Scotch Whisky
Bulk
34 bottles
every second
£
£120
every second
In 2015, Scotch Whisky was directly exported from the UK to 175 countries, a clear sign of the global
nature of the industry.
While exported directly to so many countries, 78% of exports were delivered to the top 20 markets
as a first port of call. However, despite this concentration within the major markets, several are used as
international hubs where Scotch will be forwarded to other markets, further extending its global reach.
The EU maintained its position as the main region for Scotch Whisky exports accounting for
37.6% of all Scotch exports in 2015.
Asia is the second largest region in volume terms – over 63 million LPA (equivalent to 17.7 million 9
litre cases) was exported in 2015, almost 20% of all Scotch Whisky exports.
The North American markets provided strong support for Scotch Whisky exports in 2015. Total
exports increased by an additional 1 million cases, or 7.8%, to 14.5 million cases. North America
accounts for 16% of the volume of total Scotch Whisky experts and more than 24% of the value.
19
The Scotch Whisky Association
1st Floor, Quartermile Two
2 Lister Square
Edinburgh EH3 9GL
0131 222 9200
10 Greycoat Place
London
SW1P 1SB
020 7960 6978
[email protected]
www.scotch-whisky.org.uk
Follow us on Twitter @ScotchWhiskySWA