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To get a concrete

Updated January 17, 2019

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To get a concrete essay

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To get a concrete, specific and precise idea of how Brexit influenced the Scotch whisky market, we must first define what exact situation it was in before Brexit even was in question.

To do so, I have tried to extensively analyze the industry’s data from 2015. In 2015, the volume of Scotch whisky exported went up to 1.16 billion(bn) bottles, a huge increase (10%) over the last decade, when the value went up 56% from £2.479bn. However, over the past two years, Scotch whisky sales decreased both in volume and value. This decrease was mainly due to slowdown in local economies such as for Russia, Brazil or a few African countries.

The European Union (excluding the UK) though remained the first importer for this market, totaling £1.198bn for a substantial 38% of total exports in volume for Scotch whisky. France, thanks to a ‘premiumization’ driving customers towards higher-quality Scotch whisky, came first in volume and second in value over the exports of Scotch whisky, accounts for a big part of the sales. The European Union keeps its major place in Scotch whisky sales and doesn’t look to be on a downward slope. Although Scotch whisky reaches other global markets that account for a non-negligible part of their revenues, the EU markets remain its privileged place.

However, EU markets reacted to this wave of ‘premiumization’ : countries still under the spell of the 2008 crisis went for less, and cheaper versions, whereas countries that got out of recession increased in sales performance. France, Spain, Germany, Poland, the Netherlands and Italy were all part of the top 20 markets for exportation of Scotch whisky, having a great impact on both volume and value, however counting more on volume than value. As we can see on the next picture from the Scotch Whisky Association’s annual report on Scotch whisky sales, France, Spain and Germany are the three European countries generating most sales both in volume and value for Scotch whisky. Credit : Scotch Whisky Association, “Scotch whisky exports review 2015” Keeping this data in mind, we can understand the importance of the European market for Scotch whisky, and wonder how Brexit will influence it, and what consequences we can expect from it. To sum up Over the last decade, the Scotch whisky market had been growing in both volume and value, but over 2014 and 2015 that trend was reversed.

At the brink of the Brexit vote and announcement, this trend can be a bit worrying. We will in the next part see what legal agreements linked the UK and the EU27 before Brexit to try and set a basis of understanding for the changes that occurred after it. 2) Legally The United Kingdom became a member of the European Economic Community (EEC, the ‘ancestor’ of the European Union) on January 1973, right at the end of a golden decennial for Scotch whisky. Unrelated to the entrance in the EEC, the downturn that started in the early 70’s, before growing again dramatically increasing until 1982, reaching £872m worth of Scotch whisky exports.

We will here briefly summarize the important factors affecting the Scotch whisky market up to 2015 (included) that would change with the exit of the United Kingdom from the European Union. Being part of the EEC then the EU, the United Kingdom gained from two main things : Being part of the Single Market and benefiting from the EU’s single trade policy. Since its entry in the EEC, it is estimated the UK’s GDP went up by approximately 5% thanks to the Single Market, which means it boosted both the Scotch whisky industry directly and indirectly (by increasing customers’ purchasing power). Moreover, the rules are set by the European Union that forces them to be uniformized throughout the Single Market : uniformity means, for the Scotch whisky market, less complexity and costs in the making and packaging of Scotch whisky. Guaranteeing the free movement of services, capital, goods and labor, throughout the EU27 with the addition of a few countries : Norway, Iceland, Liechtenstein and Switzerland.

It overall allows industries to make larger economies of scaling, while allowing for greater specialization and competition. But it also changes the relations with other countries and the balance of power when negotiating those. Indeed, the wine ; spirits market is very regulated worldwide and, thanks to the EU’s numerous Free Trade Agreements (FTA), the Scotch whisky industry benefited from preferential agreements (lower tariffs, less restrictions on certification of imports, more favorable rules on licensing, …) with the rest of the world. The EU, committed to a “strong, rules-based multilateral trading system” (Council of the European Union), also assures a high level of transparency, which is critically important for both exchanges outside of the EU but also inside of it. It also simply facilitates trade agreements for everyone as the Council of Europe is the only decider in matters of trade policy, thus preventing the EU and the rest of the world from having to conclude different agreements with each of the EU’s countries.

Finally, another important gain from being part of the EU comes from its protection of the Geographical Indication (GI) in the EC Regulation 110/2008 of the European Law. It assures ‘Scotch’ whisky is not taken lightly, that its name cannot be misused, therefore guaranteeing a certain quality and reputation to the region of Scotland, which, as we will see in the following part, is an important factor having an influence on consumer behavior. To sum up Being part of the European Union has allowed the United Kingdom, and therefore the Scotch whisky industry, benefit from a number of advantages, both inside and outside of trading with the EU. The regulations in place make sure the industry can focus on other matters than tariffs, geographical indications, etc. Brexit will thus put all of it in jeopardy, and the Scotch whisky industry now worryingly asks for the continuity or establishment of favorable trade agreements with both the EU and the rest of the world.

No real positive effect is suspected to affect the Scotch Whisky market as Brexit is being announced.

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