Menu

To get a preliminary idea of how Brexit might affect the Scotch whisky market

To get a preliminary idea of how Brexit might affect the Scotch whisky market, I have conducted a quiz to try and determine the opinion of a number of people on the relationship between Brexit and Scotch whisky. Regrouping questions about gender, age, country of residence, whether people have ever drunk whisky or not, where they usually drink whisky, how often they buy it, how much they know about it, their deciding factor for buying whisky, and how people see and expect the relationship between Brexit and Scotch whisky to evolve and interact.
Thanks to this quiz, I was able to collect quantitative data on this matter from 100 respondents, from which I conducted part of my analyses.
My quiz regrouped several, different types of data: Discrete Numerical Data (Age), Dichotomous Data (“Have you ever drunk whisky ?”), Ordinal Data (“Do you think will … the prices of Scotch whisky ?, …) and Nominal Data (Country of Residence, …).

From this data, I tried to see how certain factors influence others: for example, how male respondents’ answers differed from females’ ones, or how answers from people living in the UK differed from those of people living in European Union Post-Brexit or to the rest of the world, or even how different elements could influence consumer behavior.

We Will Write a Custom Essay Specifically
For You For Only $13.90/page!


order now

Here, we can see the answers to some of the questions in the quiz to help us understand how Brexit could influence (or not) the general consumer behavior :

• Do you buy whisky often ?

United Kingdom EU Post-Brexit Rest of the World

We can then determine that the EU Post-Brexit and the UK consider themselves to be bigger drinkers of whisky than the rest of the world does (including the United States of America, Canada, Thailand, New Zealand, …). Whether they actually do buy a lot of whisky compared to one another is statistically nullified with large numbers of people. One thing to note, however, is that this question was “do you buy whisky often” and not “do you buy Scotch whisky often”, and not only do the EU Post-Brexit and the UK consider themselves to bigger buyers of whisky, but they also are the major market for that good.

• Which factor is the most important when buying whisky ?
United Kingdom EU Post-Brexit Rest of the World

For men and women both in the United Kingdom and EU Post-Brexit, taste is the single biggest deciding factor when buying whisky (meaning even if Brexit was to result in an increased price, consumer behavior probably wouldn’t be critically changed). Moreover, men seem to grant more importance to the country/region of production of the whisky than women do, meaning men would probably be more okay with paying more to keep drinking the whisky from their favorite regions (here, Scotland). However, for the Rest of the World, both Price and Name appear to be quite relevant, making them more sensitive to changes in price.

Thanks to the quantitative data collected, I found out about half of the respondents believed there would be no relation between Brexit and Scotch, and the other half believed on the contrary there would be a relation between the two and that it would probably make prices rise. Moreover, it appears that the single most important factor for people to buy whisky is taste (followed by Price, then Country/Region, then Name).
Therefore, if prices were indeed to change, Scotch whisky sales might not be as greatly affected as it could have been, although it does have an important place in consumer behavior.

On the short term (which we’ll consider to be between the time between the announcement of Brexit up to the present, the end of March 2018) we can already observe the main trends that emerged from the announcement of Brexit.
In 2016, the volume of Scotch whisky exported went from the previous 1.16bn bottles to 1.2bn, and value went from £3.855bn to £4.008bn totaling an average of 4,25% of increase in value and volume between 2015 (before Brexit was announced) and 2016 (after Brexit happened, given that the majority of sales happen in the second semester of the year).
In 2017, the volume of Scotch whisky exported went from the previous 1.2bn bottles to 1.23bn, and value went from £4.008bn to £4.36bn totaling an average of 5.25% of increase in value and volume between 2016 (one year after Brexit) and 2017 (two years after the announcement of Brexit, latest data available).
Europe remained the main importer of Scotch whisky on both those years, signaling the still extremely valuable market it represents (and that the UK still has access to, until March 2019).

To sum up

If the two years preceding the announcement of Brexit were a downward slope for the Scotch whisky market, the two years that followed it were actually an important increase in both value and volume, and we can imagine two possibilities here : either people are scared of the actual Brexit and started stacking up on Scotch whisky, or Brexit actually had a positive influence, short-term, over the market. But how come ?
We will see in the next part how the legal side of Brexit, with new trade agreements and economic cooperation, impacted the current outcomes of it.

2) Legally

Before Brexit was voted, the Scotch Whisky Association was already warning against the risks of leaving the European Union, and Diageo’s (leading company on the wine ; spirits market) chief executive, Ivan Menezes, pointed : “The single market, including its regulation of food and drink, and its single trade policy are central to the success of Scotch. It lets us trade across the EU simply and easily and helps give us fairer access to other overseas markets.”. Indeed, not only the relations between the UK and the EU will change : the UK’s relations and trade agreements with the rest of the world will change with its exit from the Single Market.
Two years after the Brexit vote, we already know what happened in between and can guess what could or should happen in the near future.

Immediately after the announcement of Brexit (the end of 2016 and the year 2017), and accordingly to the leaving procedure set out in the Article 50 of the EU Treaty, the UK and the EU started negotiating. Until the UK officially leaves the EU in the end of March 2019, EU laws and regulations still apply to the UK. That is, to give enough time for both parties to negotiate over the new relations and agreements that will replace the EU ones after the UK leaves it.
Concretely, we can observe three different categories of direct consequences of Brexit : first, things that Brexit won’t affect, then others that it will change, and finally some uncertainties that should be addressed.

World Trade Organization regulations hinder the EU from bringing any change to the tariffs set on imports (here, from the UK towards any country in the EU), thus meaning won’t suffer from any difference in tariffs, the current one being set to 0%. Moreover, a few countries set out a 0% tariff rule to all nations that want to benefit from it (the United States of America for example). Being sure the tariffs on the biggest importers of Scotch whisky shouldn’t be subject to change in the years to come means the industry and investors can be reassured and focus on other pressing matter

However, tariffs does not affect another important side of exports : The rules and requirements of exports. Indeed, since the UK will be leaving the EU and therefore also leaving the rules defined by the EU, the UK will have to redefine them, and it is yet impossible to determine whether that will have a positive or negative impact, though knowing the weight of the EU isn’t behind the UK to help in the negotiations, the UK very well might not get as good agreements, and especially for Free Trade Agreements. Finally, the UK will have to completely revisit and decide what new rules they want to set for VAT and excise duty.

The major uncertainty that is now shading the future of the Scotch whisky market is the same as the sword of Damocles hanging over the UK’s head : how will Brexit affect and change the relationship to the EU, legally and economically. The United Kingdom might want to be completely out of the EU, or might try and maintain really good relations and agreements, or maybe will ask to get a European Economic Area(EEA) status, as Norway for example has with the rest of the EU, which would mean respecting a (shorter) set of rules of the EU to keep relations and trades pretty good while, technically, exiting the EU.

To sum up

As the official Brexit day is inexorably getting closer, the Scotch whisky industry worries as the negotiations between the UK and the EU are still taking place, waving an enormous threat to the industry and a lot of consequences of the new regulations that might occur are impossible to know as of now. Whatever the case may be, the industry will have to face additional paperwork and formalities that will slow down and complexify the process of exporting. However, all of the new regulations will probably not be over when exit day happens : in the meantime, EU law will prevail to prevent from gaps in the law.
But what are the main answers to look for that will determine the future of Scotch whisky ?

x

Hi!
I'm Sam!

Would you like to get a custom essay? How about receiving a customized one?

Check it out