Select Committee on Scottish Affairs Minutes of Evidence


Annex A

THE SCOTTISH DRINKS INDUSTRY—BACKGROUND

SIZE OF THE MARKET

  Current sales of food and drink produced in Scotland are £7.3 billion, according to Scottish Enterprise. Scotch whisky accounts for £2.6 billion of this figure. The Scottish beverages sector as a whole employs around 16,000 people.

SCOTCH WHISKY

  Scotch whisky is one of the UK's most important export industries. It is Scotland's third largest[23] and the UK's fifth largest[24] manufactured export earning industry. In 2000 exports of whisky were worth just over £2 billion, accounting for 74 per cent of the value of UK exports of alcoholic drinks and for 90 per cent of total whisky sales by volume. The value of exports increased by 3 per cent in 2000, while export volume rose by 5 per cent.

  Consumption of whisky in the UK has exhibited long-term decline (in favour of wine and white spirits). In 1999 consumption was 323,000 hectolitres, a fall of 22 per cent since 1990 (30 per cent since 1985). In 1999 whisky represented 35 per cent of the volume of spirits consumed, down from 47 per cent in 1985.

  Scotch Whisky provides an important source of employment in Scotland, particularly in remote areas where other employment opportunities are scarce. Some 11,000 people are directly employed by the industry and it is estimated that a further 30,000 jobs are created through indirect employment.

  Whisky production has been increasing over the last few years and peaked at 4.8 million hectolitres in 1997. In 1998 it declined by just under 5 per cent to 4.6 million hectolitres, however it remained 20 per cent above the level of production in 1989. Whisky production accounts for 90 per cent of spirit production in the UK.

  The leading brand of blended whisky is Bell's, produced by Diageo plc, with 17 per cent, by volume, of the UK market25 Diageo has 14 distilleries in Scotland. In second place is The Famous Grouse, produced by Highland Distilleries (now a subsidiary of the Edrington Group), with a 15 per cent25 share of the market. The Teacher's brand, owned by Allied Domecq, is in third place with 7 per cent25 followed by William Grant's in fourth place with 6 per cent25.

  The leading brand of malt Scotch whisky is Glenfiddich (with a 41 per cent share, by volume, of the UK market25, produced by William Grant & Sons26. The company has three malt distilleries in Scotland. In second place is Glenmorangie with a 20 per cent market share25 and three distilleries at Tain, Elgin and Islay. Other leading brands include The Macallan (Highland Distilleries), The Glenlivet (Pernod Ricard) and Highland Park (Edrington Group). These three brands have 8 per cent, 7 per cent and 5 per cent respectively of the malt whisky market25.

OTHER SPIRITS

  There is substantial and increasing production of gin and vodka in Scotland. In 1998, 45 per cent of UK gin and vodka[25] was produced and/or bottled in Scotland. Diageo, which holds UK market leadership in the gin market with its Gordon's brand, has a 42 per cent market share25. It has a distillery in Strathleven, Scotland.

SOFT DRINKS

  In 2000 UK consumption of soft drinks was almost 12,000 million litres[26], with carbonated soft drinks accounting for 50 per cent of this total. The per capita consumption of soft drinks is higher in Scotland than in the rest of the UK with Scottish consumption estimated at around 18 per cent of UK volume consumption despite the country only representing less than 10 per cent of the UK population.

  Highland Spring Ltd is the largest UK producer and exporter of natural mineral water. It is a privately owned company and is based at Blackford, Perthshire. Highland Spring is exported to over 40 countries and is the exclusive supplier of bottled water to British Airways. It holds 8 per cent, by volume, of the UK still water brands sector and 8 per cent of the sparkling water sector[27].

  Strathmore Mineral Water Company Ltd (part of the Matthew Clark Group, owned by Canandaigua) produces a range of clear, mineral water based soft drinks marketed under the Strathmore Clear brand. Its plant is located at Forfar, Scotland.

  A G Barr is a long established soft drinks business, based in Glasgow. It holds a 5 per cent share[28], by volume, of the UK carbonates market and a 5 per cent share[29] of the non-diet carbonates market. Its best known brands are Iron Bru, Tizer and St Clements.

ALES AND STOUT

  Scottish Courage is a subsidiary of Scottish & Newcastle Plc (formerly the UK's leading brewer until Interbrew's acquisition of Whitbread's brewing operations in May 2000 and Bass's brewing operations in June 2000), with a third of the UK ales and stout market29 by volume. Its leading brands include McEwan's, Newcastle Brown, John Smith's, Younger's Tartan, Webster's and Courage Best. Scottish Courage's headquarters are located in Edinburgh.

  Tennent Caledonian Breweries Ltd (TC) is part of the Scottish Beer Division of Bass Brewers UK (currently a subsidiary of Interbrew of Belgium)[30]. Bass has a 21 per cent market share of the UK ales and stouts market. Tennent Caledonian has 1,700 employees and is located in Glasgow. Its main brands include Tennent's Extra Lager and Tennent's Export.

INDEPENDENT SCOTTISH BREWERIES

  Caledonian Brewery is located in Edinburgh. In 1919 its operation was taken over by Vaux & Co of Sunderland (now called the Swallow Group). In 1987 Vaux announced its closure and the brewery was sold to a management buyout. The company now has an annual turnover of £8 million and has a range of cask ales including Caledonian 80/-, R & D Deuchars and Campbell, Hope and King. It also brews Calders beer for Carlsberg-Tetley. Caledonian Brewery exports around 5 per cent of its turnover, mainly to North America and Sweden.

  The Maclay Group brewery is located in Alloa and originally began beer production in 1830. In 1871 it commenced production at its Thistle Brewery (closed in 1999). The brewing staff then started a new brewery in Alloa under the name of Forth Brewery, which continues to brew Maclay's beers and supplies them to Maclay's 14 managed community pubs and four hotels which are mainly located in Central Scotland. Maclay's tenanted pubs and the distribution operation (which distributes Maclay brands such as 80/-, Wallace, Honey Weizen and Thrapple Quencher) were sold to Bellhaven Brewery Company in 2001. Maclay's is now 100 per cent owned by the Matthews family, after the purchase in May 2001 of the 15 per cent stake held by Bass.


23   After office machinery and communication equipment. Back

24   After chemicals, metal goods (including motor vehicles), textiles and office equipment. Back

25   In 1999-Source: Mintel. Back

26   Sucralose Report. Back

27   In 2001 (est)-Source: Mintel. Back

28   In 2001 (est)-Source: Mintel Back

29   In 1997-Source: Mintel. Back

30   See paragraph 4.14 of the Memorandum. Back


 
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