More Scottish spirits producers are showing signs of financial strain as weakening export demand, rising costs and trade barriers squeeze margins across the sector.
Research by restructuring specialist BTG Begbies Traynor found that 69 Scottish distilleries faced “significant” or “critical” financial difficulties at the end of the year, up from 49 in the previous quarter.
According to the Scotch Whiskey Association, there are more than 150 whiskey distilleries in Scotland, more than 90 make gin and a smaller number make vodka, rum and liqueurs.
Thomas McKay, managing partner of BTG in Scotland, said producers were facing a “perfect storm of falling demand, rising production costs and increased tariffs in key markets”.
Exports to the US and China, two of the most important markets for Scotch whiskey, have been hit by tariffs and tariffs, while domestic trends have also shifted.
Several UK pub groups have reported that customers are increasingly switching from spirits to cheaper alternatives such as beer or soft drinks. At the same time, broader societal changes, including declining alcohol consumption among younger consumers, have weighed on volumes.
McKay noted that demand for Scotch whiskey and gin peaked during the pandemic in 2020, when consumption surged in lockdown both in the UK and internationally.
“As that demand waned, the resulting oversupply depressed prices, while at the same time additional export costs to the U.S. began to rise sharply,” he said.
Distillers have also been hit by sharp increases in energy and labor costs over the past two years, further reducing profitability.
The challenges have already led to cuts. Last month, craft brewery BrewDog announced plans to close its distillery and spirits division, underlining the pressure on the wider drinks industry.
The variety is not restricted to Scotland. Export volumes of French wines and spirits fell to their lowest level in 25 years last year.
Industry association FEVS said shipments fell 3 percent year-on-year to 168 million cases, the weakest performance since the turn of the century. The sales value fell by 8 percent to 14.3 billion euros, the worst result for this indicator in five years.
The main obstacles cited were the tariffs introduced by the US under President Trump and the tariffs in China.
Gabriel Picard, chairman of FEVS, said new trade deals between the European Union and India and Mercosur countries in South America could help support exports in the coming year. However, he warned that sales of cognac and wine to the US and China could deteriorate further.
For Scotland’s distilleries, the coming year is likely to test their resilience. With rising costs, volatile export markets and domestic consumers tightening their belts, the industry, long one of Britain’s top exporters, is facing one of the most difficult trading environments in decades.
