{"text":[[{"start":7,"text":"Holyrood Distillery, a craft whisky maker housed in a 200-year-old former railway building near the base of Arthur’s Seat in Edinburgh, had a busy summer hosting tasting tours during the festival season."}],[{"start":19,"text":"It was a high point in an otherwise tough year for the distillery, which cost near £7mn to fit out before it opened in 2019. In the spring, months of slowing demand forced the distillery to pause production from its two towering copper pot stills for the foreseeable future, says co-founder Rob Carpenter. With 4,500 casks maturing in warehouses, he has enough stock to release bottles for “some time”."}],[{"start":45,"text":"“People are being really cautious with what they spend,” says Carpenter."}],[{"start":49,"text":"The distillery is one of the many independent producers struggling to survive the industry’s worst downturn since the 1980s. Overproduction in the 2010s has resulted in a surfeit of casks maturing just as demand has ebbed due to the global cost of living crisis and uncertain drinking trends among younger generations."}],[{"start":68,"text":"It is not the first time the industry has faced an oversupply “whisky loch”. But it has caused many to look at the long-term viability of businesses built around a product that is vulnerable to economic downturns and changing consumer habits. The fear this time for some investors is that alcohol is the new tobacco, in structural decline."}],[{"start":null,"text":"

"}],[{"start":89,"text":"The amount of whisky maturing in casks has soared from less than 400mn litres a decade ago to around 1.4bn litres this year, or 389mn cases — enough to meet current consumption levels for three years, according to Martin Purvis and Duncan McFadzean’s Commercial Spirits Intelligence newsletter. That has caused many of Scotland’s distilleries to curtail output by more than a third, insiders say."}],[{"start":116,"text":"The financial pressure is prompting a new round of experimentation in an industry prized for purism and tradition. Distillers are introducing sweeter varieties and novel products, like pre-mixed cocktail cans, in order to appeal to new customers. Investors are exploiting the glut, stowing away casks for future returns after maturation. Optimists hope whisky’s romantic resonance in growing overseas markets, especially India, will speed broader recovery."}],[{"start":145,"text":"The industry that emerges from this downturn, as in previous cycles, is bracing for a period of consolidation — though mergers and takeovers have been relatively rare so far as buyers and sellers disagree on fair value."}],[{"start":159,"text":"Major producers, including global drinks giants Diageo and Pernod Ricard, which control more than half of the overall Scotch market, have larger balance sheets to ride the crisis out — even though their share prices are down; Pernod’s has fallen by around 70 per cent from a 2023 peak. Diageo has paused production at Teaninich."}],[{"start":null,"text":""}],[{"start":null,"text":""}],[{"start":181,"text":"Instead it is the smaller, independent distilleries that produce some of the more niche, experimental whiskies that are in trouble. As many as a quarter of Scotland’s 160 distilleries could be up for sale, according to McFadzean, who is also chief executive of investment bank Noble & Co."}],[{"start":198,"text":"With banks reluctant to lend more to the sector, and distilleries running out of cash, foreign investors are circling for distressed assets. “We’ve had some ridiculous low-ball offers,” says Carpenter of Holyrood Distillery."}],[{"start":198.5,"text":"Covid legacy"}],[{"start":211.806,"text":"Crises within the whisky industry are nearly as old as the commercialisation of the spirit itself."}],[{"start":218,"text":"In the first three decades of the 20th century, the consumption of spirits in the UK and its colonial outposts plummeted during the temperance movement. To get through the slump, larger Scotch producers partnered with Canadian distributors, who smuggled the whisky into Prohibition America, where it developed a reputation for quality in the moonshine era."}],[{"start":237,"text":"By the outbreak of the second world war, says industry veteran and author Nick Morgan, more than half the volume of Scotch exports and around 65 per cent of their value went to the US, which remains the sector’s most lucrative global market. “Prohibition was the best thing that ever happened to Scotch whisky, without a doubt,” he says."}],[{"start":257,"text":"Today’s oversupply is reminiscent of the 1980s, though it is not as severe. Back then, overproduction created the proverbial loch of unsold casks, only for the inflationary impact of the 1970s oil shocks to crater demand just as American tastes shifted to other spirits such as vodka."}],[{"start":276,"text":"Today’s glut is the result of increasing production during the 2010s, which led to an excess of casks maturing during times of global economic uncertainty."}],[{"start":285,"text":"First, the 2008-09 global financial crisis caused a brief dip in demand. A decade later, during the Covid-era boom, consumers flush with stimulus cheques were experimenting with cocktails at home. Companies raced to fill their warehouses."}],[{"start":300.73,"text":"But the anticipated demand did not materialise. Instead, another bout of inflation has hammered spending power, leading drinkers to cut back and trade down to cheaper booze brands."}],[{"start":312,"text":"That has put the Scotch whisky industry into another cyclical crisis. This time, growing health consciousness among consumers, the widespread availability of weight-loss drugs and socialising moving increasingly online are all dragging down consumption."}],[{"start":null,"text":""}],[{"start":null,"text":""}],[{"start":327,"text":"In the US, where last year 18 per cent of Scotch exports by value were sold, per capita alcohol consumption was 11 per cent below 2019, according to data provider IWSR. Twenty per cent of Americans who reported that they are drinking less said it’s because they “can’t afford it”, according to YouGov."}],[{"start":346,"text":"“We are back to levels [of abstinence] we have not seen since the mid-1940s,” says Bernstein analyst Nadine Sarwat."}],[{"start":352.79,"text":"While young people have also been blamed for the industry’s woes, analysts dispute the assumption that Gen-Z does not drink. The slump in consumption has been driven by younger people being hardest hit by the cost of living crisis and Covid lockdowns, they argue. Market researcher IWSR’s latest survey of 32,000 people across the 15 largest alcohol markets found that 74 per cent of Gen Z of legal age reported drinking in the past six months, up from 66 per cent three years ago, and catching up to the total adult population drinking rate of 76 per cent."}],[{"start":387,"text":"“Overall, the ‘Gen Z drinking less’ narrative isn’t a first-order explanation of the volume decline,” says Barclays analyst Laurence Whyatt."}],[{"start":396.85,"text":"Whisky producers are attempting to appeal to younger consumers with product innovations and growing demand for “ready-to-drink” mixed alcohol in cans."}],[{"start":404,"text":"Diageo has launched fruity, sweeter versions of its flagship Scotch brand Johnnie Walker tailored to younger, female drinkers. Made for cocktails, these cheaper bottles hope to challenge Scotch’s reputation as the preserve of seasoned, older drinkers. The brand has also tied itself to celebrities such as pop star Sabrina Carpenter in a bid to widen its reach."}],[{"start":424.05,"text":"“It’s a very, very resilient industry,” says Morgan, the author. “Looking at the [historic] sales figures and data for Johnnie Walker, every time the graph goes down, it comes up higher — down, then up higher — like a boxer getting up off the floor and then punching out.”"}],[{"start":440,"text":"Bulls believe that demand will roar back when the economy recovers, driven by emerging markets."}],[{"start":445,"text":"Recent export statistics have revealed “green shoots”, says Mark Kent, chief executive of the Scotch Whisky Association, a trade body. The volume of Scotch whisky exports in the first half of 2026 rose by 6 per cent to 50mn cases, compared with the same period last year, with the value up by a more modest three per cent."}],[{"start":466,"text":"For now, the US remains the most valuable export market for Scotch despite the impact of President Donald Trump’s imposition of 10 per cent tariffs on British goods. Whisky exports fell 15 per cent by volume between May and December last year."}],[{"start":null,"text":""}],[{"start":null,"text":""}],[{"start":480,"text":"To the relief of the industry, intense lobbying by the UK and Scottish governments resulted in a tariff carve-out for whisky from July. Negotiations are said to have played on Trump’s familial Scottish roots and fears for the bourbon whiskey industry in Kentucky. Distillers in Scotland normally import around $300mn of used American casks a year to mature whisky."}],[{"start":502,"text":"“With export volumes growing and costs down, many distillers are making more free cash flow now — so we may be past the worst and perhaps on the road to recovery,” says McFadzean."}],[{"start":513,"text":"Diageo’s latest full-year results for the year to the end of June showed free cash flow rising by $463mn to $3.2bn. The UK company, which produces about a third of all whisky in Scotland, has $8.5bn worth of ageing spirits inventory, of which over half is made up of Scotch."}],[{"start":533,"text":"“They [major producers] are like a central bank for whisky — they control how much whisky is in the market or out of the market at any given time, in the same way a central bank controls money supply to stabilise the economy,” says Alastair Valpy, chief executive of Volpe & Castello, a bonded warehouse and bottling company."}],[{"start":533.5,"text":"Casks for miles"}],[{"start":551,"text":"The current whisky excess has attracted interest from both consumers and speculators who believe bargain casks will appreciate in value over the next decade to produce both a healthy return — as well as exceptional whisky."}],[{"start":565,"text":"“The smart money is going into bonded storage,” says one industry professional, referring to warehouses approved by HMRC, the tax authority, which can store Scotch without paying excise duty until it is released for sale."}],[{"start":578,"text":"Across the post-industrial, semi-rural heartlands of Fife and Clackmannanshire, a growing number of bonded warehouses are storing much of the 22mn casks, or 12bn 70cl bottles, of whisky under maturation."}],[{"start":592,"text":"Three of them are operated by Volpe & Castello, founded by Valpy and Charles Costello in 2022. On the outskirts of Kirkcaldy, they have transformed a defunct furniture factory into a 200,000 sq ft facility where storing a cask costs around £50 a year."}],[{"start":610,"text":"Most of their clients’ 40,000-plus casks are being stored for long-term returns, though others bottle for consumption. A 30-year-old cask of the luxury Macallan brand, which they estimate would fetch around £600,000 to £800,000 at auction, sits on the floor to settle before a planned move into long-term storage."}],[{"start":630,"text":"Volpe & Castello’s longer-term business plan is to build the cask storage business into a bottling operation that can expand into markets such as the US and Asia. “Scotland makes the world’s finest whisky and Asia has some of the world’s most enthusiastic whisky consumers,” Valpy says."}],[{"start":648,"text":"China, which in January halved tariffs on Scotch to 5 per cent, has in recent years become an important market for premium whisky, but the value of exports tailed off in 2025."}],[{"start":659,"text":"Many argue India is the next big market. Already the world’s largest by volume consumed, the south Asian nation could in the coming years leapfrog the US as the world’s largest market by value as well."}],[{"start":null,"text":""}],[{"start":null,"text":""}],[{"start":671,"text":"“I think the final whisky frontier is India,” says William Wemyss, co-founder of Wemyss Family Spirits, an exporter. “There is a fundamental difference: India has a history of drinking brown spirits; China has a history of drinking white spirits, in terms of baijiu.”"}],[{"start":686,"text":"A UK-India free trade agreement, which came into force last month, halved import tariffs from 150 per cent to 75 per cent, with the rate being phased down to 40 per cent by 2036."}],[{"start":698,"text":"“That’s going to make premium Scotch substantially more affordable,” Wemyss says. Scotch only accounts for 3 per cent of India’s whisky market — so any expansion of that pie would be “very material”, he adds."}],[{"start":710,"text":"As the Indian middle classes grow, the hope is that they will upgrade their drinking preferences from cheap Indian blended whisky to higher-end imports from Scotland, including single malts and craft blends."}],[{"start":721,"text":"“India is pushing ahead — a young, aspirational population with easier credit conditions and therefore more liquidity to spend,” says Nishant Sharma, who moved to Scotland from India two decades ago. His independent company, Rutland Square Spirits, sells Scottish-made gin and rum inspired by his Indian heritage, with plans to move into whisky."}],[{"start":741,"text":"Interest from the subcontinent could also drive inward investment. Sharma has raised commitments of £50mn to invest into the Scotch whisky supply chain, including “distressed assets” such as distilleries."}],[{"start":753,"text":"In the 1990s, the industry drained the whisky loch through business restructuring and product innovation. Distillers brought distribution in-house to regain profit margins from overseas partners. They also expanded marketing of the “single malt” segment, blending romantic narratives and creative packaging to soak up excess liquid in the warehouses."}],[{"start":773,"text":"“The thinking in the ’90s was: ‘where can we find the money’,” says Morgan, the author. Now that the industry’s traditional markets are drying up, “clearly India . . . is a huge opportunity”."}],[{"start":785,"text":""}]],"url":"https://audio.ftcn.net.cn/album/a_1788750119_8088.mp3"}