Coronavirus: Scotland Distillers Face a Financial Impact

Highlights

  • China is the biggest spirits market, Scotch whiskey worth 89 million pounds was exported to China in 2019
  • The scotch whiskey production will be severely affected
  • A potential loss of 200 million pounds for the liquor industry

One industry which will be severely affected is the Scotch whisky industry, as its production will have a negative impact. China is the biggest market for spirits in the world. It is also one of the biggest markets for Scotch whisky. The total export of Scotch whiskey to China recorded in the year 2019 was worth 89 million pounds. The restaurants, bars and event spaces have been closed down in China which will surely dampen the demand.

The global level of grounding flights due to this pandemic will also affect duty-free sales. It’s an alarming situation for spirit giants, right from Diageo to Chivas, as they might be hit by a potential loss of 200 million pounds, due to the global pressure of the pandemic, resulting in future slowdown for the spirits industry. As there is a rapid increase in COVID-19 cases domestically, Scotch whisky producers will have to prepare themselves for supply chain disruption. They must consider seriously, if they can comply with professional obligations due to short falls in the supply chain caused by the virus.

The spirit companies will have to start by checking whether existing contracts cover the business in the wake of such events. Force majeure clauses are utilized to outline the steps taken in circumstances which are outside a business’s control. But even if current contracts contain these clauses, they may not be defined well enough to provide cover. It is always beneficial to comprise examples of the sorts of things the clause covers while the contract is being prepared.  The freeze on alcohol duty announced in last week’s Budget will provide a relief for Scotch producers.