Scotch whisky holds a prestigious position in the world of spirits. Its rich tradition, complex flavours, and worldwide appeal position it as a symbol of luxury, craftsmanship, and cultural heritage. The forecast for the Scotch whisky market from 2024 to 2028 indicates substantial growth in the industry, influenced by various factors and is characterised by significant trends and challenges.

Market Projections

According to Technavio, the Scotch Whisky Market is set to expand, with an anticipated increase of USD 15.11 billion and a Compound Annual Growth Rate (CAGR) of 9.03% between 2023 and 2028. The market’s accelerated CAGR during the forecast period highlights its strong potential for growth and development.

Driving Forces

Several key factors are driving the growth of the Scotch whisky market:

International Demand

The increasing international demand, particularly from emerging markets in Asia, Europe, and North America, is driving growth. In these regions, Scotch whisky is being embraced as a symbol of luxury and tradition.

Online Accessibility

The expansion of online platforms and e-commerce channels has greatly increased the accessibility of Scotch whisky. These platforms significantly boost growth by directly reaching consumers.

New Whisky Drinkers

Once perceived as “a man’s drink”, whisky continues to attract diverse demographics because its offerings have become more varied and approachable.

Health-Conscious Trends

With consumers becoming increasingly health-conscious, interest in organic whisky variants is on the rise. Brands such as The Glenlivet and Nc’nean, which offer organic ingredients and avoid artificial additives, are catering to this demand.

Scotch Whisky Market Trends

A pivotal trend shaping the market is the increasing demand for premium Scotch whiskies. Consumers are increasingly ready to pay more for exceptional quality, storytelling, and exclusivity, driving the demand for single malt expressions.

This movement could be fuelled by millennials who favour quality over quantity, attracted to the allure of the finest offerings. Even younger demographics, notably the 18-25 age group, have shown a remarkable 25% increase in whisky consumption since 2021, according to a YouGov poll in 2022.

Diageo’s Prima & Ultima exemplifies this trend by offering enthusiasts a rare glimpse into vintage casks from iconic distilleries, some of which have been inactive for years. The fourth release, 8-bottle set, is available for purchase on The Whisky Exchange for £45,500.

The increasing popularity of premium cocktails provides a new and accessible viewpoint on whisky appreciation. Moreover, a 2023 report by Distill Ventures highlights the expanding role of women, who now make up more than 35% of whisky drinkers in the UK and the US.

Scotch Whisky Major Challenges

According to The Scotch Whisky Association (SWA) global exports report figures show a slight decrease from the exceptional exports of 2022, a “bumper” year as global markets recovered from the pandemic. In comparison to 2019, Scotch Whisky exports experienced a substantial 14% increase in value, coupled with a 3% growth in volume.

Despite these encouraging trends, industry leaders caution against overlooking the significant challenges anticipated in 2023, domestically and in key markets. They stress the necessity for concrete government support to sustain long-term growth, highlighting several key factors:

UK-India Free Trade Agreement Discussions

In 2023, India’s export value was £278m, representing a 22% decrease from 2022. This decline was due to ongoing discussions about the UK-India Free Trade Agreement and demands for tariff reductions on Scotch imports. However, it’s noteworthy that this figure is a 31% increase compared to 2019, pre-pandemic. India imported the equivalent of 167m bottles of Scotch Whisky in 2023, which is a 24% decrease from 2022, but a 27% increase from 2019.

USA Cost of Living Crisis

Historically the largest market for Scotch Whisky, the United States saw a 7% drop in sector-wide exports compared to 2022 and an 8.5% decline compared to 2019, totalling £978 million. Industry experts believe this is due to global economic conditions and increased living costs for US consumers. Despite expectations of a realignment in 2024, the SWA highlights the midpoint of the five-year removal of 2019-imposed tariffs on single malt Scotch Whisky. They urge the UK government to maintain efforts in negotiating tariff-free trade with the US.

In addition to export challenges:

The Bourbon Shortage Dilemma

Over the past decade, the rapid expansion of distilleries in the U.S. has outpaced the growth of new cooperages, causing a significant impact on the Scotch whisky industry. This imbalance between the demand and supply of ex-bourbon barrels is leading to increased cask prices. To address this issue, whisky makers are demonstrating resilience. Major producers are maintaining their maturation profiles without compromise and pressuring suppliers to secure the necessary cask volumes globally.

Potential Ban on Peat

Scotland is considering a ban on peat sales to protect moorlands and address climate change. This restriction could complicate or even halt the production of peated whiskies, potentially increasing their scarcity and value.

Scotch Whisky Market Segments

The CGA RSM Hospitality Business Tracker reported an 8.8% increase in sales for Britain’s managed pubs, bars, and restaurants in December 2023 compared to December 2022. UK on-trade spirits sales reached £7.6 billion (US$9.7bn) in 2023, marking a 4.6% decrease from 2022. However, sales of Scotch and imported whiskies rose by 0.3%.

According to Fortune Business Insights, the off-trade channel segment experienced the highest growth in 2022 and is expected to maintain its dominance in the coming years. William Grants & Son’s annual report for 2021 shows that off-trade sales in the spirits sector increased by 14.3%. This surge is largely due to the increased availability of products in off-premises channels following the re-opening after COVID restrictions.

Scotch Whisky Key Regions

According to the SWA, in 2023, the Asia-Pacific region maintained its position as the largest market for Scotch Whisky in terms of value (£1.8bn). Meanwhile, the USA remained the largest export destination for Scotch Whisky (£978m).

Notably, value exports to China saw a record surge of 165% compared to 2019.

Singapore (19%) and Taiwan (8%) also contributed to the region’s dominance. This is due to the trend of premiumisation, especially the growing preference for single malt Scotch Whisky in China and Singapore, which witnessed double-digit growth from 2022.

Europe remained a crucial export region for Scotch Whisky, with France reclaiming its status as the industry’s biggest volume market (174m bottles).

Market Analyst Overview

In conclusion, the forecast for the Scotch whisky market from 2024 to 2028 indicates a promising trajectory marked by substantial growth. With an anticipated increase of USD 15.11 billion and a Compound Annual Growth Rate (CAGR) of 9.03%, the industry is poised for expansion, driven by various factors including international demand, online accessibility, and evolving consumer preferences.

The increasing demand for premium Scotch whiskies highlights a shift towards quality. This is evidenced by the fact that in 2023, exports of Single Malt Scotch Whisky exceeded £2bn for the first time, according to the SWA. This growth is driven by a new generation of enthusiasts, changing demographics, and growing interest in regional markets like China, Singapore, and Taiwan.

Despite facing challenges, the Scotch whisky market displays resilience, adapting to changing consumer trends and market dynamics. Through strategic initiatives and collaborative efforts, industry participants can navigate these obstacles while leveraging new opportunities. This ensures a sustainable and prosperous future for one of the world’s most iconic spirits.