Keeping Scotch transport on track

02 Apr 2015

Modal choice, flexibility and environmental benefit were the watchwords at a recent Rail Freight Group's conference in Edinburgh where I listened to my colleague Peter Clark speak on the importance of transport to the Scotch Whisky industry. 

Many of my fellow delegates were involved in the Hitrans-led 'Lifting the Spirit' trial. The pilot project in 2013/14 proved it is physically possible to move spirit from the highlands to the central belt by rail.  The opportunity may be great, but the report also highlights some practical challenges that need to be overcome for rail to be really effective.  Despite the obstacles, I was encouraged that rail freight operators and their supply chain partners are up for the challenge. 

A number of the delegates argued that commitment is required from Scotch Whisky producers to make rail haulage 'work'.  I'm sure that's certainly part of the solution. But an aggregated commitment from a range of industries with goods to haul would also be essential. Managing commercial discussions requiring commitment from producers will be difficult. It will, I believe, require a strong independent facilitator to help all players to identify, share and manage the risks -financial and reputational - involved in such collaboration, but it is achievable.

I've no doubt that a signal from producers of volumes available for rail haul might help get things moving.  But in a classic 'chicken and egg' situation, commitment will only come from confidence in the service on offer and evidence that it is at least competitive with the status quo. 

While Scotch Whisky cased goods exports in 2014 were slightly down on previous years, the overall outlook for Scotch is strong.  The disconnect between spirit production and cased goods shipments is down to the fact that spirit must be matured for at least three years before it can be called Scotch.  And while exports may have dipped over the last year, steady investment in production continues.  When a distillery is built or expands, haulage requirements for raw materials and spirit movements grow too, driving the need for ever-better and more flexible modes of transport for all the industry's inputs, products and by-products.  The opportunity for rail for these movements is great.

Our members are already committed to rail to get cased goods to UK ports for distribution to export markets.  Around 30% of all bottles headed to France went by rail in 2012.  Our partnership with freight operators appears to have worked for cased goods, so why not bulk?

To understand the challenges, it's important to recognise how much collaboration already takes place in Scotch at the production stage.  To make a Blended Scotch, tankers may take spirit from multiple sites for blending. Clearly this process must be precisely managed to ensure quality control.

Health and Safety is a priority for distillers. SWA Members have committed voluntarily to 'bottom-loading' loading of tankers by 2024 -  removing the need for staff and contractors to work at height.  Our road hauliers have been quick to respond to the challenge with big investments in new tankers. I'm optimistic that the rail industry could do likewise and that intermodal bulk tanks can also meet our bottom-loading requirements.

A unique feature of the transport of spirit is the requirement for it to travel under bond.  This means that security and strong revenue control of our high-value excise goods are essential, not just to avoid theft but also the significant fines that come from spirit travelling with the wrong electronic 'paperwork' or inappropriate insurance cover.  Rail movements, like all whisky movements, must be reliable and priced competitively.

On the face of it, these challenges appear achievable but the devil will be in the detail.  I believe we need a clearer understanding of the needs and requirements of all parts of the supply chain. We are appreciative that the Rail Freight Group created an opportunity to keep the conversation going following the trial.  To maintain momentum, and to ensure our supply chain is well-informed about our members requirements, we have put together a brief analysis (see below) of distiller's rail freight needs.  I hope this will help stimulate ongoing discussions and help us move forward with rail freight.

Julie Hesketh-Laird is deputy chief executive & director of operational and technical affairs



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