CEO Members' Day Speech 2015

05 May 2015

David Frost, SWA Chief Executive

Members, guests, colleagues, ladies and gentlemen, a lot has happened since we were here last year. We've had an independence referendum and Scottish politics may never be back to normal.

We've seen the international scene get riskier, exporting get tougher and yet we've seen the Scotch Whisky industry continue to grow. New distilleries opening, new investment flowing in
and new members joining this Association.

So despite the challenges, we are in good heart as an industry and as an Association.
That's where I want to begin: with my Association team. I want to give a big thank you to all the SWA's staff for all the hard work they have put in this year. It is great working with such a committed and such an expert team.

I want to say a particular thank you to Campbell Evans and Nick Soper, who have left us since we last met, and who deserve the highest esteem for what they have done for our industry.

You, our members, also deserve a big thank you and particularly your incoming and outgoing chairs, Pierre Pringuet and Ian Curle. Without the work you all put in on committees and council, we could not be as successful as we are.

These two elements - my team, and you the members - are the building blocks of the new even stronger Association we're building this year. For no extra cost to you, we are delivering:

  • extra emphasis on making our case with politicians, diplomats, and civil servants in London;
  • a properly staffed London office, headed by a senior professional out of government, to do this;
  • work more clearly focused on the four central priorities that determine our industry's success;
  • more presence in the public debate about why open markets are so closely linked to our success;
  • a better skills mix through new jobs, new recruits, and better training and opportunities for everyone who works for the SWA.

I am delighted that Julie Hesketh-Laird has stepped up to be our new deputy CEO, and is taking a vital role in helping us deliver this ambitious agenda.

As you know we are also taking the big decision to move to a new Edinburgh office over the summer. This will help us showcase our industry better and give our staff a better working environment. It is a statement about the kind of Association and indeed industry we want to be and vital to the progress I want us to make towards an even stronger even more effective SWA, able to deliver success for all of you.

We have a particularly special success to celebrate this year; last month the Chancellor cut duty on Scotch whisky by 2%. The first cut since 1996, and only the fifth since the Excise act in 1823. David Williamson and his team were a key part of a brilliant campaign that for the first time systematically engaged all political opinion across all the UK. The result was a great one and he and the team deserve huge credit for getting us there.

I've no doubt we will need to fight this campaign again. It is still iniquitous that 77% of the price of a typical bottle of Scotch is taxation but we welcome and applaud this clear signal of support from our government. We deserve that support.

We are a major UK industry by any measure. We produced an economic report in January showing the following figures;

  • £5 billion on UK GDP every year
  • 40,000 jobs supported
  • amongst the best paid staff in Scotland
  • £4 billion on the U.K.'s trade performance each year

We are growing still further. You the established producers are continuing to invest and last year six new distilleries saw spirit flow for the first time and we've already seen one more this year. Indeed we are aware of 30 or so new distillery projects. We haven't seen anything like this for years.

These new entrants to our industry will bring extra economic strength and political weight. I want to make sure they join us in building even stronger industry and operate within the mainstream of our traditions and our work. I'm sure big and small producers, established and new producers, won't always agree on everything but there are huge benefits from working together as closely as we can.

Those new entrants to the industry are also driving a growing debate around what "craft" means in whisky making, we have nothing to fear from that.  After all, the modern Scotch whisky industry is a great craft business. How else could you describe an industry that:

  • makes 2 billion+ bottles every year
  • can be confident how the spirit will taste in 3, 5, 10, 20 years' time, and replicate that year-on-year
  • produce a range of styles and products that can meet any consumer need worldwide
  • and at the same time improve performance on health and safety, the environment, energy, and compliance in many areas.

This is really an incredible scientific and technological achievement. No other spirit comes close and we should all be extremely proud of it.

Another area where we can be proud of our work is our export performance. Of course 2014 was challenging; global trade slowed again, the Eurozone continued to limp along, we have a major crisis in Russia and the austerity measures in China continued. None of this is going to get any easier in the short run.

I know we all feel under more pressure and having to work harder to get results but for all that our performance is still pretty impressive, we still exported £4 billion last year. To hold the fall in exports to just 3% in volumes and 7% by value is a strong performance and trends are still working in our favour. We are still consolidating in developed markets, in emerging markets underlying growth is strong especially in big markets like Mexico Brazil or India. It's only the problems in China or Russia, or the dreadful economic policy-making in places like Venezuela, that blur the picture. So no complacency, but no misplaced gloom either.

Our success even in difficult markets like India, where exports went up 30% last year, shows we can be successful even in the most challenging conditions. This year we've had successes elsewhere as an Association: stopping discriminatory tax rises in Chile or seeing off pressure of the graphic health warning labels in Thailand but the battle is never-ending. That's why - as we heard from Simon Fraser earlier - our partnership with the UK government is vital, and I'm confident that, whoever wins the election, they will support us as we press for fair access to all our markets in future.

Another area that is important for us is the ongoing debate about the social consequences of alcohol. I still see this is our biggest long-term challenge. Our reputation as an industry depends on our being visibly part of the solution to misuse of alcohol, and we are.

We collaborate very closely with the Scottish government in dealing with harmful drinking, the Scottish Government Alcohol Industry Partnership is central to that. It is helping deliver really good outcomes and we strongly support it. Our refreshed Code of Conduct on Marketing, which binds us all, is a model of good practice in how to market responsibly in the online world.

Our own new Scotch Whisky Action Fund, supporting innovative projects to tackle misuse, also signals that intention: last year we got eight times as many applications as we could support and this year the signs are the same will be true again, but there's always more to be done and we are working on a new strategy to give extra focus and more impact to our work.

It is true of course that the legal case on minimum unit pricing remains unresolved, and it remains controversial. As we predicted, we are seeing other countries and territories begin to take up the idea but the case is now in the European Court, as we wanted it to be. We are confident of our case, we have a great Legal Director in Magnus Cormack to help us make the arguments and we look forward to vindication in the next 12 months.

Finally, a few words on the political scene. We are in the middle of an election campaign, a campaign that in Scotland is being fought in the aftermath of the passions unleashed by the referendum campaign. Indeed the ongoing ripples from that campaign have put Scotland at the heart of British politics as perhaps never before.

For us, that brings opportunities and challenges. Opportunities: because more systematic focus on Scotland's needs, by way of infrastructure, skills, connectivity, and business support, after the election, can only be good for us. Challenges: to make sure that wealth creation and competitiveness remain at the heart of the political debate.

You may remember that immediately after the referendum Scottish business in a joint statement said:

"the touchstones of the new devolution settlement must be boosting business and growth. Whatever devolution settlement is now agreed must be stable and sustainable… Any extra powers should be used to make Scottish business more competitive."

To put it charitably I am not sure these ideas have been a big theme in the election campaign so far. Of course social spending and greater equality are important, but we will not achieve them unless we have a prosperous and successful business sector here in Scotland and across the UK. Nor will we achieve them if politicians end up casting aside the work of the Smith Commission for short-run political reasons and getting into yet another debate about the constitution.

Our needs are simple:

  • fair taxation
  • a flexible labour market that develops skills and allows us to create jobs
  • a business environment that enables us to get on with what we do best
  • a constitutional framework that gives us the support of all governments within the UK  to back our exports.

This Association will be pressing our politicians whatever the configuration of the new government to keep the focus on this and to deliver stability and competitiveness.

Ladies and gentlemen. To conclude, as I have made clear, our industry is in good shape and it is in good heart. So is your Association.

We face challenges but we are confident of meeting them, we have many opportunities and we are confident of taking them. You can have confidence in the work of your Association and we can all have strong faith in the future of Scotch whisky.

Thank you.