22 May 2019
Karen Betts' speech to SWA Members' Day
Good morning, and let me add my welcome to this year’s Scotch Whisky Association Members Day. It’s great to see so many of our members, large and small, here today. As well as many others connected to the industry. The SWA team and I are looking forward to catching up with you all during the course of today, and we hope you find the programme useful. Peter, thank you for opening today’s proceedings and for your reflections on the SWA’s work over the past year. Brexit has certainly kept us on our toes. And Derek, I know everyone is looking forward to hearing from you about the work the Scottish Government is doing to ensure that Scotland’s economy thrives.
As you’ll all know by now, today’s theme is the changing world of whisky, and we’ll be looking at the opportunities and challenges of that change. My challenge, in the next 15 minutes or so, is – in whisky terms – to whet your whistle on the subject. Our panel later will dig into the topic further from a range of industry perspectives, so it will be fascinating to hear what they have to say.
As far as I’m concerned, well I’m going to start with a statement of the obvious. Our industry is good at change. In more than 500 years of production, we have proved remarkably resilient and remarkably successful at finding the balance between continuity and change.
The world around us has changed around us hugely. And we’ve adapted and grown stronger, moving from local roots to become a truly global phenomenon and some of the world’s most recognisable consumer brands. We are fiercely proud that, today, Scotch Whisky is the world's number one internationally traded spirit, and that more Scotch is enjoyed worldwide than American, Irish and Canadian whiskies combined.
But what does the future hold? What does the changing world of whisky mean for us?
To answer this, I want you to join me in imagining the world in 2050, and in thinking about what we will need to do together to create the conditions for our industry’s future success. Because our industry’s aim, and my organisation’s mission, is to ensure that Scotch Whisky continues to grow in strength globally, for the enjoyment of generations of consumers worldwide, for the future of the communities we support and for the strength of the economy of which we are a part.
And looking into the future is, of course, something you are all good at, since many of your businesses plan at least 30 years ahead.
So, to 2050.
Millennials will be well into their 50s and 60s. Generation Z-ers will be at the heart of our industry, running it, leading it and snapping at the heels of their millennial bosses. Given Scotch Whisky’s family traditions, I think it’s safe to assume that many of our children will be in the midst of this. My son will be 40, and maybe he really will have a teleporter to zoom him anywhere he wants to go in a nano second, which is certainly what he believes now.
But what will all that mean for Scotch?
Well, if over the next 30 years the ships carrying Scotch around the world have fair winds and following seas, I’m going to suggest it will look something like this:
Scotch Whisky will remain the world’s preeminent whisky. We will continue to be, globally, the luxury spirit of choice. To do that we will have doubled down across our long-established markets in Europe and North America. And, critically, we will have secured our position in emerging markets. Because, by 2050, according to current economic and population growth rates, the top 5 economies in the world will be China, the US, India, Indonesia and Brazil. Scotch Whisky will have grown both with the growing affluence of the middle classes in these countries, and with consumers’ growing curiosity for exploring Scotch Whisky’s craft, sophistication and provenance.
Scotch Whisky’s global competitors – American whiskey, Irish whiskey, Japanese Whisky and other global premium spirits – will have done their best to knock us off our perch in the intervening years. But they will not have succeeded. Because Scotch Whisky’s consistency, quality, diversity and authenticity, alongside its heritage and its stories will win the day. Our industry’s skill in understanding the dynamic preferences of new and existing generations of consumers all over the world will be key to this. In 2050, we be continuing to evolve with these preferences, and innovating for them, as our own traditions evolve.
As we will have innovated in our products, so too will we have innovated in the way that we make Scotch. We’ll need to do this as our industry grows to ensure its sustainability into the future. Because by 2050 Scotch Whisky will need to be at the heart of a carbon-neutral, circular economy.
For a number of years now our industry has focussed on how we address climate change, because Scotch Whisky depends heavily on the landscape in which we’re rooted. Scotch hails from some of the most beautiful parts of Scotland, as do the water and cereals on which we depend. So we’ve long been ambitious to more than play our part in preserving the natural resources around us. In the last 10 years, since the launch of our Environmental Strategy, we’ve invested millions of pounds in moving our industry onto an environmentally sustainable footing.
By 2050 then, the industry will have reduced its reliance on fossil fuels to zero. In their place, we’ll be using renewable sources of energy, building on the solid foundations we have in place today. Through continued industry investment in ground-breaking research, innovation, and new technologies, we anticipate that many of our distilleries will be completely self-sufficient in their energy use. Some may even be bio-refineries, where we will be using by-products to create new raw materials for new uses, such as innovative sources of energy, and new animal and fish feeds. All our distilleries will have further improved their water efficiency, and will be fully capturing the energy stored in water heated for the distillation process.
By 2050, we’ll also have changed the way that we move Scotch so we minimise our environmental impact. To do so, the Scottish Government will need to have worked hand-in-hand with industry to ensure efficient, well-functioning and resilient infrastructure.
By 2050 we’ll want to be using ever more sustainable methods to move Scotch globally. Well ahead of 2050, we hope that sustained investment in rail transport will mean we can move more and more Scotch onto rail. Alongside sustained government investment in a rapid electric charging network for Scotland’s roads. These will provide an enormous boost to ours and other businesses, offering low carbon alternatives for our workers travelling between distilleries, bottling plants and export hubs; and new, cleaner ways for tourists to discover our beautiful country and its fabulous distilleries. With the right investment, by 2050 we will have seen visitor numbers continue to grow and to create further jobs across rural communities, boosting international trade and making tourism one of Scotland’s most significant industries. The Scottish Government’s current investment in super-fast, fibre optic broadband will have provided a significant boost to this as well.
Turning to farming and our supply chain, by 2050 we will have strengthened the sustainability of our barley supplies. New crop varieties, developed in collaboration with the James Hutton Institute’s world-leading barley hub, will be further improving the quality and consistency of our cereal supply; and new farm management techniques will be supporting strong, sustainable local ecosystems. Our use of peat will continue to be a net positive, since the peat restoration in which the industry is already engaged not only replaces more peat stocks than we use but also absorbs carbon dioxide from the atmosphere.
We will also have worked with the Scottish Government to ensure that the right incentives are put in place to encourage investment in new technologies and materials so that – well in advance of 2050 – our packaging will have become fully recyclable and zero emission. Glass bottles will be fired with renewable energy, and they will be lighter than they are now. Packaging will have a second life. And we will be continuing to lengthen the lives of the casks we use to mature Scotch Whisky.
Automation and the use of AI will have increased by 2050, raising further the industry’s productivity and improving the health and diversity of our employees as more heavy, physical tasks become automated. However, our people will remain central to everything we do, and critical to our success. We will continue to invest heavily in our workforce, developing new skills alongside nurturing ancient ones. For Scotch cannot exist without distillers and bottlers, engineers and scientists, coopers and coppersmiths, stock managers and marketing storytellers, blenders and bartenders. And it’s our investment in our people that underpins our industry’s high productivity, which currently stands at over £200,000 per employee. This is higher productivity than the energy sector, life sciences or the creative industries. By 2050 too, the industry will be seeing the benefits of the Scottish Government’s investment now in foreign language-learning in schools, with more and more distilleries welcoming tourists with multi-lingual tours.
Our commitment to ensuring diversity, from gender to background, ethnicity, age and disability, will be visible long before 2050. For the industry is working now to reflect and celebrate Scotland’s diversity and the diversity of our global consumers. In doing so, we want to attract talent to our businesses in Scotland and beyond. We share a responsibility with the government and the education sector to support the creation of this talent and to ensure that pipelines exist to bring great people into our industry and to provide them with fulfilling careers.
Turning to global trade, the openness of export markets over the coming years will be critical to Scotch Whisky’s growth. Within this, as I’ve said, today’s emerging markets will be hugely important. In an ideal world, despite some ups and downs as the UK leaves the EU and as the US and China learn to live with one another’s strengths, over the next 30 years global trade will continue to liberalise. For, looking back over the last 30 years, without a doubt the Scotch Whisky industry has benefitted significantly from the increasing liberalisation of global trade. Tariffs and non-tariff barriers in many of our markets have gradually been removed. Taxes for imported goods in many of our markets are fairer. We are now able to export Scotch to a number of countries with no restrictions at all, and to many more with minimal restrictions.
In this, Scotch Whisky is a textbook example of the benefits of free trade. Free trade has benefitted our businesses, our employees and our consumers. Today, ever-more open markets and ever-fairer trading conditions, mean that people all over the world can buy an ever-wider range of Scotch – produced by a large company or a small distillery – at ever-more locally competitive prices. Free trade is gradually eliminating market distortions and driving economic benefits for people everywhere. Protectionism does none of these things. So, in our view, industries and governments must stand up for free trade and the higher standards of living and greater consumer choice it has brought us.
It follows, then, that by 2050 we would like to see a strengthened, rules-based world trading system, with the World Trade Organisation at its heart. By then, the WTO will have been through some necessary reforms to address its growing membership and the strains caused by global economic challenges that didn’t exist when it was first created. We want to see a reformed WTO remaining the guardian of a stable, fair, global trading system, and a driver for global economic reforms that ultimately benefit ordinary people everywhere. By 2050, the WTO also will have helped us address some of the new opportunities of our future trade, such as agreed frameworks for e-commerce.
Linked to Scotch Whisky’s ability to thrive globally is the need for strong, balanced regulation, and in the coming years we want to see good regulation expand in our global markets. Taxation is an important part of good regulation. Our industry – as responsible operators generating significant tax receipts for the UK government and for governments overseas – pays its taxes proudly. These are excise taxes, sales taxes, corporation taxes and some tariffs, and we facilitate the payment of our employees’ income taxes. But governments need to ensure that taxes are sufficiently balanced to be effective, and that they are straightforward in the way they are administered. In short, set taxes too high and make them too complicated and you will damage our competitiveness. We will be less able to compete well against products that pay less tax, for example French wine. In the end, this risks our efficiency and productivity. This conversation about competitive rates of tax and excise is one we continue to hold with the UK government, not least as they consider the next Budget.
Just as importantly, good regulation also means a framework of sound laws governing how alcohol is sold, where it is sold, and to whom it is sold, including underage and drink-driving laws. So over the coming years we will continue to work with governments and other partners worldwide to ensure that markets are well-regulated and that consumers understand the importance enjoying alcohol responsibly. Well-regulated markets also help to drive out counterfeit Scotch, a battle which the SWA constantly fights, for counterfeit undermines our reputation and value, and drives criminality and corruption.
Linked to good regulation is the work that the industry does, at home and overseas, to help ensure that our consumers make informed choices about alcohol. Ultimately, we want to help bring about a shift in attitudes towards alcohol such that today’s consumers and generations to come approach what they drink with knowledge, appreciation and care. So we will continue, in partnership with governments and other organisations, to work to promote responsible consumption and reduce alcohol-related harm. And we will continue to support the delivery of numerous projects, including education about responsible drinking and support for those affected by alcohol harms, as well as addressing broader inequality. We will do this as individual companies, collectively as an industry through the Scotch Whisky Action Fund, and through the significant support our companies give to charitable trusts and foundations.
Now, as I come towards the end of what I wanted to say to you, there is one final thing to mention. And that’s Brexit. Frankly, it’s unusual for me to have got this far without saying something about Brexit, so you can count yourselves broadly spared today. But nonetheless I need to make the point that it will be hard to get to 2050 if can’t get past 31 October 2019. So I am going to take this opportunity to urge all politicians to work together to find a clear and sensible way forward, both on how the UK leaves the EU and on negotiating the best possible future trading relationship with the EU. That negotiation also needs to take into account the trade and economic opportunities that Scotland and the UK will have into the future with countries outside Europe, particularly emerging economies like India, China and Brazil. It’s worth noting that Scotch Whisky exports to China have grown a staggering 19,000% in the last 30 years. We need our governments and politicians to get on with creating the circumstances for stellar growth over the next 30 years in markets of potential all over the world.
To conclude, 2050 isn’t far away, particularly for an industry that thinks in decades rather than in years.
So we need to work now, with governments and other partners at home and overseas, to ensure that our vision of the future can be realised.
A vision in which our industry grows and strengthens globally, with each bottle of Scotch exported continuing to take that unique taste of Scotland, and a unique piece of our heritage, to consumers worldwide.
A vision in which our industry achieves environmental sustainability, playing our full role in Scotland’s and the UK’s work to bring global warming to end.
And a vision in which our work in partnership with governments, regulators and others creates balanced regulatory environments which benefit our consumers, our companies and society more broadly.
This will create an industry famed for the past and fit for the future.