Chivas Brothers signals hope for US breakthrough despite fresh exports blow

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THE chief executive of Chivas Brothers has declared he is confident of a breakthrough between the US and UK to end the tariffs which have cost the Scotch whisky industry more than £500 million in lost exports, despite Washington deciding to retain the import tax for the next six months.

Jean-Christophe Coutures insisted the decision by the US to not escalate the 25 per cent import tariff this week was a “positive sign” that the Biden administration was keen to strike a deal.

The 25 per cent import tariff was imposed on single malt and other Scottish products by former US President Donald Trump as part of a long-running trade dispute between America and the European Union over aircraft subsidies in October 2019.

The effects were laid bare in new figures released by the Scotch Whisky Association yesterday, which showed exports to the US fell from more than £1 billion in 2019 to £729m last year.

Despite hopes in the industry that President Biden will be more open to resolving the dispute than Trump, the US Trade Representative said on Thursday that “it is unnecessary at this time” to revise the tariffs.

Mr Coutures told The : “Today we are in a wait and see situation. There has been no escalation, and it seems to me when I read the press there is an appetite for all stakeholders, including the UK Government, to find a solution, a global solution. I personally believe the solution will be global, and from this global solution we need a tariff elimination.”

 Whisky exports plunge to lowest level in a decade

Mr Coutures said a combination of the tariffs and the coronavirus pandemic, which has resulted in the extensive closure of the on-trade and reduced activity in travel retail outlets around the world, have “absolutely hammered” the industry.

Noting that the US tariff has hit smaller distillers particularly hard because it has made access to the market more difficult for them, he called on the UK Government to show its support for the industry by reducing excise duty on whisky at next month’s Budget.

While the spirits industry in the UK has shown “resilience” amid the pandemic, whisky and gin distillers such as Chivas were “suffering heavily” because of US tariffs, the closure of the on-trade in key markets, and because visitor centres at distilleries remain closed.

The company’s Beefeater gin brand has been struggling in established markets such as Spain as more than 70% of sales are generated in the on-trade.

Mr Coutures said: “Those businesses need support, and the way to support these businesses… we will need to look at a reduction in tariff (duty).”

His comments came as Chivas reported a slowing of sales decline in the first half of its financial year. Total Scotch sales were down 10% in the six months to December 31, compared with a fall 27% in the previous half.

Whisky giant calls for urgent action to axe US tariffs as cost to industry nears £500m

Sales were up 18% in China and 13% in Taiwan, reflecting the strides both countries have made in controlling the pandemic, but plunged by 18% in Japan amid lockdown conditions. US sales rose 2%, with Chivas highlighting the continuing success of The Glenlivet as an entry-level single malt, despite the import tariff.

Mr Coutures singled out Asia as a key growth area for the future, and highlighted the potential of India, expressing hopes that the UK can secure a free trade deal with the country which he said is the “largest whisky market in the world”.

Closer to home, Mr Coutures said Chivas had put Brexit “behind” it, partly because it is exporting by sea rather than through the Channel Tunnel, though noted that the exit from the European Union had brought some extra costs and red tape. “The biggest issue is labelling,” he said, explaining that customers in the EU were now requiring more information to be supplied on product labels.

Although Mr Coutures noted that Chivas had not faced an increase in the cost of dry goods, such as glass and labels, because of Brexit, he said the extra paperwork is “time-consuming and costly”.

Asked if the distiller, which employs 1,800 people, had cut jobs because of the pandemic, he said all staff have been retained, adding that it has also been adding roles “because we have faith in our future”.

Staff have been recruited in areas such as engineering and external affairs, the latter as a result of Brexit, and some temporary workers have been taken on full-time.

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The company has also continued to invest in developing visitor facilities at The Glenlivet and Scapa distilleries, and in projects to reduce its carbon emissions.

“We are making some investment to get our visitor centres in the right shape for the full reopening,” Mr Coutures said.

Figures released by the SWA yesterday show that global exports of Scotch fell to their lowest level in a decade in 2020, as overseas sales were hit heavily by the combined effects of US tariffs and coronavirus.

Overall exports fell by more than £1.1bn, or 23 per cent, to £3.8bn, with the number of 70cl bottles dropping by 13% to the equivalent of 1.14 billion.

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