Brexit Impact and Trade Tensions: Scotch Whisky Development Report

This report provides a comprehensive analysis of the Scotch whisky industry's development, particularly in the context of Brexit and the associated trade tensions, especially between the UK and the US. It delves into the macro-environmental factors influencing the industry, including political, economic, socio-cultural, technological, environmental, and legal aspects. The report identifies key issues and choices faced by the industry, such as exchange rate fluctuations, legal protection challenges, and brand reputation concerns. It also examines the impact of trade tensions, particularly the imposition of tariffs on single malt Scotch whisky, and its effects on sales. The report concludes with strategic recommendations, including the application of the Ansoff matrix, to mitigate the negative impacts and capitalize on opportunities for growth and resilience in the face of these challenges.

DEVELOPMENT OF
SCOTCH WHISKY

TABLE OF CONTENTS
INTRODUCTION...........................................................................................................................3
MAIN BODY...................................................................................................................................3
Macro-environmental analysis of Scotch whiskey as well as Brexit..........................................3
Key issues as well as choices faced by Scotch whiskey industry and UK.................................5
Impact of trade tension between UK and US on sale of single malt scotch whiskey.................6
Recommendations.......................................................................................................................7
CONCLUSION................................................................................................................................9
REFERENCES..............................................................................................................................10

INTRODUCTION
The development of Scotch whiskey took a drastic turn since the termination of UK from
EU referendum and thus have been affected to a great extent. Scotch whiskey is basically made
by from fermenting the malted barley as well as the resulted alcohol is then concentrated within
batch distillation in copper pots. Scotch whiskey is mainly made in the Scot land and thus is the
largest producer. The main aim of this report is to analyze the impact of Brexit on the scotch
whiskey industry and recommending the various strategies for compensating the various losses
of this impact.
This report gives a brief overview of macro-environmental analysis of Scotch whiskey as
well as Brexit, Key issues as well as choices faced by Scotch whiskey industry and UK, impact
of trade tension between UK and US on sale of single malt scotch whiskey and
recommendations.
MAIN BODY
Macro-environmental analysis of Scotch whiskey as well as Brexit
One of the most effective as well as well-known theory of global marketing is RESTEL
analysis. This is the framework which basically the framework which helps in analyzing the
various factors which impacts the organization or overall industry.
Political factors
The political factors mainly tax rate, tariffs, political stability etc. Politicians generally in
UK did not agree with the withdrawal agreement and Prime Minister generally failed to get the
agreement with RU through the parliament and was forced to resign. Later on conservative party
mainly led government but with small majority. This affected the Scotch whiskey industry in UK
to great extent as this withdrawal agreement with EU led to the political stability in UK. Due to
this political instability, it became difficult for whiskey organizations to internationally trade its
items (Holden, 2016).
Economic factors
The economic factors mainly consist of exchange rate, interest rates, employment ratio
etc. When UK decided to leave EU referendum then this eventually led to the high instability
within UK. European union is generally considered as second largest economic bloc across the
world and thus before the emergence of Brexit, the economic integration of EU and UK was
considered as the common market where there were no barriers for trading among the member

countries. But since emergence of Brexit, there has been a high economic instability in country
which has affected Scotch whiskey industry in negative way as it has led to the currency
depreciation (Smith, 2018).
Socio-cultural factors
These factors mainly encompasses the attitudes, lifestyle, belief of the entire population
and thus affects operations of industry and organization in a great way. Social influence if the
Brexit upon UK as the brand as well as impact upon the consumer perception for the companies
as well as products branded in association to UK and Scotland has been imperative. According to
this case study, the county which mainly uses the country of origin for branding and marketing
products as well as services generally faces isolationist and regressive perception from the
foreign consumers. This has actually reduced the competitive advantage of Scotch whiskey
industry as UK decided to leave EU while Scotland and the Northern Ireland decided to remain
in EU. This has eventually protected the Scotch whiskey industry from backlash of the decision
of UK for leaving EU (Maccullochand Bartlett, 2019).
Technological factors
The various technological factors includes automation, innovation level, rising power of
the internet etc. The scotch whiskey industry has been impacted by the technological aspects to a
great extent. When UK left EU referendum then the scotch whiskey industry faced a huge brunt
as due to the termination of this agreement, their consumer base suddenly reduced from UK.
Besides this, as UK is highly innovation oriented thus this termination also declined the sale of
their innovative products (Russell and Kellershohn, 2018).
Environmental factors
These factors mainly consists of environmental policies, climatic factors etc, efficient use
of the resources etc. The Scotch whiskey companies invested a great amount like millions for
making Eco-friendly bottles which have the capability to produce around 600 bottles within a
minute. But since the emergence of Brexit, the promotion of this industry has somewhat reduced
to a high extent as the UK was one of the country which valued environmental safety and
products to high level (Godden and Allen, 2017).
Legal factors
These factors mainly encompasses the various laws as well as regulations like
employment laws, discrimination laws etc which mainly governs a country. The UK government

mainly highlights that the industry of scotch whiskey are mainly influenced by the regulations of
UK upon packaging, labeling etc while the Scotch Whiskey association apparently acknowledges
that most of the rules as well as regulations are mainly created at European level. Thus, this
conflict between the laws of UK and EU and need to comply with rules of both country has
eventually affected the industry in negative way.
Key issues as well as choices faced by Scotch whiskey industry and UK
The scotch whiskey industry has faced a large number if issues due to the impact of
Brexit and termination of UK from EU referendum.
Effect of the exchange rate
This is one the major strategic issue which UK as well as scotch whiskey industry has
faced due to the impact of Brexit is the decrease in exchange rate. It has been reported that post-
Brexit, the value of pound suddenly declined and an instability within the exchange rate
emerged. This falling pound basically resulted in currency depreciation making the products
cheaper for the foreign consumer and resulting in economic instability in UK. This has also
affected Scotch whiskey industry in addition to UK as the price of the products of whiskey
companies fell down and this gave rise to high competition in market and reduced revenue due to
low exchange rates (Dunne, 2018).
The choice which UK has for dealing with this issue is to reduce the inflation by making
exports highly competitive.
Legal protection
This is the another major issue which UK as well as scotch whiskey industry has faced
post-Brexit. Due to the emergence of Brexit, there has been a change in the legal laws as well as
regulation in UK which have resulted in the political instability in the country and have affected
UK to a high extent. Along with this, UK government highlights that the scotch whiskey industry
is majorly influenced by the UK regulations but Scotch whiskey association claims that most of
their rules are mainly created by European level. Thus, this is the major problem which scotch
whiskey industry is facing where they are required to comply with the laws and regulations of
both UK and Europe (MacKenzie, Gordon and Gannon, 2019).
In order to overcome this problem, UK has the another choice is to support the
international laws for harmonization as well as standardization of the laws within regional
economic grouping of EU as UK business currently are only influenced by the domestic laws.

Brand reputation
This is the another most important as well as significant issue which has been faced by
UK as well as scotch whiskey industry after the termination of UK from EU referendum.
According to the scotch whiskey association, this industry mainly benefit from the positive
perception of consumers as well as their high valuation for country of origin. But Brexit has
impacted its brand reputation due to standing of UK as the county of origin as well as standing in
Europe as well as international community. This has also impacted UK to great level as this has
affected the relation of UK with various neighboring countries who are still with EU. For dealing
with this problem, UK has the strategic choice to incorporate various international community
within its market and has the opportunity to negotiate with EU on various aspects (Ichijo, 2019).
Impact of trade tension between UK and US on sale of single malt scotch whiskey
Trade tensions
The trade tensions between US as well as UK mainly began with aircraft manufacturing
between the Airbus as well as Boeing and thus affected both the countries to a great extent. The
major countries which were mainly involved within production of the Airbus A380 as well as
A350 were France, UK, Germany etc. Due to the involvement of UK in production of the steel as
well as aluminum, trade tensions between US and UK began to take shape. In the year 2019,
around 25% of the tariff were being imposed on the products of EU like Italian cheese, Olive oil,
Yogurt, Scotch whiskey etc. From previous 25 years, Scotch whiskey is being imported in US
mainly tariff-free and this has resulted in the growth of sales in US to around £1.04 billion. USA
is mainly one of the largest and growing exporter for Scotch whiskey having the sales nearly
£1.4 billion in the year 2018 (Alemanno, 2016). Out of all these, the sales of single malt scotch
whiskey represented the sales around £344 million where around 25% of the tariff is being
imposed. But later on EU took the case against USA regarding the US subsidiaries for aircraft
builder Boeing and the imposition of great tariff on steel as well as aluminum by President
Trump generally led EU as well as Mexico to impose around 25% of the tariff upon US
Whiskies which also included Single malt scotch whiskey. As UK is one of the member of EU
thus this has resulted in the emergence of trade tension between US and UK due to this tariff on
Whiskies. This trade tension has impacted both the countries to a great extent and has impacted
the producer of single malt scotch whiskey as well as its sale in US to a high level.

Due to the imposition of this 25% tariff as well as increasing trade tension between US
and UK, the sales of Single malt scotch whiskey has eventually decreased in US. This has
affected the producer of single malt scotch whiskey in US where it us mainly produced. Scotch
whiskey association mainly contend that the growing trade tension between the two countries
will eventually hit the smaller companies within industry who mainly produces Single malt
scotch Whiskies. This association primarily estimates that 25% tariff could ultimately lead to the
decline of around 20% in the sales within upcoming 12 months. Inclusion of the single malt
scotch whiskey is highly concerning and is affecting the sales in USA as these whiskies are
mainly produced by the small distilleries in Scotland but have the largest market in US. Thus,
this tariff will impose a huge restriction on the export of single market scotch whiskey by USA
and thus will eventually decrease its sales in USA. USA has basically now imposed a high tariff
on the single malt Scotch whiskey as well as other products from UK as well as EU thus this has
reduced the sales of whiskies in US to around 43.6% and affected the small companies who are
mainly focused in producing these whiskies (Piggott, 2017). This has also impacted their
revenue and profit ratio. The producer of Single malt scotch whiskey in US have been largely
affected as due to the decreasing sale of whiskies in US, the market of brewing industry has
faced a huge brunt and most of them have become unemployed. Besides this, due to this
decreasing sale because of the increasing trade tensions between two countries the small
producers of single malt scotch whiskey has become highly dependent on the other alternative
and the overall performance of their companies has been highly affected. In this way, the great
trade tension between US as well as UK has eventually impacted the sale of single malt scotch
whiskey to high level.
Recommendations
Ansoff matrix
This is basically the most effective global marketing strategy which helps the
organizations as well as industry to devise the various strategies for the future growth.
Market penetration
This is basically the strategy where organizations mainly increases their market share by
offering the existing products within the existing markets. Scotch whiskey can increase the sales
of its single malt scotch whiskey by increasing its promotion as well as distribution within US
(Bower, 2018).

Market development
In this strategy, organizations basically expand their supply chain within new market by
offering its already established products. In short, in this organizations capture great market
share by entering new markets with its existing products. Scotch whiskey industry can enhance
the sales in US of its single malt scotch whiskey by targeting the neighboring regions of US or
by attracting the new and different customer segments in USA (Holden, 2016).
Product development
This is one of the most remarkable as well as significant strategy in Ansoff matrix which
mainly concerns with developing the new products as well as services and offering in the
existing market. In the nutshell, within this organizations capture a great market share by
bringing new products for its established customer base. Sale of Single malt Scotch whiskey can
be increased in USA by bringing great innovation in it and investing heavily in research and
development (Smith, 2018).
Diversification
This is the most complex yet highly significant strategy of this matrix in which
organizations mainly enters the new market with its new product and hence capture the market
share. In this, organizations develops new products as well as services and tap new market
segment with these. Scotch whiskey industry can increase the sale of single malt Scotch whiskey
by bringing innovation in this and attracting the new market segment of US like rural areas
(Maccullochand Bartlett, 2019).
Out of the four, the most effective strategy which can be used for increasing the sale of
single malt scotch whiskey in US is product development. As due to the imposition of tariff on
the export of Scotch whiskey, the sale of this whiskey has reduced in US thus small companies in
US can bring innovation in single malt scotch whiskey and offer it to the market segment of US.
For example- these companies can add different ingredient in this whiskey like chilli pepper,
spices which will make this whiskey highly innovative and creative and can attract the customers
of US through this creative idea (Russell and Kellershohn, 2018).

CONCLUSION
It has been summarized that scotch whiskey industry is one of the highly growing
industry which has seen a great growth in market. Due to the effect of Brexit, the scotch whiskey
industry has faced a huge ups and downs. Various factors like political, economic, legal factors
have affected the sales of scotch whiskey since the termination of UK from EU referendum.
Besides this, the industry has encountered a large number of issues like brand reputation, trade
tensions etc. Due to the increasing trade tensions between UK and EU, the sale of single malt
scotch whiskey has been affected to a great extent and its sales in US has been hindered and
declined to high percentage.

REFERENCES
Books & Journals
Alemanno, A., 2016. Balancing free movement and public health: The case of minimum unit
pricing of alcohol in Scotch Whisky. Common Market Law Review.53(4). pp.1037-1063.
Bower, J., 2018. Managing consumption, production and maturation. Accounting for Alcohol:
An Accounting History of Brewing, Distilling and Viniculture.
Dunne, N., 2018. Minimum Alcohol Pricing: Balancing the ‘Essentially Incomparable’in Scotch
Whisky. The Modern Law Review.81(5). pp.890-905.
Godden, D. and Allen, E.L., 2017. The development of modern revenue controls on alcoholic
beverages. World Customs Journal. p.3.
Holden, M., 2016. The development of analytical approaches to profile Scotch Whisky colour
(Doctoral dissertation, University of Strathclyde).
Ichijo, A., 2019. What has the Brexit process done to Scotch whisky?. The Political
Quarterly.90(4). pp.637-644.
Macculloch, A. and Bartlett, O., 2019. Evidence and Proportionality in Free Movement Cases–
The Impact of Scotch Whisky. European Journal of Risk Regulation.
MacKenzie, N.G., Gordon, J. and Gannon, M.J., 2019. A Spirit of Generosity: Philanthropy in
the Scotch Whisky Industry. Business History Review.93(3). pp.529-552.
Piggott, J.R., 2017. Whisky. In Current Developments in Biotechnology and Bioengineering (pp.
435-450). Elsevier.
Russell, I. and Kellershohn, J., 2018. Advances in technology and new product development in
the beer, wine, and spirit industry. In Innovations in Technologies for Fermented Food
and Beverage Industries (pp. 89-104). Springer, Cham.
Smith, R., 2018. An exploration of the current and future importance of Marketing within the
Scotch whisky industry, with a focus during the projected growth trajectory (Doctoral
dissertation).