Stuart McCallum

Scotland’s whisky industry is bracing for a turbulent year in 2025, despite our latest Quarterly Economic Outlook indicating that increased government and consumer spending are set to accelerate UK economic growth in 2025.

There are several challenges on the horizon, particularly the threat of tariffs being imposed by the new Trump administration which pose a downside risk to growth in consumer markets. For Scottish whisky businesses, much of the demand for premium products has been driven by the US market. In the last Trump administration, we saw whisky exports significantly impacted by the 25% tariff on Scotch whisky, increasing costs for US consumers, which could see export demand fall in 2025.

The slowdown in China’s economy and consumer spending is also causing further concern, with Scotch whisky exports to China falling by 42.4% in the first half of 2024. In the short term, this may see single malt producers feel the squeeze in 2025 and 2026. But, this will not deter major distilleries from maintaining the same production levels, managing tighter margins, and continuing to plan for the next 30 years. They will need to navigate reduced demand, which since last year, has led to a build-up of stocks. The surplus of products presents a logistical challenge to source additional casks, warehouses, and fire protection measures, which in turn requires further financing and resource.

However, with a changing export market comes opportunities to establish new relationships and innovate. We’ve seen the likes of Diageo adopt new marketing strategies including special releases and the launch of the Diageo Archive, offering customers an immersive food and drink experience into its various brands including Johnnie Walker.

With consumer spending expected to accelerate this year, alongside an increase in international flights to Scotland, it’s likely we’ll see whisky distillers focus on providing consumers with high-end, quality experiences as tourism continues to grow. This may provide partnership opportunities with local restaurants and hoteliers, ensuring Scotland remains a destination of choice for UK and overseas visitors.

While the larger distilleries may weather the storm without facing major issues, it could be a different story for smaller businesses, especially those established in the last five years, as they may not have the financial resilience to absorb another tough year of sales. This could lead to consolidation and more mergers and acquisitions amongst micro distilleries to become part of larger drinks portfolios.

For premium producers, we’ve seen the sale of Edrington’s The Famous Grouse (subject to regulatory approval), enabling Edrington to focus on its prestige spirits brands. As a result, 2025 will be a challenging year for the Scotch whisky market, the industry is well-equipped to navigate these headwinds, with opportunities to adapt, form local partnerships and develop relationships with new markets.

Stuart McCallum is partner and head of consumer markets in Scotland at RSM UK