Annex A
THE SCOTTISH DRINKS INDUSTRY—BACKGROUND
SIZE OF
THE MARKET
Current sales of food and drink produced in
Scotland are £7.3 billion, according to Scottish Enterprise.
Scotch whisky accounts for £2.6 billion of this figure. The
Scottish beverages sector as a whole employs around 16,000 people.
SCOTCH WHISKY
Scotch whisky is one of the UK's most important
export industries. It is Scotland's third largest[23]
and the UK's fifth largest[24]
manufactured export earning industry. In 2000 exports of whisky
were worth just over £2 billion, accounting for 74 per cent
of the value of UK exports of alcoholic drinks and for 90 per
cent of total whisky sales by volume. The value of exports increased
by 3 per cent in 2000, while export volume rose by 5 per cent.
Consumption of whisky in the UK has exhibited
long-term decline (in favour of wine and white spirits). In 1999
consumption was 323,000 hectolitres, a fall of 22 per cent since
1990 (30 per cent since 1985). In 1999 whisky represented 35 per
cent of the volume of spirits consumed, down from 47 per cent
in 1985.
Scotch Whisky provides an important source of
employment in Scotland, particularly in remote areas where other
employment opportunities are scarce. Some 11,000 people are directly
employed by the industry and it is estimated that a further 30,000
jobs are created through indirect employment.
Whisky production has been increasing over the
last few years and peaked at 4.8 million hectolitres in 1997.
In 1998 it declined by just under 5 per cent to 4.6 million hectolitres,
however it remained 20 per cent above the level of production
in 1989. Whisky production accounts for 90 per cent of spirit
production in the UK.
The leading brand of blended whisky is Bell's,
produced by Diageo plc, with 17 per cent, by volume, of the UK
market25 Diageo has 14 distilleries in Scotland. In
second place is The Famous Grouse, produced by Highland
Distilleries (now a subsidiary of the Edrington Group), with a
15 per cent25 share of the market. The Teacher's
brand, owned by Allied Domecq, is in third place with 7 per
cent25 followed by William Grant's in fourth
place with 6 per cent25.
The leading brand of malt Scotch whisky is Glenfiddich
(with a 41 per cent share, by volume, of the UK market25,
produced by William Grant & Sons26. The company
has three malt distilleries in Scotland. In second place is Glenmorangie
with a 20 per cent market share25 and three distilleries
at Tain, Elgin and Islay. Other leading brands include The
Macallan (Highland Distilleries), The Glenlivet (Pernod
Ricard) and Highland Park (Edrington Group). These three
brands have 8 per cent, 7 per cent and 5 per cent respectively
of the malt whisky market25.
OTHER SPIRITS
There is substantial and increasing production
of gin and vodka in Scotland. In 1998, 45 per cent of UK gin and
vodka[25]
was produced and/or bottled in Scotland. Diageo, which holds UK
market leadership in the gin market with its Gordon's brand,
has a 42 per cent market share25. It has a distillery
in Strathleven, Scotland.
SOFT DRINKS
In 2000 UK consumption of soft drinks was almost
12,000 million litres[26],
with carbonated soft drinks accounting for 50 per cent of this
total. The per capita consumption of soft drinks is higher
in Scotland than in the rest of the UK with Scottish consumption
estimated at around 18 per cent of UK volume consumption despite
the country only representing less than 10 per cent of the UK
population.
Highland Spring Ltd is the largest UK producer
and exporter of natural mineral water. It is a privately owned
company and is based at Blackford, Perthshire. Highland Spring
is exported to over 40 countries and is the exclusive supplier
of bottled water to British Airways. It holds 8 per cent, by volume,
of the UK still water brands sector and 8 per cent of the sparkling
water sector[27].
Strathmore Mineral Water Company Ltd (part of
the Matthew Clark Group, owned by Canandaigua) produces a range
of clear, mineral water based soft drinks marketed under the Strathmore
Clear brand. Its plant is located at Forfar, Scotland.
A G Barr is a long established soft drinks business,
based in Glasgow. It holds a 5 per cent share[28],
by volume, of the UK carbonates market and a 5 per cent share[29]
of the non-diet carbonates market. Its best known brands are Iron
Bru, Tizer and St Clements.
ALES AND
STOUT
Scottish Courage is a subsidiary of Scottish
& Newcastle Plc (formerly the UK's leading brewer until Interbrew's
acquisition of Whitbread's brewing operations in May 2000 and
Bass's brewing operations in June 2000), with a third of the UK
ales and stout market29 by volume. Its leading brands include
McEwan's, Newcastle Brown, John Smith's, Younger's Tartan,
Webster's and Courage Best. Scottish Courage's headquarters
are located in Edinburgh.
Tennent Caledonian Breweries Ltd (TC) is part
of the Scottish Beer Division of Bass Brewers UK (currently a
subsidiary of Interbrew of Belgium)[30].
Bass has a 21 per cent market share of the UK ales and stouts
market. Tennent Caledonian has 1,700 employees and is located
in Glasgow. Its main brands include Tennent's Extra Lager and
Tennent's Export.
INDEPENDENT SCOTTISH
BREWERIES
Caledonian Brewery is located in Edinburgh.
In 1919 its operation was taken over by Vaux & Co of Sunderland
(now called the Swallow Group). In 1987 Vaux announced its closure
and the brewery was sold to a management buyout. The company now
has an annual turnover of £8 million and has a range of cask
ales including Caledonian 80/-, R & D Deuchars and
Campbell, Hope and King. It also brews Calders beer
for Carlsberg-Tetley. Caledonian Brewery exports around 5 per
cent of its turnover, mainly to North America and Sweden.
The Maclay Group brewery is located in Alloa
and originally began beer production in 1830. In 1871 it commenced
production at its Thistle Brewery (closed in 1999). The brewing
staff then started a new brewery in Alloa under the name of Forth
Brewery, which continues to brew Maclay's beers and supplies them
to Maclay's 14 managed community pubs and four hotels which are
mainly located in Central Scotland. Maclay's tenanted pubs and
the distribution operation (which distributes Maclay brands such
as 80/-, Wallace, Honey Weizen and Thrapple Quencher)
were sold to Bellhaven Brewery Company in 2001. Maclay's is now
100 per cent owned by the Matthews family, after the purchase
in May 2001 of the 15 per cent stake held by Bass.
23 After office machinery and communication equipment. Back
24
After chemicals, metal goods (including motor vehicles), textiles
and office equipment. Back
25
In 1999-Source: Mintel. Back
26
Sucralose Report. Back
27
In 2001 (est)-Source: Mintel. Back
28
In 2001 (est)-Source: Mintel Back
29
In 1997-Source: Mintel. Back
30
See paragraph 4.14 of the Memorandum. Back
| 
