
As Diageo prepares to announce its 2025 interim results today (4 February), the company’s previous annual report ending June 2024 revealed a concerning 10% decline in Scotch whisky sales. With Brown-Forman shifting Glenglassaugh to shared production with BenRiach, Guinness has emerged as an unexpected bright spot in Diageo‘s portfolio, with the brand reportedly worth over £8 billion following surging demand.
This contrast between struggling whisky sales and booming beer business echoes historical patterns that once reshaped the scotch whisky landscape – though today’s industry leaders might have learned from past challenges.
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Whisky Industry Shows Signs of Strain
Diageo’s full-year results for 2024, released last summer, painted a challenging picture for Scotch whisky, with flagship brand Johnnie Walker experiencing a 6% decline while single malt sales dropped by 14%. These figures, covering the period to June 2024, suggested a broader industry challenge rather than isolated brand performance issues. All eyes are now on today’s interim results to see if this downward trend has continued into the second half of 2024.
The industry’s response to this downturn has been swift and significant. Brown-Forman announced a global workforce reduction of approximately 12% – affecting over 600 employees across their 5,400-strong workforce. This restructuring aims to create a “more agile and efficient organization,” according to the company.
More recently, Glenglassaugh Distillery’s shift to a shared production model with BenRiach represents a nuanced approach to managing output. “We operate a shared production model with Benriach, which will involve periods of production alongside occasional silent seasons,” a Brown-Forman spokesperson told The Whiskey Wash, emphasizing that this doesn’t signal a closure but rather an operational adjustment.
These industry-wide responses echo strategies employed during previous market challenges, though today’s distilleries appear to be taking more measured steps to manage production and workforce levels rather than facing outright closures.
History’s Lessons Echo in Modern Strategy
The 1980s ‘Whisky Loch’ stands as a stark reminder of how oversupply and falling demand can reshape the scotch whisky landscape. During this period, Distillers Company Limited (DCL) – now part of Diageo – faced the difficult decision to close multiple distilleries, including historic names like Brora, Glenury Royal, and St Magdalene.
Today’s industry leaders appear to be implementing more nuanced strategies to avoid similar drastic measures. Rather than permanent closures, we’re seeing flexible production models and operational adjustments. Glenglassaugh’s shift to shared production with BenRiach, for instance, represents a more adaptable approach to managing output while maintaining distillery viability.
The key difference between then and now lies in corporate structure and market diversification. While the 1980s crisis led to widespread closures and consolidation, today’s major players have broader portfolios spanning multiple drinks categories. This diversification potentially provides a buffer against market fluctuations – particularly evident in Diageo’s case, where strong performers like Guinness might help offset challenges in the scotch sector.
However, the industry is clearly taking pre-emptive steps through workforce reductions and production adjustments, suggesting lessons learned from historical overcapacity issues remain fresh in corporate memory.
The Guinness Effect
Recent speculation about Guinness’s potential £8 billion valuation highlights just how valuable the brand has become, particularly as it captures the attention of younger consumers. While Diageo has firmly stated they have “no intention to sell” the brand, its success could provide crucial advantages during this challenging period for scotch whisky.
The strong Guinness performance might allow Diageo to maintain whisky inventories during the downturn, avoid distillery mothballing, and continue investing in cask programs – options that pure-play whisky companies might find more challenging. This financial cushion could mean the difference between temporary production adjustments and more drastic measures like those seen in previous industry downturns.
However, it’s important to note that while Guinness’s success might help buffer against current challenges, Diageo’s commitment to scotch whisky remains clear through its continued investment in distillery operations and brand development.
While the scotch whisky industry faces significant headwinds, today’s response appears more measured than during previous downturns. The industry’s approach to managing these challenges – through shared production models, workforce restructuring, and portfolio diversification – suggests a more sophisticated strategy than the widespread closures of the 1980s.
As Brown-Forman’s spokesperson noted regarding Glenglassaugh, “Our commitment to crafting exceptional whiskies remains as strong as ever.” This sentiment, echoed across the industry, suggests that while adaptation is necessary, the foundations of scotch whisky production remain solid – even if some producers are better positioned than others to weather the current storm.