Scotch Whisky Makers Say Single Malt Is Best in a Single Country


At the Kilchoman Distillery Co Ltd. on Islay, a windswept island two hours by ferry from the west coast of Scotland, a banner nailed to a weathered barn proclaims “Better Together,” the group opposing Scottish independence.

Unraveling the 307-year-old union with England “is not something we should even be considering,” Anthony Wills, Kilchoman’s founder and managing director, said in the distillery’s wood-floored tasting room.

Islay, with eight distilleries making some of the world’s priciest whiskies, highlights a paradox of the debate leading up to the referendum a week from today: It’s tough to find support for a Yes vote among makers of a product that rivals tartan plaid and haggis as a national symbol.

Last year, Scotland’s 109 distilleries sold 4.3 billion pounds ($7 billion) of whisky abroad, the country’s second-largest export, after oil, according to the Scotch Whisky Association. Many in the industry, which the association says accounts for 85 percent of Scotland’s food and drink exports, say they would be better off remaining part of the U.K.

“I’m definitely going to vote No,” said Simon Coughlin, chief executive officer of Bruichladdich Distillery Co. Ltd., who bought and resurrected the company 14 years ago and in 2012 sold it to Paris-based Remy Cointreau SA for 58 million pounds.

Too Risky

“It’s a business that’s working, it’s stable, the global market for whisky is growing,” Coughlin said, pouring a precise measure of water into a tumbler of his seven-year-old single malt. “Frankly, anything that puts that at risk, I’m not for.”

A poll published late yesterday by Survation put the Better Together campaign back in the lead, by six percentage points, after one by YouGov Plc last weekend rattled financial markets by showing the Yes side ahead for the first time. The fact is, enough people are undecided to tip the outcome either way.

Whisky executives are little different from other Scottish business leaders in supporting a No vote.

The chiefs of oil producers BP Plc and Royal Dutch Shell Group Plc have said they would prefer Scotland stay put. Edinburgh-based insurer Standard Life Plc says it might shift business elsewhere to avoid uncertainty over Scotland’s currency and regulation. It reiterated that possibility yesterday.

Douglas Flint, the Scottish-born chairman of HSBC Holdings Plc, wrote in the Daily Telegraph newspaper in August that a Yes vote could spur capital flight from Scotland, “leaving its financial system in a parlous state.”

Currency Question

Though the Scotch Whisky Association is officially neutral, the group has said a No vote could expose producers to far greater foreign exchange risk if Scotland is forced to abandon the pound, a key battleground in the debate. The three main U.K. political parties have ruled out a currency union with an independent Scotland, something nationalist leader Alex Salmond says is a bluff and a campaign tactic.

“As of now, the nature of an independent Scotland’s currency remains unclear,” David Frost, the whisky association’s chief, wrote in its annual report in May. “This could affect our exports, management of supply chains, pricing, and competitiveness.”

Predecessor Gavin Hewitt is more direct. In August, he organized a letter signed by 131 executives, including leaders of 10 whisky makers, urging Scots to vote No.

“The case for independence has not been made,” he said by phone, adding that some of roughly 30 new distilleries in various stages of planning might be jeopardized. “At the moment they’re being brave and going ahead, Hewitt said. But ‘‘uncertainty will slow that pace of investment.’’

Queen Elizabeth

Producers say a big concern is whether an independent Scotland would remain a member of the European Union.

The EU has represented the industry in tax and labeling disputes in countries such as India, Japan, Korea and Thailand. Pierre Pringuet, CEO of Paris-based Pernod Ricard SA (RI), which controls 20 percent of the global Scotch market by volume with brands such as Chivas Regal and Ballantine’s, said losing that support would be costly.

‘‘Market access is not a given,’’ said Pringuet, whose company this month will unveil a new distillery in the Speyside region, near Queen Elizabeth’s summer residence at Balmoral. ‘‘So the support of strong diplomacy is critical.’’

Supporters of independence say the only way to guarantee Scotland remaining in the EU is to vote Yes because Prime Minister David Cameron plans to hold a referendum on Britain’s membership in the bloc if he’s re-elected next year.

Tax Policy

The tax policy of an independent Scotland remains a big question mark, said Trevor Stirling, an analyst at Sanford C. Bernstein & Co. in London. One fear is that oil revenue won’t be as bountiful as the Scottish National Party predicts, he said.

In case of a shortfall, whisky ‘‘is an obvious place to potentially come looking,” Stirling said. “Everybody in the industry is very nervous.”

Whisky makers, of course, aren’t monolithic in backing the Better Together campaign.

In the gravel employee parking lot at Kilchoman, several cars sport Yes stickers and Scottish flags, evidence of support for independence among blue-collar workers. A TNS poll released this week showed that 46 percent of managers and professionals would cast a No vote, versus 33 percent who would vote Yes. Among manual workers, the split is 42 percent for independence versus 33 percent against.

Ranald Watson is marketing manager at Springbank Distillers Ltd., a producer on the Kintyre peninsula whose managing director was the only whisky maker among 200 Scottish business people who pledged a Yes vote in response to Hewitt’s missive.

Heart v. Wallet

Watson said there was no reason to fear that Scotland would be forced out of the EU.

“We fully expect to continue as a member without any interruption,” Watson said. An independent country with its own voice in international affairs will give greater exposure to Scotland as a brand and the industry, he said.

Across the water from Springbank, back on verdant Islay, Jean Donnay remains unswayed. Donnay is building a new distillery called Gartbreck in an old white-stucco farmhouse a half-hour’s drive along Islay’s winding, one-lane roads from either of its ports. Gartbreck will start producing in mid-2016, Donnay said, but he frets that a Yes vote could make his investment less profitable.

“If you think with your heart, I can understand they want to be independent,” Donnay said. “But if you think with your brains or your wallet, I think independence will be a bit costly.”


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