Scotch whisky is a globally recognised spirit, with an array of long-established and highly visible brands. How did an industry based in a country of less than six million people gain the influence it sees today?
Firstly, the industry is highly consolidated. Two international groups, Diageo and Pernod Ricard, account for more than 60 per cent of global sales by volume. Additionally, unlike products tied to a very small region (for example, Champagne), the broad geographical scope of the Scotch whisky designation allows production across more than 150 distilleries throughout Scotland. Combined with a flexible production and blending system, these features have enabled a small number of multinational companies to build globally dominant brands while benefiting from the legal protections and cultural cachet associated with Scotch whisky.
Secondly, the industry has been shaped by controversy and litigation. Behind the scenes, the Scotch Whisky Association (SWA) has been active in the legislative and political arena for more than a century. This is the backdrop to our research, which uses a rich dataset of government documents and minutes from Council of Europe meetings ahead of the UK’s plans to join the European Economic Community. More recently, we also unearthed intriguing information from the transcripts of hearings investigating the US liquor market conducted by the United States Tariff Commission (USTC) during January 1958.
The origins of the SWA
The Distillers’ Company Limited (DCL) emerged in 1877 from the merger of six large grain distillers. This created a de facto monopoly in grain whisky production, the bedrock of blended Scotch. There appeared no need for a trade association. However, attitudes changed abruptly in the early twentieth century. A 1905 court case under the Sale of Food and Drugs Act 1875 challenged whether blended whisky, which combined malt and grain spirits, could legitimately be sold as whisky. Had these challenges succeeded, they would have threatened not only the blended Scotch category but also the large-scale grain whisky industry on which it depended. Although the Royal Commission largely resolved disputes over whether blended whisky could legitimately be sold as whisky, producers remained concerned about growing government intervention. The Liberal government’s efforts to raise revenue through alcohol taxation convinced the industry that it needed a coordinated organisation to protect its interests. The Whisky Association (subsequently, the SWA) was thus formed in London, in 1917, under the chairmanship of DCL’s William Ross.
Although Scotch whisky received a statutory definition in UK law in 1933, legal definitions for whisky and blended whisky were not introduced until 1969. More significantly, Scotch whisky did not obtain formal geographical indication protection (like Champagne or Cognac) until 1989. As a result, the Scotch Whisky Association often had to rely on litigation to challenge imitation products and misuse of the Scotch name, especially in Continental Europe, where registered appellations benefited from an unqualified right to protection. The pressing issue for the SWA in Europe became how to protect the designation “Scotch whisky” in countries with legal systems that were quite distinct from the UK.
The SWA’s international presence
Despite its single-industry focus, the SWA has exerted influence on policy greater than its size. In the UK, the SWA has seen regular contact with MPs and major departments such as the Board of Trade. In the US, its activities extended to regular meetings with the British Ambassador, the USTC, and the Alcohol, Tobacco and Tax Division. Additionally, in Europe, it was a regular attendee at the Council of Europe meetings.
What was the basis of this multi-jurisdictional influence? By 1938, exports of Scotch whisky exceeded domestic sales, with the US being the most significant export market. Following the Second World War, the British government viewed whisky exports as an important source of foreign currency, particularly US dollars. This elevated the industry’s political importance and gave the Scotch Whisky Association a central role in relations with overseas regulators and governments. Acting as the industry’s representative, the SWA successfully lobbied US authorities to adopt its preferred definition of Scotch whisky, helping strengthen legal protections for the product internationally. The resulting pressure also contributed to the introduction of statutory definitions of whisky, Scotch whisky and blended whisky in UK law in 1969.
The SWA’s current role
By 1989, the protection of Scotch whisky in all markets seemed assured. The Scotch Whisky Act 1988, prohibiting the sale of Scotch whisky lower than 40 percent alcohol by volume, was supported and ‘managed’ by the SWA. Additionally, the SWA’s work in Europe fed into the comprehensive definition of whisky and other spirits in EEC Council Regulation 1576/89.
Nonetheless, the SWA remains prominent in geopolitics. Today, this involves protecting Scotch whisky from passing off but also includes lobbying for reductions in UK taxation on alcohol.
Written by Dr Julie Bower, Senior Lecturer in Management, Birmingham City University, and Professor David Higgins, Professor of Accounting & Finance, Newcastle University Business School.
All IAS Blogposts are published with the permission of the author. The views expressed are solely the author’s own and do not necessarily represent the views of the Institute of Alcohol Studies.