WHISKY prices are set to soar in the next 18 months due to a rise in duty and growing global demand from emerging markets.
Distillers warn that prices will have risen by 40% since 2005 and premium brands will command more than £30 a bottle next year as the industry grapples with an unprecedented surge in sales, rising production costs and an expected duty rise in Wednesd
ay's Budget.
Own label prices have already halted their downward trend while mid-sector single malt brands, which were languishing around the £20 mark two years ago, are expected to exceed £25 by 2009.
Fraser Thornton, managing director of Burn Stewart Distillers, makers of Bunnahabhain and Black Bottle, says his firm is now distilling at full capacity, producing more liquid than at any other time in the company's history.
He said: "Historically we ran at 50% capacity but such is the uplift in demand that we are now flat out. But this is not unusual, this is the situation across the industry. There is now a huge upward pricing pressure facing the industry. When producers can export the volumes that we are currently seeing in bulk then they view pricing very differently.
"The days of Scotch filling the cheap brown liquid category are over. What we will see is an upturn in pricing from the own label upwards. In the UK market I can see 10% rises each year with the top end malts averaging £30 by 2009."
As revealed by Scotland on Sunday last month, the industry is bracing itself for the first increase in the excise duty on spirits since 1997. Although taxes on beer and wine have risen in line with inflation since 1997, spirits have been exempt from increases to protect the competitiveness of the Scotch whisky industry.
But sources say the Chancellor, Alistair Darling, is considering a plan to lift the freeze on spirits which has been in place since Labour came to power, in a bid to tackle problem drinking. Darling has indicated that he believes price rises can play a part in a coordinated strategy to tackle alcohol abuse.
The level of duty is typically 33p on a pint of beer, £1.33 on a bottle of wine and £5.48 on a bottle of whisky. Each percentage point increase in next Wednesday's Budget would raise £40m for the Treasury from beer, £25m from wine and £5m from spirits. A rise of 1% in the duty on spirits would add 5p to the price. Analysts say a rise of 10%, which has been demanded by the Health Alcohol Alliance of doctors and charities, would add 54p to a bottle of whisky.
As well as growing demand from China, India, Russia and Brazil the industry is also facing rising energy costs, including the 50% increase in oil prices affecting transport and the cost of glass manufacture. Grain prices have also surged by as much as 130% since 2005.
The full article contains 502 words and appears in Scotland On Sunday newspaper.
