The Elite Ayrshire Business Circle

Thursday, 27 January 2011

A dram tae Rabbie Burns keeps Scotland’s whisky industry strong

On Burns Night this week, many people around the world will have toasted the Bard with a dram of the ‘water of life’. Whisky is one of Scotland’s best known and best loved exports.

Despite whisky sales in the UK showing a decline over the last five years, Scottish Enterprise’s Scottish Manufacturing Advisory Service (SMAS) is optimistic about the opportunities the industry can exploit with their support, according to new figures released this week.


Over the last three years, SMAS has been working closely with the whisky industry and its supply chain to help them identify new ways to increase productivity, improve efficiency and add real value to their bottom line.

During this time, it has delivered 39 improvement projects, including assistance with process improvement, leadership and organisational development, which have helped generate £5 million of productivity gains for these companies.

Approximately 320 companies are involved in the industry’s supply chain, from malting companies to distilleries, and packaging companies to warehousing and logistics. To date SMAS has focussed its support on the 115 mixing, bottling, production and packaging companies where it can make the greatest impact.

Barry Mole, SMAS’ lead practitioner in the north of Scotland, explains, “Since working closely with the major suppliers in the whisky supply chain, it’s clear that they already run a fairly slick operation – but there’s always room for improvement – and despite already working with a fair number of companies in this sector we want to work with even more, so now would be a good time to get in touch to see how we can help.

“Where we can add real benefit is to challenge their management and working practices and highlight the benefits which innovation and business efficiency can make to their bottom line. Some of the companies are already experiencing the benefits of putting in place continuous improvement programmes. This approach is a real step forward for the industry and one which will reap rewards both now and in the future.”

East Kilbride-based The Boxshop Ltd supplies packaging to a broad range of industries throughout the UK, including many whisky manufacturers. It has been working with SMAS since the service was first launched in 2005, on projects such as improving machinery maintenance processes, increasing lean awareness across all personnel, and implementing more cost-effective procurement procedures, which resulted in its first project increasing productivity by 60%.

Boxshop Director, Douglas Lamb, comments, “With our initial SMAS projects, I must confess to being fairly sceptical. However, our practitioner did a good job of convincing me that we should give them a try and nowadays, when a new project is suggested, I don’t need to be convinced any more. I know it works, I know it will bring benefits and I know it will make a difference to our bottom line.”

The whisky industry has remained strong throughout the economic downturn which is largely due to just over 90% of the whisky produced in Scotland being exported abroad. Figures show that in the first six months of the financial year nine out of its top ten export markets grew in value including South Africa, the USA and France.

More recently, the Scottish Manufactured Exports Estimates for the third quarter of 2010 reported an overall decline in Scottish manufactured export sales, however, the food and drink and tobacco industry bucked this trend and saw a 0.9% increase during the same period.

Supporting the industry to realise its full potential involves both the private and public sectors. The SMAS team has partnered up with Highlands and Islands Enterprise, Scottish Development International and the Scotch Whisky Association to help achieve this.

Key facts

• Scotch Whisky contributes £3.9 billion a year in Gross Valued Added (GVA) to the Scottish economy once industry spending across the supply chain is taken into account (and £2.7 billion in GVA to the economy directly)
• Over £1.1 billion is spent every year with Scottish suppliers, up 61% since 2000
• Four fifths of annual operating expenditure is in Scotland, including £200 million on cereals and £300 million on dry goods (bottles and packaging)
• Annual industry turnover in Scotland is £6.4 billion
• Capital spending of £355 million a year, of which £108 million is invested on capital items made in Scotland
• £464 million in income (salaries & wages) generated within the industry and over £1.6 billion across the supply chain

Employment

• 10,300 people directly employed by the industry in Scotland, up from 9,600 in 2000
• 20% of employment is in rural communities, largely across the Highlands & Islands
• 52% of jobs are in Strathclyde, with 17% in Central Scotland & Fife, and 11% in Lothian
• In total, 35,000 Scottish jobs rely on the continued success of Scotch Whisky
• Employee productivity at £262,000 per head is six times the Scottish average

(Source: Scotch Whisky Association)

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