Producers of whisky look to middle classes in the BRICs

WHENEVER Scottish nationalists are selling the case for independence, they peddle the myth that some clapped-out oil fields in the North Sea will bring decades of guaranteed prosperity. They would be better pinning their flimsy economic arguments on a liquid that is being exported in ever greater quantities: Scotch whisky.

Diageo’s decision to invest £1bn in its own Scotch production facilities underlines growing demand for the drink. The growth isn’t being driven by recession-weary consumers in the west, but rather the burgeoning middle classes in emerging markets.

In 2011, 93.3m nine-litre cases were consumed worldwide, according to International Wine and Spirits Research, a four per cent increase on the year earlier. Volume growth in the BRICs was much faster, at 24 per cent: 18.2 per cent in Brazil; 47.2 per cent in Russia; 27.5 per cent in India; and 3.9 per cent in China.

This is from a relatively low base. The BRICs consumed around 11m nine-litre cases in 2011, accounting for just 12 per cent of global consumption. But with compound annual volume growth of 18 per cent between 2006-2011, that won’t be the case for much longer.

The Chinese market might lag behind the other BRICs, but it is also seen by the industry as the most fertile place for future growth. Its alcohol market is worth around £42bn, with Baiju – a white liquor that has been produced for 5,000 years – accounting for about three fifths of that. International spirits – mainly Scotch and Cognac – account for just two per cent, but Diageo and others are betting that the growing middle class will swap Baiju for a prestigious western tipple such as Scotch.

You might think that the Chinese government would prefer home-grown companies to reap the spoils, but a crucial Sino-UK agreement brokered last year has given Scottish producers some cause for comfort. Scotch whisky now has Geographical Indication of Origin Status, a kind of legal protection akin to that given to Champagne.

Sadly for those nats, it won’t be enough to prop up an independent Scottish economy any time soon, what with its ageing population and dependency on welfare. According to HMRC, Scotch whisky exports to China were worth just £3.4m last year.