Analysis and Evaluation of Scotch Whisky Industry Coursework

Analysis and Evaluation of Scotch Whisky Industry - Coursework Example Production of scotch whiskey has adversely been affected by declining revenues and slow growth for the past 5 years. This is attributable to declining per capita consumption of spirits, health and societal concerns about the misuse of alcohol and tough competition from its close substitutes. One of the major drivers of growth was the exports before the onset of the financial crisis, which slowed down the markets in US and Europe. Effects of global restructuring and cost-cutting measures on the Scotch whisky industry Diageo, as part of its restructuring plan reported that it would close down its Port Dundas grain whisky distillery and the Kilmarnock bottling plant. The latter is where the world’s most popular Scotch whisky, Johnnie Walker, had been bottled. This would cost about 710 jobs. Diageo also intend to expand its Leven plant and create about 400 jobs. A protest ensued from the stakeholders but the decision was ultimately undertaken by Diageo. Another whisky producer Why te & Mackay cut 85 jobs in Scotland. These signal decisions by producers to shift bottling overseas due to increased costs and the emerging economies, which have become important markets. Shifting production processes offshore will have an impact on production of other spirits in Scotland, which rely on the economies of scale by large-scale whisky distilling and bottling to remain operational. Analysis of Scotch whisky in terms of market segmentation . In 2008, Scotch whisky was overtaken by vodka as the highest selling spirit in the UK. However it is easily the most popular UK spirit exports with revenues of ?3.0 billion in 2009. Under the UK law, Scotch whisky must be produced in Scotland. It divided into 3 major types: single grain, single malt or blended. When blended, Scotch comprises 60 percent to 85 percent grain whisky. Its alcohol content ranges from 40 percent to 95 percent by volume. The Scotch whisky industry directly employs about 10,000 people at over 100 distilleries in Scotland. Famous Grouse and Bell’s are the top brands of blended Scotch whisky in the UK. Imported whiskies account for only 4.0 per cent of spirits sales. Included in this category are Irish whiskey, US and Canadian whiskey and Indian whisky. US-produced corn whiskey (bourbon) has demonstrated solid growth in the United Kingdom, particularly among younger drinkers. Markets for Scotch whisky industry Scotch whisky accounts for majority of the exports, followed by vodka and gin. By the year 2011-12, it is expected that exports will account for 88 percent of industry revenue. Scotch whisky’s major export markets are the US, France, Spain, Singapore and South Korea. India and China are becoming increasing important too. Business and production locations for Scotch whiskey There are four major producing regions in Scotland: the Highlands, the Lowlands, Islay and Campbeltown, Speyside is home to more than half of the distilleries in the UK. Scotland also accounts for mos t of the production of spirits other than whisky, including vodka, gin, rum and ready-to-drink beverages. Combining existing production facilities, bottling capacity and distribution channels with production of other spirits provides tremendous economies of scale for spirits producers. In the past two years, more than ?500 million has been spent on new infrastructure in the region. Key Success Factors of the Scotch whisky industry The most important Key Success Facto