Things are happening quickly in the distilled spirits industry. As multiple forces collide — import/export tariffs between the E.U., U.K. and U.S., the resumption of on-premise drinking, supply chain fluctuations, etc. — the question becomes, ‘What will people be drinking?’
There has been a lot of talk revolving around the the single malt category. This explainer post is an attempt to grab a snapshot of where the industry is and where it is going. If you are looking for more information about what single malt whisky is and how it differs from bourbon, check out this piece I did for Gentlemen Ranters.
Tariffs on Single Malts from U.K. took a toll on the market…
Tariffs on single malt from the Europe — which included scotch and Irish whiskeys — have put a hit on the market.
The Spirits Business reported U.S. tariffs cost the industry more than £500 million (US$682m) in lost revenues.
But how has that affected customers? Well, it depends on where you live.
The impact of the tariffs has not been felt uniformly throughout the U.S. Because of the three-tiered system of alcohol distribution, whether you noticed any difference in price or availability will depend on your state.
Pennsylvania is a control state. So, I reached out to the Pennsylvania Liquor Control Board to find out if and how the tariffs have altered what residents are drinking.
How have pandemic shutdowns affected sales of single malts?
As we wrote before, Pennsylvanians have had a unique experience during the past 16 months when it comes to purchasing wines and distilled spirits.
Pennsylvania is a control state, which means all distilled spirits must be purchased through a state-operated Fine Wines & Good Spirits store — except for bottles purchased on-site at distilleries. As a result, customers within Pennsylvania would be forgiven for not knowing the tariff war ever started.
Shawn M. Kelly, press secretary for the Pennsylvania Liquor Control Board was kind enough to share some sales data. It was pretty thorough. So, rather than try to incorporate it into a standard nut graf format, I’m just going to share the bulk of the email conversation here.
“Fine Wine & Good Spirits never suspended or interrupted purchases of products subject to tariffs, so the tariffs have had no meaningful impact on supply of wines and spirits in our stores. Further, most retail prices for tariff-affected products have not changed and will not change. The majority of suppliers of our most popular products subject to tariffs have been absorbing tariff costs, rather than passing them on to us and our customers.
“In the early days of the COVID-19 pandemic, Fine Wine & Good Spirits did experience a decline in Scotch sales, but that was likely caused by the closure of our brick-and-mortar stores and the suspension of e-commerce sales. Then, once we resumed e-commerce sales, because of processing capacity, we limited products available online to the top 675 items, which limited available Scotches to only the biggest brands. Once all stores reopened and unlimited online sales resumed mid-year, Scotch brands started selling again, reversing the negative trends seen in the early days.
“Excluding the time when FW&GS stores were closed in 2020, sales of Scotch increased every year since 2017. The rate of increase slowed in 2019, but it rose slightly in 2020. Both blends and single malts showed trade-up. Dollar sales increased, while units sold and 9L cases sold decreased or remained flat.“
Sales data for combined scotch category sales in Pennsylvania:
| Year | Total 9 L Cases | Total Unit Sales | Total Dollar Sales |
| 2017 | 179,579 | 1,735,628 | $59,486,761 |
| 2018 | 180,244 | 1,751,658 | $62,017,770 |
| 2019 | 178,609 | 1,746,445 | $63,528,968 |
| 2020 | 177,840 | 1,709,356 | $65,336,247 |
| Pct Chg 2018 | 0.37% | 0.92% | 4.25% |
| Pct Chg 2019 | -0.91% | -0.30% | 2.44% |
| Pct Chg 2020 | -0.43% | -2.12% | 2.84% |
| Blend | Single Malt | |||||
| Year | 9 L Cases | Unit Sales | Dollar Sales | 9 L Cases | Unit Sales | Dollar Sales |
| 2017 | 142,040 | 1,269,959 | $35,838,099 | 37,539 | 465,669 | $23,648,662 |
| 2018 | 140,538 | 1,257,189 | $36,672,950 | 39,706 | 494,469 | $25,344,820 |
| 2019 | 137,279 | 1,229,320 | $36,872,926 | 41,330 | 517,125 | $26,656,041 |
| 2020 | 137,471 | 1,209,573 | $37,392,540 | 40,369 | 499,783 | $27,943,707 |
| Pct Chg 2018 | -1.06% | -1.01% | 2.33% | 5.77% | 6.18% | 7.17% |
| Pct Chg 2019 | -2.32% | -2.22% | 0.55% | 4.09% | 4.58% | 5.17% |
| Pct Chg 2020 | 0.14% | -1.61% | 1.41% | -2.32% | -3.35% | 4.83% |
“So far in 2021, the overall trend is nearly the same, except single malt Scotch has increased more on dollars and volume compared to blended Scotch,” Shawn said.
| Total 9 L Cases | Total Unit Sales | Total Dollar Sales | Avg Price | |
| Jan to Mar 2020 | 37,518 | 370,917 | $12,664,757 | $34.14 |
| Jan to Mar 2021 | 35,736 | 337,855 | $13,525,741 | $40.03 |
| Pct Chg | -4.75% | -8.91% | 6.80% |
| Blend | ||||
| 9 L Cases | Unit Sales | Dollar Sales | Avg Price | |
| Jan to Mar 2020 | 29,683 | 272,281 | $7,645,381 | $28.08 |
| Jan to Mar 2021 | 27,506 | 235,825 | $7,736,528 | $32.81 |
| Pct Chg | -7.33% | -13.39% | 1.19% |
| Single Malt | ||||
| 9 L Cases | Unit Sales | Dollar Sales | Avg Price | |
| Jan to Mar 2020 | 7,835 | 98,636 | $5,019,376 | $50.89 |
| Jan to Mar 2021 | 8,229 | 102,030 | $5,789,214 | $56.74 |
| Pct Chg | 5.04% | 3.44% | 15.34% |
Is Single Malt Scotch about to get cheaper?
In March, the Biden Administration lifted tariffs on UK single malts, along with cheese, cashmere and machinery. But it was only a temporary four-month pause.
Customers should not expect to see prices plummet right away. After all, import/export merchants have been eating the additional costs for over a year. They deserve a break from ultra-thin margins they’ve been forced to deal with through the pandemic.
Over the long term, prices could begin to ease and more products should begin to hit the pipeline if politicians in Washington, Brussels and London can figure a way out of the tit-for-tat situation. Right now American spirits are still suffering 25% tariffs when exporting into the E.U. Those tariffs have been squeezing American bourbon producers who would like to increase global sales. This past week the E.U. announced they would not go through with a scheduled rise to 50%.
One could imagine additional supply and demand curve stressors within America’s barrel inventory.
Will there be more Single Malt to choose from?
Probably?
The U.S. Tobacco and Alcohol Tax and Trade Bureau recently ruled to allow 700mL bottles to be sold in the United States. That is a big deal because the 700mL format is the standard bottle size in the United Kingdom, European Union, Japan and much of the rest of the whiskey-loving world. A lot of special releases are sold everywhere else except for the U.S. because the expense of special packaging for export don’t outweigh the cost.
However, the PLCB said they only have one 700mL bottle in the works. In the near term, you might be able to find expensive, high-end products in the exclusive travel retail segment, like this $7,500 bottle of scotch.
We’ll have to wait and see which ones come through the line.
What is American Single Malt?
The last edition of the ACSA magazine showed some enthusiasm for American Malts. Producers may have anticipated an opportunity as the tariffs rolled out to entice single malt scotch lovers who were being priced out of their favorite brands to try something new.
The PLCB shared the following data on the subject:
“We currently carry two Pennsylvania single malts in the American Whiskey category: Bluebird Distilling American Single Malt Whiskey 100 Proof and MLH Distillery Forefathers American Single Malt Whiskey 96 Proof. One was introduced in 2019 and the other in late 2020. They have been gaining share of the group; in 2020, they were 5.4% of sales. Year-to-date 2021, they are 13.6% of sales.
“Similar products from other states have larger shares: Colorado (55.6% for 2020; 54.4% YTD) and North Carolina (28.3% for 2020; 28.3% YTD) are the top two states.”
The Colorado whiskey mentioned is likely Stranahan’s.
