Nowadays the family’s Glenfarclas malt is produced in a modern, highly automated plant that exports it to the United States, Taiwan and other countries. But the profit returns here to the valley of the River Spey in the heart of Scotland’s whisky country. And that repatriated money is what makes Glenfarclas such a rarity.
“Within a 20-mile radius of where we are now, there are 35 distilleries,” said Mr. Grant, the director of sales at Glenfarclas. But only a handful of the operations within that 30-kilometer radius remain in Scottish hands. The rest are owned by big multinationals — most notably Diageo, based in London, and the French company Pernod Ricard — which book their profits and employ many of their staff members elsewhere.
In fact Mr. Grant, 36, says he knows of no other whisky maker apart from Glenfarclas that has its sales and marketing operation based at the distillery in this scenic part of Scotland. Though he says relations with the big non-Scottish players are good — they buy some of Glenfarclas’s output for their blended whiskies, after all — Mr. Grant notes that what sets his family’s company apart is its place in the community and the fact that “we’ve been here forever.”
To be sold as Scotch whisky, liquor must be produced in Scotland. The rest of the business can be elsewhere, though, and it often is.
Non-Scottish companies control about four-fifths of the £4.2 billion, or $5.6 billion, global market for Scotch, which is being driven by growth from emerging economies. The United States is still the biggest export market, by value, at £600 million in 2011. But Scotch whisky exports to Brazil grew 48 percent that same year, those to Taiwan 45 percent and to Venezuela 33 per cent, according to the Scotch Whisky Association.
John Kay, a prominent economist and former economic adviser to the Scottish government, says that too little of the money from those exports ends up in the Scottish economy.
He has proposed a £1 “bottle tax,” levied on all Scotch production, which would be paid by the distillers. The precise value of such a tax is hard to predict, but the Scotch Whisky Association says that about 1.3 billion bottles were exported in 2011 and it estimates that foreign sales make up 95 percent of the market.
But much of the monetary benefit goes to governments that slap duties on the product wherever it is sold.
“A lot of money is being made out of this product by foreign governments and foreign companies,” Mr. Kay said. The bottle tax, he said, would be a way to keep some of that money in Scotland.
With a referendum looming next year on Scottish independence, the idea has prompted a new debate about the country’s economic assets. It has even prompted comparisons between the North Sea natural gas and oil extracted from Scotland’s coastal waters and the Scotch spirit distilled on its heather-covered moorlands and windswept islands.
Whisky supports about 10,000 jobs in Scotland, including those of people working in bottling plants, and in total about 36,000 in Britain across the whole of the economy, including haulers and packaging companies, the Scotch Whisky Association says. But the distilleries themselves are not big job creators. Although the most modern ones operate 24 hours a day, they tend to employ no more than a dozen people.
Patrick Harvie, member of the Scottish Parliament for Glasgow responsible for enterprise for the Scottish Green party said it was “good to see others starting to question the benefits to Scotland of allowing our national assets to be controlled by global corporations.”
Mr. Harvie drew a parallel with a debate over the tax liability of corporations, including Starbucks, that use their multinational status to reduce corporate tax bills. Diageo says that it pays about 18 percent of tax on its profit on average but does not say where it does so.
“Our most famous whisky brands are registered abroad and the owners’ tax arrangements are less than clear,” Mr. Harvie said.
Article source: http://www.nytimes.com/2013/02/16/business/global/its-scotch-but-the-owners-live-elsewhere.html?partner=rss&emc=rss