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| It’s Scotch, but the Owners Live Elsewhere | |
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| BALLINDALLOCH, SCOTLAND — George S. Grant markets malt whisky made in the shadow of the snow-capped Ben Rinnes, the same spot where, five generations ago, his family bought a distillery in 1865 for £511. | BALLINDALLOCH, SCOTLAND — George S. Grant markets malt whisky made in the shadow of the snow-capped Ben Rinnes, the same spot where, five generations ago, his family bought a distillery in 1865 for £511. |
| Nowadays the family’s Glenfarclas malt is produced in a modern, highly automated plant, and is exported 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. | Nowadays the family’s Glenfarclas malt is produced in a modern, highly automated plant, and is exported 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. | “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.” | 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, the liquor must be produced in Scotland. The rest of the business can be elsewhere, though, and it often is. | To be sold as Scotch whisky, the 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 markets. The United States is still the biggest export market by value, at £600 million last year. But Scotch whisky exports to Brazil grew 48 percent last year, those to Taiwan 45 percent and to Venezuela 33 percent, according to the Scotch Whisky Association. | 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 markets. The United States is still the biggest export market by value, at £600 million last year. But Scotch whisky exports to Brazil grew 48 percent last year, those to Taiwan 45 percent and to Venezuela 33 percent, 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. | 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 last year, representing about 95 percent of total production. | 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 last year, representing about 95 percent of total production. |
| But much of the monetary benefit goes to governments that impose duties on the product wherever it is sold. | But much of the monetary benefit goes to governments that impose 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. | “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 distilled on its heather-covered moorlands and windswept islands. | 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 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. | 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, a member of the Scottish Parliament in Glasgow who is 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.” | Patrick Harvie, a member of the Scottish Parliament in Glasgow who is 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 companies, like 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 those taxes are paid. | Mr. Harvie drew a parallel with a debate over the tax liability of companies, like 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 those taxes are paid. |
| “Our most famous whisky brands are registered abroad and the owners’ tax arrangements are less than clear,” Mr. Harvie said. | “Our most famous whisky brands are registered abroad and the owners’ tax arrangements are less than clear,” Mr. Harvie said. |
| For all that, though, there is little indication that the Scottish government plans to adopt the bottle tax. For one thing, it is already fighting legal challenges to a plan to place minimum prices on alcohol as a way of discouraging binge drinking. | For all that, though, there is little indication that the Scottish government plans to adopt the bottle tax. For one thing, it is already fighting legal challenges to a plan to place minimum prices on alcohol as a way of discouraging binge drinking. |
| A bottle tax plan would very likely set off a separate, titanic legal and political fight with one of Scotland’s biggest industries. The tax idea “only has merit for those who wish to undermine the Scotch whisky industry’s competitiveness in the global market and undermine its growth prospects,” said Campbell Evans, director of government and consumer affairs at the Scotch Whisky Association. | A bottle tax plan would very likely set off a separate, titanic legal and political fight with one of Scotland’s biggest industries. The tax idea “only has merit for those who wish to undermine the Scotch whisky industry’s competitiveness in the global market and undermine its growth prospects,” said Campbell Evans, director of government and consumer affairs at the Scotch Whisky Association. |
| “Apart, perhaps, from the oil and gas sector, nobody else is investing in Scotland” as this industry is, Mr. Evans said. | “Apart, perhaps, from the oil and gas sector, nobody else is investing in Scotland” as this industry is, Mr. Evans said. |
| Big companies like Diageo and Chivas Brothers, owned by Pernod Ricard, are happy to show off their investments in Speyside and argue that the economic effects are felt beyond distillery payrolls. | Big companies like Diageo and Chivas Brothers, owned by Pernod Ricard, are happy to show off their investments in Speyside and argue that the economic effects are felt beyond distillery payrolls. |
| Diageo’s ultramodern Roseisle plant, which produces each year about 10 million liters, or 2.6 million gallons, of spirit — the alcohol from which whisky is made — employs only about 10 frontline staff members to keep operations running continuously at its five-story complex. | Diageo’s ultramodern Roseisle plant, which produces each year about 10 million liters, or 2.6 million gallons, of spirit — the alcohol from which whisky is made — employs only about 10 frontline staff members to keep operations running continuously at its five-story complex. |
| But the company points to wider economic benefits: to farmers who provide barley, to local contractors who help equip and service the plant, and to small businesses that benefit from the tens of thousands of tourists who visit distilleries in the region each year. | But the company points to wider economic benefits: to farmers who provide barley, to local contractors who help equip and service the plant, and to small businesses that benefit from the tens of thousands of tourists who visit distilleries in the region each year. |
| “Diageo sustains over 4,000 direct jobs in the Scottish economy across 50 sites, many of which are in remote and rural areas of Scotland,” Peter Lederer, director of Diageo in Scotland, said in a statement. | “Diageo sustains over 4,000 direct jobs in the Scottish economy across 50 sites, many of which are in remote and rural areas of Scotland,” Peter Lederer, director of Diageo in Scotland, said in a statement. |
| “We also make a major indirect contribution to the Scottish economy,” he added, saying that Diageo was the biggest single purchaser of grain from Scottish farmers and purchased £400 million of goods from each year from suppliers based in Scotland. | “We also make a major indirect contribution to the Scottish economy,” he added, saying that Diageo was the biggest single purchaser of grain from Scottish farmers and purchased £400 million of goods from each year from suppliers based in Scotland. |
| A bottle tax, he said, would be “potentially deeply damaging to the industry and to the prospects for investment and growth in the future.” | A bottle tax, he said, would be “potentially deeply damaging to the industry and to the prospects for investment and growth in the future.” |
| At Glenfarclas, which produces about 3.5 million liters of spirit a year, Mr. Grant argues that a £1 bottle tax would hit Scottish-owned operations as much as foreign ones. | At Glenfarclas, which produces about 3.5 million liters of spirit a year, Mr. Grant argues that a £1 bottle tax would hit Scottish-owned operations as much as foreign ones. |
| For him, the big multinationals are both a blessing and a curse. On the one hand they use their sheer size to negotiate better deals with suppliers and retailers, driving down their own costs in ways Glenfarclas does not have the clout to match, and dominating British supermarket shelves. | For him, the big multinationals are both a blessing and a curse. On the one hand they use their sheer size to negotiate better deals with suppliers and retailers, driving down their own costs in ways Glenfarclas does not have the clout to match, and dominating British supermarket shelves. |
| But Glenfarclas also sells some of its production to the multinationals, which they use for blended whisky — a mix of malt whisky, made from malted barley, with whisky that can be made from wheat or other grains. | But Glenfarclas also sells some of its production to the multinationals, which they use for blended whisky — a mix of malt whisky, made from malted barley, with whisky that can be made from wheat or other grains. |
| The big companies have also helped to open new export markets, promoting whisky to a younger generation of drinkers in Asia and Latin America and enabling smaller distilleries to capitalize on a boom they never could have created on their own. | The big companies have also helped to open new export markets, promoting whisky to a younger generation of drinkers in Asia and Latin America and enabling smaller distilleries to capitalize on a boom they never could have created on their own. |
| So far, swimming nimbly with the big fish has enabled Glenfarclas to remain a family firm. And despite blank-check offers from multinationals, Mr. Grant said, the operation is not for sale. | So far, swimming nimbly with the big fish has enabled Glenfarclas to remain a family firm. And despite blank-check offers from multinationals, Mr. Grant said, the operation is not for sale. |
| “Do you want to be the sixth, seventh, or eighth generation of a family,” he said, “and be the schmuck that sells?” | “Do you want to be the sixth, seventh, or eighth generation of a family,” he said, “and be the schmuck that sells?” |