Scottish Malting Barley and Distilling Supply Chain Map
About This Sector MAIN ACTIVITIES
DEFINITION
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The malting barley supply chain includes arable farmers, co-ops and grain merchants, maltsters and malt whisky distillers These businesses align themselves in separate and distinct vertically integrated chains
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Spring barley growing and harvesting Grain testing, drying and storage Malting (steeping, germination, kilning and cleaning) Mashing, fermentation, distilling, storage, maturation, blending and bottling
MAJOR PLAYERS (UK) Co-ops and Merchants ▪ Co-ops/farmer groups Aberdeen Grain, Banff and Moray Grain Group, East of Scotland Farmers, GrainCo, Highland Grain ▪ Merchants - Cefetra, Frontier, MSP, ScotGrain Maltsters ▪ Bairds, Boortmalt, Crisp Malting, Diageo, Simpsons Malt Distillers ▪ Diageo, Chivas Bros, Edrington Group, Wm Grant and Sons, and many other smaller distillers
Key Facts and Figures
~11k people employed
directly in the Scotch Whisky sector and supporting ~42k jobs all over the UK
Around 20% of global barley production is used for malt
Scotch whisky accounted for 26% of all Scotland's international goods exported and 1.5% of all UK goods exported (2022)
There are 146 operating Scotch whisky distilleries across Scotland
In 2022, Scotch whisky accounted for 77% of Scottish F&D exports, and 25% of all UK F&D exports
Scotland accounts for 12% of total whisky sales value in the UK, where brand still predominates over private label
~90% of barley
requirements for the industry are sourced in Scotland
Top 4 export markets for Scotch whisky by value are US, France, Singapore and Taiwan, by volume are India, France, US and Brazil
Global Maltsters ▪
Boortmalt (Axereal) – 3 million tonnes (Australia, N America, C&E Europe, W Europe, Africa)
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Soufflet – 2.4 million tonnes (Australia, S America, N America, C&E Europe, W Europe, Asia)
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Malteurop – 2.3 million tonnes (S America, C&E Europe, W Europe, Asia)
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United Malt (Bairds) – 1.25 million tonnes (Soufflet take over) (Australia, N America, Europe)
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Supertime – 1 million tonnes (Asia-Pacific)
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Avangard – 9k tonnes (C&E Europe, W Europe)
Brewer/Diageo Maltsters ▪
AB InBev – 3 million tonnes (S America, N America, C&E Europe, Asia-Pac, Africa)
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Heineken – 750k tonnes (N America, C&E Europe, W Europe, Africa)
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Diageo – 185k tonnes
UK independents ▪
Crisp – 425k tonnes
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Simpsons – 300k tonnes
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Muntons – 200k tonnes
Global Players
Malting Barley and Distilling Supply Chain Key External Drivers
Agricultural Machinery and Equipment Farmers Growing and Harvesting Barley
Alcohol Consumption Per Capita
Malting (steeping, germination and kilning)
Grain Testing
Drying to a 12% Moisture Content Other Added Value: Preparation of Grain Bulks
Health Consciousness
Mashing, Fermentation and Distilling Storage and Maturation Blending and Bottling
Real Disposable Household Income
UK: Grain Buyers
Markets
Fertilisers and Pesticides
Market Demand for Malt Whisky
Malting, distilling
1st Tier Suppliers
Seed Barley Suppliers
Grain testing drying and storage
Climate
Exchange Rates and Tariffs
UK: Maltsters, Distillers UK and Exports: Wholesalers, Retailers and Foodservice
Malting Barley Distilling Production Process Maltsters
Grain Store Dry, screen and store barley. Moisture Level 12% (required to stabilise grain)
Stop germination process by reducing moisture content. Kiln grain to ~5% moisture
On-Farm
Maltsters
Distillers
Sow, grow and harvest barley. Moisture Level 17 – 20%
Wash and steep barley. Moisture level 44% (required to stimulate germination)
Add water to the malt. Heat to extract sugars. Drain mash prior to the fermentation and distillation process
Primary Production ▪
About 25m tonnes of malting barley are used globally per year to produce 20m tonnes of barley malt, of which the EU uses almost 40%
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Barley is the largest cereal crop grown in Scotland, representing 1/3 of the total barley growth in the UK
▪ Spring barley is commonly used to produce malt for the whisky sector and to a lesser extent for beer production. ~1.6mt spring barley was produced in 2022 (up by 11%) and 361kt winter barley (up by 9%) ▪ Spring barley yields have been up by 17% to 6.81t/ha and winter barley was up by 6% to 8.19 t/ha ▪ For spring barley, the area used was ~249,462ha, a 0.3% increase on the 5-year average, while for winter barley it was ~46,358ha, a 5.3% increase on the 5-year average (Agri Census 2023 data)
Growing and Harvesting
▪ The area of spring barley planted is influenced by several factors including weather (how much winter crop was sown and so what area is left), rotational considerations and malting barley demand and price
Primary Production ▪ The main areas in Scotland to grow spring barley remain the NE, East and the Highlands, whereas for winter barley the NE, East and South of Scotland are preferable
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Winter ploughing is one of a suite of methods used for seedbed preparation
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Weather patterns and rainfall, particularly at harvest, significantly affect growing conditions, yields and quality
▪ Malting barley trades at a premium over feed barley. In 2022, 51% was sold from merchants to maltsters and 40% to the feed industry
Growing and Harvesting
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Barley used in malt production must meet tight specifications for moisture (<12%), screenings, germinative capacity, nitrogen (<1.65%) and skinning
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Whisky malt requires low levels of nitrogen content, which is characteristic of Scottish spring barley
▪ Demand for barley across the UK comes from two main sources: the drinks industry and livestock feed ~50% crop goes for malting; 45% for livestock feed
Primary Processing
▪ Barley continues to represent 25.4% revenue of the UK cereal, grains and oilseed industry ▪ Post-harvest, central grain drying, and storage is preferred due to the poor quality of some farm infrastructure ▪ Modest tonnages of barley are imported ▪ The major buyers include: ❑ Farmer co-ops, including Aberdeen Grain, Banff and Moray Grain Group, East of Scotland Farmers, GrainCo, Highland Grain
❑ Cefetra, Frontier, MSP (including WN Lindsay), ScotGrain ▪ Buyer numbers have recently declined, and it is not yet clear how the supply chain will realign ▪ There are limitations in the methods used in grain sampling and testing, which can damage trust in the supply chain ▪ Systems of traceability at this stage of the chain are paperbased which compromises transparency
Grain Testing, Drying, Dressing and Storage
Secondary Processing
Malting
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The UK malting industry is the third largest in the world. Types of maltster are distilling maltsters (own and operate maltings for their own distilling needs) and sales maltsters (make malt to a customer's specification for brewing, distilling or food)
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Scotland’s whisky industry, which accounts for 77% of Scotland’s food and drink exports is heavily dependent on malting barley grown by Scottish farmers
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British maltsters provide malt to 14 of the largest 20 brewers in the world
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On average, just over 50% of the barley crop is consumed by the malting sector ~ an average of around 920k tonnes per annum over the last three years (~917k tonnes in 2022)
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UK Malsters buy around 1.9-2m tonnes of malting barley to produce ~1.6m tonnes of malt
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In 2022 55% of UK malt was used for distilling, 31% for brewing, 10% for export and 4% for other food
Secondary Processing
Malting
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In the maltsters industry 38.6% of revenue comes from Scottish spring barley, 1.5% from Scottish winter barley, 41.1% from English spring barley, 17.8% from English winter barley and 1% from other malt
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Major markets for malt are spirit producers (60%), beer producers (36.5%) and food and non-alcoholic drink producers (3.5%)
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Four Key Maltsters are Anglia Maltings (includes Crisp Malting), Baird's, Boortmalt and Simpsons Malt who together account for ~70% UK market share. Diageo Scotland produces much of its own malt
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Bairds has recently made investments in new capacity. Boortmalt and Simpsons have announced plans for additional processing
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Maltsters co-operate with each other through MAGB to pool info on barley type and quality needed to produce malt in line with customers’ specifications
Secondary Processing
▪ Scotch whisky must be produced in Scotland under UK and EU law. There are three major types of whisky: single grain, single malt and blended ▪ ~83% of UK spirit production revenue is generated from whisky ▪ 83.2% of whisky manufacturing establishments are located in Scotland. Speyside accounts for nearly half of all Scottish whisky distilleries ▪ Over 90% of the whisky produced in Scotland is blended and contains both malt and grain. The average blended Scotch is between 60% and 85% grain. The alcohol content of Scotch whisky ranges between 40% and 95% alcohol by volume ▪ Four major players (Diageo, Chivas Bros, Edrington Group, William Grant & Sons) together account for ~84% of UK spirit production market revenue
Distilling, Maturation and Blending
▪ Many companies have invested in Scotch Whisky distilleries to maintain Scotland’s geographical dominance and fulfil booming demand for the product
▪ Over the past five years the industry has become more concentrated, leading to an expansion of production capacity and installation of new equipment at bottling plants to improve efficiency
Markets ▪ The Scotch Whisky supply chain is worth more than £1.8bn ▪
UK Off-Trade markets (supermarkets, convenience stores, off licenses) are anticipated to account for ~61.8% of spirit sales in 2023 and On-Trade (pubs, restaurants, hotels, etc.) for ~38.2%
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Blended Scotch whisky represents £63.7m of revenue for spirit sales in Scotland; Scotch single malt whisky £51.9m and imported whisky £20.2m
▪ Whisky retail channel breakdown for GB shows that 77.2% of sales are in multiples, 7.6% in discounters and 15.2% in impulse shops ▪ All presentations of whisky have been impacted by decline on sales. The 700ml presentation still holds the largest value in the market followed by 1litre bottle ▪
For exports, bottled blended Scotch whisky accounts for 59% of value exports and single malt for 32%
Wholesalers, Retailers, Foodservice UK and Exports
Markets ▪
Scotch whisky accounted for 26% of all Scotland's international goods export and 1.5% of all UK goods export (2022)
▪ In 2022, Scotch whisky accounted for 77% of Scottish F&D exports, and 25% of all UK F&D exports ▪ Scotch whisky is exported to 174 markets around the world ▪ Export value of Scotch Whisky in 2022 was £6.2bn, up £1.68bn compared with 2021 and £1.28bn compared to 2019 (pre-pandemic) ▪ India is the largest market for Scotch whisky in terms of volume but is just 2% of the Indian whisky market. Reduction of the Indian tariff could increase exports to £1bn in the next five years
▪ USA exports recovered to reach >1£1bn for the first time since the 25% tariff on single malt whisky was suspended
Wholesalers, Retailers, Foodservice UK and Exports
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Global demand for malting barley is growing driv en by an expanding drinks industry but also by demand from food and pharmaceutic
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Recent and planned inv estments by the malting sector are likely to mean there is a growing demand for malting barley in Scotland
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All major maltsters (apart from Muntons) have at least one establishment in Scotland
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The potential additional demand is currently challenging to quantify. New inv estment might result in the displacement of older, less efficient capacity
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7k of the 11k jobs from the Scotch Whisky industry prov ide employment across the Highlands and Islands
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SWA has dev eloped a sustainable strategy focused on four key goals: cutting GHG to achiev e net zero by 2040, using water within the responsible use range by 2025, all new packaging to be reusable, recyclable or compostable by 2025 and playing an activ e role in the conserv ation and restoration of peatland to deliv er environmental benefits for the common good by 2035
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There has been some consolidation among existing players to div ersify product portfolios and expand market reach
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Single malt whisky is more likely to be drunk on its own, underlining the importance of flav our compared with other spirits
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An activ e global health lobby continues to seek further restrictions to reduce alcohol consumption
Sector Trends
SWOT Analysis WEAKNESSES
STRENGTHS
▪ Quality of some farm drying and storage infrastructure ▪ Ideal growing climate
▪ No data on the reasons for/rates of barley rejection
▪ Resilient to climate change
▪ Varietal robustness – rejections, waste and cost
▪ Established and connected supply chains
▪ Reliance on pesticides and fertilisers
▪ Regular cross industry forums
▪ Loss of CAP subsidies in farming
▪ Strong international reputation for high quality malting barley
▪ Paper-based traceability
▪ Well established and successful global brands
▪ Limitations of the methods used in grain sampling and testing, damaging trust in the supply chain
▪ Strong R and D institutions providing development support along the chain
▪ Historical lack of investment in malting capacity – now being addressed
▪ Ambition to develop net zero barley
▪ Susceptibility of whisky exports to sudden tariff changes
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Estimated that every second 53 bottles of Scotch whisky are exported (more than in 2021)
▪ Tourism is an important income source for the industry
▪ Introduction of UK-EU customs checks ▪ Brand imitation and counterfeiting in export markets ▪ An aging workforce at many points along the chain ▪ High level of market share concentration ▪ Cost of living crisis slowing down the recovery of hospitality sector
SWOT Analysis THREATS
OPPORTUNITIES ▪
Greater uptake of precision farming and use of new practices, e.g., green digestate
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Reduced inefficiencies due to the limitations in grain testing update and standardised quality tests between farms and maltsters
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Dev elopment of the International Barley Hub and BariTone project Use of latest technologies to reduce carbon footprint for energy use, e.g., green hydrogen or other sustainable fuel
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Use of new technology to improv e transparency and traceability, e.g., e-passports
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Dev elopment of new v arieties with a lower env ironmental impact and higher yields
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Dev elopment of new biotechnologies to support plant health
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Increased collaboration between representative organisations along the chain to address issues of concern
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Emerging market opportunities for the Asia-Pacific region
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Strong demand for Scotch whisky
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Research on making best use of cask for maturation
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Trade deals: Canada, Indo-Pacific trade block, Chile, US
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Increased competition for arable land to grow proteins for human consumption as consumer meat consumption declines
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Loss of plant protection and other agronomic chemistry, e.g., glyphosate
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Ban on peat extraction which prev ents the production of peated malts
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Climate change and linked risk from increasing incidence of mycotoxins, e.g., T2/HT2
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Climate change and linked risk to ev olution of new plant disease and pest challenges
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Falling alcohol consumption per capita and increasing health consciousness are shrinking the alcohol market
Whisky Production Emissions by Source 30% 37%
14%
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Barley production = 37%
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Other emission sources can largely be tackled through renewable energy, at a cost
1% 18%
Barley Production
Transport
Malting
Distilling
Feed processing
ECONOMIC ▪
Demand for malting barley is relatively consistent, backed by its use in the whisky sector
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Heavy investment in brands and marketing of Scotch whisky to appeal to new generation of consumers
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Research on improvements in manufacturing such as fermentation and yeast performance
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High quality institutions need to continue supporting R and D, certification and quality assurance
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Collaboration among key R and D institutes and the ability to adopt new technologies
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New investment in malting capacity will have the potential to increase efficiency
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Minimising maturation losses in the process
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Good proximity to key suppliers
SOCIAL / PEOPLE ▪
Shortage of truck drivers for harvest grain transport
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An aging workforce at many points along the chain
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Trends of reduction of alcohol consumption
Sustainability
Sustainability ENVIRONMENT ▪
As the climate warms, growing may be possible on higher ground, expanding output
▪ New technologies and spring barley varieties improve supply chain efficiency and ensure sustainable supply of cereals ▪
SWA aims for the sector to reach net zero by 2040. Progress to date: ❑
28% primary energy usage now from non- fossil fuel sources
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Greenhouse gas emissions < by 34%
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Energy efficiency improved by 9.2%
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Water efficiency improved by 22%
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94% packaging is recyclable or reusable
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General waste to landfill < to1%
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SQC benchmark against the Sustainable Agriculture Initiative at silver level and is aiming for gold
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The Scottish supply chain is made up of smaller groups, with differing levels of vertical integration. They adopt different strategies and priorities for improving sustainability, with there is a lack of consistency across the sector
Malting Barley and Distilling Supply Chain Sustainability Credentials
Economic Environmental
Social
Research and Training
Farm
Merchants and Co-ops
Maltings
Distilling
International Barley Hub translating barley research into economic, social, environmental and commercial impacts for the breeding, farming, malting, brewing, feed, food, health and related industries
Farm assurance – SQC requirement for every farm to develop a biodiversity and Integrated Pest Management (IPM) plan
Highland Grain use of renewable energy for drying
Baird’s use of Advanced Membrane Bioreactor (aerobic) and Reverse Osmosis Plant (AMBR and RO) to reduce water use at their Inverness maltings
SW A – a sector pathway to Net Zero with baseline and recommendations
Scottish Agronomy delivering independent, evidence-led advice focusing on optimising inputs for sustainable crop output
LEAF assurance focusing on enabling more circular farming through regenerative practices
East of Scotland Farmers and Highland Grain decarbonising malting barley KTIF project
Simpsons Malt use of vegetable oil fuels in road transport
Diageo Spirit of Progress – an action plan to create a more sustainable and inclusive world
Machinery Rings delivery of pre-apprenticeship schemes offering training and mentoring and a SCQF4 qualification
Scottish Government National Test Programme and Track 1 to encourage baseline current sustainability measures
Encouragement of greater use of sustainable agriculture initiatives including Boortmalt, Crisp, Simpsons
Scotch W hisky Sustainability Strategy
Spirited Crafters (Programme from the SW A)
Adoption of precision farming techniques
Simpsons Malt adoption of BLab/BCorp standards which measures social and environmental impact
SW A Diversity and Inclusivity Charter 2022
Diageo supporting farmer-led innovation group in Ireland
Boortmalt installation of modern kilns at Buckie to increase energy efficiency
BariTone Programme
Boortmalt commitment to UN Sustainable Development Goals
Boortmalt adoption of IS14001 standard that sets out the requirements for an environmental management system
Scottish Malting Barley and Distilling Supply Chain Quality Assurance
Processing
Markets
Growing and Harvesting
Grain Testing, Drying, Dressing and Storage
UK: Marketing Coops, Grain Buyers, Maltsters, Distillers, Retailers and Foodservice
SQC, TASCC, AUKM
Research Institutes JHI, SRUC, Univ. Dundee, Abertay, Heriot Watt, Rowett, (International Barley Hub), Institute of Brewing and Distilling
Trade Bodies AHDB, AIC, MAGB, NFUS, SWA
Malting, Distilling, Blending and Maturation Climate Limits to grain testing Variable yields Varietal robustness
Export: Retailers and Foodservice
Other Added Value: Preparation of Grain Bulks High energy and water usage
Supply Chain Issues
Tariff changes Alcohol and health
Waste Reduction Sustainability Expansion of malting capacity Consistent quality assessments Development of new varieties
Supply Chain Opportunities
Primary Production
References June Agricultural Census 2021 Scottish Government Economic Report on Scottish Agriculture Tables 2020 Scottish Government Cereal and oilseed harvest estimates: final 2022 Scottish Government Malt manufacturing in the UK 2023 IBISWorldUK Whisky production in the UK 2022 IBISWorldUK Cereals, Leguminous Crops & Oilseed Growing 2023 IBISWorld UK Spirit Production in the UK, 2023 IBISWorld UK Maltsters’ Association of Great Britain Welcome to the Scotch Whisky Association (scotch-whisky.org.uk) Home (swri.co.uk) Home - The Maltsters’ Association of Great Britain (ukmalt.com) Spirit deep dive report: GB retail, 2022 The Knowledge Bank
*Oct 2023 Reviewed regularly as new reports and statistics become available.