Scotland business

Famous Grouse maker Edrington reports fall in profits

Macallan bottles Image copyright Edrington Group

Spirits group Edrington has reported a fall in profits as sales faltered for two of its best-known brands - The Famous Grouse and Cutty Sark.

Pre-tax profits, before exceptional items, fell by 13.2% to £146.4m in the year to 31 March.

Overall sales held steady at just under £575m, but output fell by eight million standard bottles to below 100 million.

Edrington said it had been hit by "fiercely competitive" markets in Asia and in blended Scotch across Europe.

Profits after tax, but before exceptional items, were down by £7m to £72.7m.

The Glasgow-based distiller's Famous Grouse and Cutty Sark blends suffered double-digit declines in sales, but there was growth for Edrington's single malts, The Macallan and Highland Park.

Image copyright Edrington Group

Analysis by Douglas Fraser, Scotland business/economy editor

Edrington is a rare beast in the Scotch whisky industry - it is big and Scottish-based, and it hands profit to worthy causes through its main shareholder, the Robertson Trust.

But it's not unusual in the problems it has been facing, as the rapid growth in Scotch exports has hit turbulent trade winds in more recent years.

Its blends, led by Famous Grouse and Cutty Sark, remain market leaders but have seen a significant fall-off in demand, while its single malts - led by The Macallan and Highland Park - are growing.

Across the industry, the overall volume of whisky exports fell by 2.4% during 2015, to £3.9bn. The previous year, it fell 7%.

But while blends declined (the industry slower, it seems, than Edrington's fall) the value of single malts has now hit 25% of the export total.

It is clear from Edrington's strategy that it sees the prospects for further growth are from more differentiated and premium bottlings of single malt, with the five-year strategy set out last year focused heavily on the few brands and on innovative marketing.

It has identified cities as the key to the high end whisky drinker, and sees the younger millennial demographic as a target for imaginative social media marketing and sales.

Growth in the Americas remains its best prospect, while Asia is going to be of increasing importance though growth will be slow, while its European markets remain flat.

The distiller said The Macallan achieved growth in both volume and value, despite "a setback in Taiwan, where intense competitive activity dented volume and market share".

However the brand performed "particularly strongly" in China, Russia and the USA.

Edrington also reported that Highland Park continued to show "good momentum" across its major markets in Europe, the USA and Canada.

There was a marginal decline in the sales of Brugal rum, but Edrington said there were signs that the brand had "arrested the significant decline of prior years".

Last year the company announced a £239m writedown for the brand after facing "tough economic and competitive conditions" in the key markets of Spain and The Dominican Republic.

'Year of transition'

A year ago, Edrington set out its 2020 strategy which included plans to develop super premium brands, "perfect The Macallan" and "accelerate Highland Park".

Chief executive Ian Curle said: "A year on from the launch of Edrington's new strategy, we see evidence that we have put the right strategy into effect, and that it is delivering results.

"During this year of transition we have faced challenging economic and trading conditions with strong performances in key markets and shortfalls in others.

"In combination with the influence of currency, this has adversely affected our results."

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