Scottish Whisky’s Largest Owner
As it stands today, in early 2024, only 15% of Scottish distilleries are independently owned. Whilst this may not sound that bad, all of those distilleries have been founded since the turn of the millennium. Nearly 70% of the Scotland’s distilleries are owned by international companies, the largest of which is Diageo - the British multinational alcoholic drinks company. in this post we’ll dig a bit more into Diageo’s background and influence on the Scottish whisky industry.
Diageo’s Dominance
Diageo was founded as a result of the merger between Guinness PLC and Grand Metropolitan in 1997. The distilleries it came to own had been part of Guinness and became the jewel in Diageo’s spirits crown alongside the likes of Smirnoff Vodka and Tanqueray Gin. With a portfolio now boasting some of the most esteemed whisky brands in existence, including Johnnie Walker, Lagavulin, Talisker, and many more (including some of my favourites: Glenkinchie and Glen Elgin), Diageo stands as the unrivalled titan of the whisky landscape. It owns more than 20% of Scotlands distilleries but more than 25% of total production capacity.
While some may view Diageo's dominance through a lens of modern capitalism and greed, the story runs deeper. The consolidation of Scottish distilleries predates Diageo's emergence, with much of it occurring after the turn of the last century.
Before Diageo
The roots of Diageo's dominance trace back to The Distillers Company, founded in 1877 by six patent still operators who recognised the benefit of a unified approach to mitigate competition's detrimental effects on profit margins. As the demand for whisky surged in the late 19th century, The Distillers Company adopted a strategic approach to expansion, weathering downturns more effectively than its rivals.
By the early 20th century, The Distillers Company had consolidated much of the Scottish whisky production industry, owning nearly every patent still in the UK by the 1920s. This unprecedented control propelled the company to dominance throughout the 20th century, until mismanagement in the 1980s precipitated a hostile takeover by Guinness in 1986.
Guinness's acquisition of The Distillers Company, marred by allegations of stock manipulation, set the stage for Diageo's ascent to prominence in the whisky world. Through subsequent mergers and acquisitions, Diageo inherited The Distillers Company's legacy and further solidified its position as the preeminent force in Scottish whisky distillery ownership.
But is it good for the industry?
The Scottish whisky industry has frequently leaned on an image of history, tradition and heritage to promote and sell its wares. Diageo’s broad ownership and scale of production seems to fly in the face of some of these tropes, but as with many industries the reality of large scale production of goods and the image they portray can differ. But does this matter? The investment provided by a conglomerate like Diageo - or, indeed, the handful of competitors that, between them, owner the vast majority of Scottish distilleries - is vital for stability, growth and the ability to weather the volatility in the industry.
Obviously we would all like to see our favourite distillery with more independence and ability to decide how to invest capital and grow, or not, themselves. I believe that the Scottish whisky industry has a reasonable balance of ownership with many new, independent distilleries continuing to open alongside the more established distilleries. It seems there is space for all approaches to thrive!