How Will Scottish Whisky Businesses Deal With New Tariffs - It's Tough But Not Impossible

3rd April 2025

Scottish whisky producers are no strangers to overcoming trade challenges, and many in the industry view the new U.S. tariffs as another hurdle to be navigated through a mix of innovation, strategic restructuring, and proactive government engagement.

One key response is industry-wide lobbying. The Scotch Whisky Association has already expressed disappointment following the announcement of the 10% tariff, recalling the severe impact that higher tariffs had on exports during Trump's earlier term—when losses were estimated in the hundreds of millions of pounds 2. Producers are now urging the UK government to secure a more favorable trade deal with the United States, a tactic that could alleviate the immediate financial pressures while setting the stage for longer-term stability.

Another strategy involves rethinking supply chain logistics and production processes. Some distilleries are exploring options to localize parts of their production, such as bottling or blending, closer to the U.S. market. By establishing facilities or partnerships on American soil, they can potentially sidestep the tariff classification and maintain their price competitiveness. In parallel, producers are also investigating alternative sourcing for raw materials, allowing them to rethink product formulations and cost structures without compromising on the premium quality that defines Scotch whisky.

Additionally, many in the industry are re-examining their pricing and market diversification strategies. Given the luxury and brand cachet of Scotch whisky, there is room to adjust pricing—though carefully so as to avoid diminished demand among discerning international buyers. By leveraging digital supply chain tools and advanced market analytics, companies can quickly assess tariff impacts and adjust their strategies in near real time. Some are even looking to expand into emerging markets outside the traditional U.S. and EU bases, diversifying their export destinations and reducing reliance on any single market.

Ultimately, the combined approach of government advocacy, supply chain innovation, and strategic market diversification forms the backbone of how the Scottish whisky business is adapting to the new tariff landscape. These initiatives not only help mitigate short-term disruptions but also lay a foundation for a more resilient operation in a fluctuating global trade environment.

Localizing Production
A key strategy employed by several distilleries is the localization or nearshoring of some production elements—particularly bottling and blending—to markets closer to the U.S. This approach can help circumvent the full impact of tariffs when finished products cross borders. For example, modern distilleries like Holyrood Distillery in Edinburgh embody a forward-thinking model. Although primarily known for their innovative approach to distilling and visitor experiences, such operations could be pivotal in establishing local U.S. partnerships that allow part of the production process (such as bottling) to take place on American soil. By doing so, whisky brands can classify their exports differently, potentially reducing the tariff hit while simultaneously deepening market ties and shortening supply chains 2.

Embracing Digital Tools for Supply Chain Management
Parallel to restructuring production practices, many Scottish distilleries are integrating advanced digital tools—such as ERP (Enterprise Resource Planning) systems—to drive efficiency and adaptability. Digital solutions in the whisky industry provide real-time data analysis across production stages, from raw material sourcing and fermentation to aging and bottling. For instance, insights from Catalyst ERP articles suggest that implementing systems like Bottle ERP allows distilleries to monitor production parameters, optimize inventory levels, and react swiftly to disruptions, all of which are essential when tariff-induced cost increases ripple through the supply chain.

This digital transformation not only enhances traceability—from "grain to glass" —but also enables companies to track the provenance of ingredients, monitor environmental conditions during maturation, and ensure consistent quality across batches. With enhanced data capabilities, producers can better manage production schedules and adjust operational strategies—an agility that becomes crucial when facing unpredictable trade policies. Moreover, digital connectivity can facilitate closer collaborations with logistics partners and even governmental organizations to advocate for favourable regulatory frameworks.

Integrating Both Strategies for Long-Term Resilience
The combination of local production adaptations and digital innovation paves the way for a more resilient operational model. By localizing certain production processes, distilleries not only reduce their exposure to fluctuating tariffs but also build a logistic and market presence in key regions. Simultaneously, advanced ERP systems and related digital tools turn operational data into actionable insights, meaning companies are better equipped to forecast disruptions and implement rapid counter measures.

For instance, a distillery that registers a sudden spike in tariff-related costs can use its digital dashboard to quickly tweak production volumes, renegotiate procurement terms, or adjust pricing strategies—all while keeping a close watch on quality control measures. This dual approach drives long-term competitiveness by ensuring that the heritage and craft of Scotch whisky are preserved while modern business practices propel the industry into the future.

Digital systems tailored specifically for whisky operations are revolutionizing how distilleries manage every stage of their production—from grain intake to maturation and bottling. Modern platforms like Vapour are at the forefront of this transformation. As reported in the Herald Scotland article, Vapour is designed to capture data throughout the whisky-making process. It allows distilleries to record production details via a mobile device, ensuring complete traceability along the entire journey of the spirit. This level of digital integration not only improves quality control but also informs better decision-making regarding process optimizations and scheduling adjustments .

In addition, specialized ERP systems and distillery management software, such as those highlighted by Catalyst ERP and DRAMS, provide comprehensive solutions that automate recipe management, monitor production parameters, and ensure regulatory compliance. For instance, Catalyst ERP outlines how automating critical processes—from mashing to maturation—not only minimizes human error but also scales production efficiently. Meanwhile, DRAMS has a long history working with distilleries, offering tools designed to handle everything from inventory management to tracking cask maturation, which is crucial when maintaining a premium and consistent product.

Looking at dual transformation strategies in other industries can shed light on the benefits of these digital adaptations. The concept behind dual transformation is to simultaneously optimize core operations while exploring new business models and growth avenues. For example, as detailed in McKinsey's discussion on dual transformation, companies like Alibaba and Grab have managed to reinforce their existing operations (their "core") while also venturing into fresh, innovative areas that drive long-term growth . For the whisky industry, this means balancing the preservation of heritage-distilled techniques with modern digital interventions aimed at streamlining and scaling operations. This dual strategy not only mitigates risks—like those posed by tariff-induced cost increases—but also opens doors to new market opportunities and operational excellence.

Ultimately, by integrating tailored digital systems, Scottish distilleries can achieve greater operational transparency and agility. They are better positioned to react to supply chain disruptions, adjust production processes in real time, and maintain their reputations for quality in the face of global challenges. At the same time, adopting dual transformation allows these companies to remain true to traditional craft methods while investing in innovation that secures their competitive edge for the future.