RECESSION AND RECOVERY

When war broke out in 1914, privations were only to be expected; but nobody can have imagined how great they would be. The Boer War a decade earlier had caused the industry scarcely a ripple. True, it all had to be paid for eventually, and Lloyd George’s ‘People’s Budget’ of 1909 had increased the duty on spirits by a third. It was just the industry’s luck that Lloyd George – who conducted a long affair with his secretary, and was involved in a financial scandal, but who was evangelically teetotal – should still be Chancellor of the Exchequer when the First World War erupted. To their horror, they learnt that he was seriously entertaining complete prohibition, and, although they talked him out of it, they were forced to make concessions. Fortunately one of his chief advisers, James Stevenson, was one of their own, having been seconded to the Ministry of Munitions from Johnnie Walker. At a meeting in 1915 the whisky barons, led by DCL’s formidable chairman, Harold Ross, learned of the forthcoming Immature Spirits Act, an idea of Stevenson’s to preserve existing stocks by enforcing a minimum of three years’ maturation in bond before sale. (This measure has since become one of the industry’s quality benchmarks and is something it is very proud of.) They also agreed to convert six grain distilleries to acetone production and to supply industrial alcohol from the remainder. It seemed they had got off lightly.

But worse was to come as the war dragged on. Output was cut to half its 1916 level. The maximum permissible alcoholic strength was all but halved. In 1917 duty was increased to 30s per proof gallon – before the war it had been 14s 9d. The big grain distillers with their Government contracts, their stocks in bond and their comfortable balance sheets could scrape by, although Buchanan’s and Dewar’s merged in 1915 just to be on the safe side. But the independent malt distillers couldn’t. One by one they closed, leaving the blenders anxious as to where their malt fillings were to come from. In 1916 DCL bought Speyburn and Tobermory while Dewar’s took over Lochnagar and Talisker; but there were still concerns over sourcing fillings when the war was over.

They needn’t have worried. Peace was followed by an economic boom, but demand for the industry’s dwindling stocks (padded out by the discovery of a Government reserve of 3.5 million proof gallons) was held back by further increases in duty in 1919–20, which meant that a bottle of Scotch that cost 4s before the war now cost 12s 6d; and, of course, by Prohibition in the United States. And the boom proved shortlived: by the mid-1920s it had fizzled out almost everywhere except in the south-east of England, where modern industries such as electronics and aero-engineering were still blossoming. The Wall Street Crash of 1929 was followed by the Great Depression, and consumer demand was almost wiped out.

The 1920s and early ’30s took a terrible toll on the independents. Campbeltown in Kintyre had had thirty-four distilleries over the years; at the end of Prohibition every one of them was closed, and only three have since reopened. The 133 working distilleries of 1920 fell to seventy-two by 1931 and fifteen by 1933. Of course, the majority of these silent stills were not dead, but sleeping: the comparative simplicity of distillery equipment meant they could be mothballed with little maintenance; and their often remote locations, together with their size and specialised nature, made them hard to sell for other uses. Nonetheless, the independent sector was all but wiped out during the years 1925–33, with only the hardier companies such as William Grant of Glenfiddich fame, Highland Distillers, the Grants of Glenfarclas and a handful of others clinging on.

Hazelburn distillery in Campbeltown, now sadly closed.

The sheriff’s deputies dump illegal liquor during Prohibition Santa Ana California,1932.

It was a different story for DCL. With its broad spread of interests and strong finances it was able both to catch the more desirable malt distilleries as they fell, acquiring Glendullan, Glenlossie, Caol Ila, Clynelish, Old Pulteney, Balmenach and many others, and also to mop up all its major competitors. In the early 1920s it bought out the two independent companies still owned by the Haig family – Haig & Haig in 1922 and John Haig in 1924. In 1925 it snapped up both Scottish Malt Distillers (formed in 1914 through the merger of Glenkinchie, Clydesdale, Grange, Rosebank and St Magdalene) and even Buchanan-Dewar’s. In 1926 it bought John Walker; in 1927 it bought Peter Mackie’s White Horse Distillers.

DCL didn’t quite reign supreme, however. For the first time, foreign money was coming into the stricken industry (unless you count English money as foreign: the gin distiller Gilbey’s had bought Glen Spey, Strathmill and Knockando between 1887 and 1904). The money wasn’t exactly clean, though: much of it was mob money. Vast amounts of Scotch were smuggled into Prohibition America by blockade runners based in the Bahamas and St Pierre-Miquelon. But by the late 1920s the sea routes were becoming too dangerous, and the focus switched to Canada and the Detroit River narrows separating Windsor, Ontario, from Detroit. The man who sold the Detroit mobsters their stock was a legitimate tycoon, Samuel Bronfman, who in 1928 secured his source of supply by buying Seagram Distillers of Windsor, which had a stake in the Milton and Glenkeith distilleries and the Aberdeen merchant Chivas Brothers. (Chivas was already deeply involved in smuggling, even packing its bottles in watertight cases.) Bronfman sensed that Prohibition was ending and that whoever had footholds in both Scotland and the United States would profit handsomely. The same logic appealed to another big Windsor distiller, Hiram Walker, which bought the Glenburgie-Glenlivet distillery in 1930 and continued to invest throughout the 1930s, buying Ballantine’s in 1936 and building the Inverleven grain distillery in 1938. These interventions were not hugely significant in themselves, but they prefigured the post-war era, when the Scotch whisky industry became a very tempting target for foreign investors.

A bootlegger’s still, preserved at Havre Underground Museum, Havre, Montana.

New York detectives Moe Smith and Izzy Einstein celebrate the end of Prohibition with a (legal) bottle of White Horse.

The late 1930s were comparatively kind. The end of Prohibition and Roosevelt’s New Deal created demand in the United States, while rearmament by all the Western powers generated jobs and disposable income at home. Many distilleries were brought out of mothballs, and the number at work rose from 1933’s fifteen to ninety-two at the outbreak of the Second World War. But the 1939 grain harvest was the last to be sold on the open market for many years. When rationing was introduced in January 1940, Scotch wasn’t on the list. But it was all but impossible to come by, for the government closed all the grain distilleries and slashed the allocation of barley for malting: none of the 1943 harvest was allocated for distilling at all, and in 1944 there was only a single distillery working. Another sharp rise in duty stood in for rationing: when a bottle of Scotch at 13s 6d represented a fifth of the average weekly wage, not many would queue up to buy it. Instead, as much whisky as possible was exported for dollars: when the SS Politician of Whisky Galore fame sank off Eriskay in late 1941 she was carrying 28,000 cases of Scotch, or a third of a million bottles, all destined for the United States.

New York mafia boss Frank Costello, whose company Alliance Distribution acquired Leith whisky merchant William Whiteley after Prohibition. Whiteley’s blends The King’s Ransom and House of Lords had been popular with American bootleggers as they were very rich and malty and could be watered down for extra profit.

For Winston Churchill was no Lloyd George, and intended all along to preserve the industry. ‘On no account reduce the barley for whisky,’ he said at one point. ‘This takes years to mature and is an invaluable export and dollar producer.’ And the post-war Labour government agreed: in 1945 it increased the industry’s grain allocation to 43 per cent of 1939 levels, but deterred home consumption with a series of swingeing duty increases that topped out at £10 10s 6d per proof gallon. In 1949 the grain allocation was restored to its 1936 level, but not until 1953 was wartime regulation abolished altogether.

It was the beginning of a new boom as the distilleries shook off their wartime lethargy and got back to work. The 1945 harvest supplied enough malt for fifty-six malt distilleries to resume production and by 1950 the number working had reached ninety-five – three more than in 1939.

And suddenly the Canadians were back, building on the strategic position that dated back to Prohibition. In 1950 Seagram’s bought the Strathisla distillery in Keith. In 1954–5 Hiram Walker bought Glencadam in Brechin, Scapa in Orkney and Pulteney in Wick. In 1956 American investors followed the Canadians when Schenley Industries of New York bought an old-established English gin distiller, Seager Evans, which since 1927 had put together a Scottish mini-empire comprising the merchants Long John, the Glenugie malt distillery and the Strathclyde grain distillery. Schenley had deep pockets: in 1957 it opened a new malt distillery, Kinclaith, inside the Strathclyde complex, and in 1958 it built Tormore in Speyside. The following year another American-backed investor, Inver House, built both a grain and a malt distillery, Glenflagler, near Airdrie.

With prosperity returning to the West, Scotch was becoming the world’s favourite spirit: more accessible than Cognac, more sophisticated than gin, more cosmopolitan than vodka, and with a range of qualities and prices suited to everyone from worker to jet-setter. By 1961 production had returned to prewar levels and exports were increasing rapidly – £81 million in 1962, £228 million in 1972, £872 million in 1982. Home demand was boosted by the deregulation of off-licences in 1964, which spurred the growth of the supermarkets. To cope with this new demand, which in the whisky industry has to be estimated several years in advance, more than a dozen new distilleries were built in the 1960s and ’70s, most of them to provide fillings, but some – Isle of Jura, Glenallachie, Tamnavulin – destined to become well-known single malts in their own right. This scale of building hadn’t been seen since the 1890s, but in terms of output it was nothing compared to the extent to which existing distilleries were expanded. Balvenie had new stills added in 1957, 1965 and 1971. Glenfarclas went from two to four stills in 1960 and to six in 1976. Glengrant went from four stills to six in 1973 and to ten in 1977. And so it went on. Fettercairn, GlenDronach, Glen Garioch ... the coppersmiths had never been so busy.

The expansion phase of the 1960s and ’70s quickly attracted the attention of more outsiders. Some were foreign: French pastis giant Pernod-Ricard bought Aberlour in 1974; in 1980 Martini-Rossi acquired William Lawson Distillers, owner of Macduff, after a trading relationship that had already lasted thirty years; in 1981 Remy-Cointreau bought Glenturret. But at this stage most of the investment came from British brewers, who were well into the frenzy of amalgamation and takeover that created the Big Six. Not unnaturally, Scottish & Newcastle was first into the ring with the purchase of Charles McKinlay in 1960. At the time McKinlay had already started rebuilding the old Isle of Jura distillery, which reopened in 1963; in 1968 it completed a new build at Glenallachie, intended to supply fillings for the McKinlay blend. In 1962 Courage bought the London wine merchants Saccone & Speed, which owned the Hankey Bannister blend. In 1972 Watney’s bought International Distillers & Vintners, which included the three Scottish distilleries owned by Gilbey’s. Three years later Whitbread bought Long John International, the trading name of Seager Evans. Last into the ring was Allied-Lyons, which laid the foundation for the enormous Allied Domecq global wines and spirits conglomerate when it bought William Teacher together with Ardmore and GlenDronach in 1976. (In fact the only Big Six brewer that didn’t buy into distilling was the biggest, Bass. It had inadvertently found itself in possession of Auchentoshan when it bought the Glasgow brewer Tennent’s in 1964 and sold the distillery on as quickly as it could.)

The boom couldn’t last, and when the downturn of the early 1980s came it found the industry hugely overstocked and with a staggering surplus of capacity. Retrenchment became the order of the day. Between 1982 and 1985 twenty-nine distilleries – twenty-one of them owned by DCL – were either mothballed or closed for good. It was a sign of weakness that one corporate predator in particular was prepared to exploit. In 1985 Guinness bought the Perth distiller and blender Arthur Bell, whose main brand had overtaken the DCL-owned Haig as Britain’s best-selling blend some years earlier. The following year it took over the mighty DCL itself, amid much controversy. Four of the participants, including the Guinness chief executive Ernest Saunders, were later jailed for false accounting; but the takeover stood, and Guinness became the world’s leading spirits company. Allied, too, was on the hunt for a greater presence in the world’s wines and spirits market: in 1984 it bought both United Rum Merchants and Hiram Walker, and in 1989 it acquired Whitbread’s spirits business, including Laphroaig, the famously peaty Islay malt distillery.

Tormore, Speyside, one of a crop of new distilleries that opened as prosperity returned in the 1960s. It was designed by Sir Albert Richardson, then President of the Royal Institute of British Architects.

The new regulations that followed the Monopolies & Mergers Commission’s report into Britain’s brewing industry in 1990 sparked a corporate meltdown in which the Big Six frantically reshuffled their assets to accommodate the new regime. These assets by now included well over half of the Scotch industry, which mostly fell into the hands of two supergroups: Pernod Ricard and Diageo. Allied merged with the Spanish wines and spirits giant Pedro Domecq in 1994 to create Allied Domecq, which was in turn bought by Pernod Ricard in 2005 for nearly £7.5 billion. Its whiskies are traded in the United Kingdom under the name Chivas Brothers. Guinness and Grand Metropolitan merged in 1997, with Guinness’s wines and spirits subsidiary United Distillers and its Grand Met opposite number IDV together forming UDV. The conglomerate has now been renamed Diageo and owns, among many things, half the distilleries in Scotland, Britain’s leading blend in Bell’s, and the world’s leading blend in Johnnie Walker.

Auchroisk at Mulben, Banffshire, was built in 1972–4 to supply malt fillings for IDV’s J&B Rare. Designed to fit both its site and its heritage, its weatherproofing is traditional Scottish lime render and it incorporates small conical-roofed towers in the local architectural vernacular.

Roseisle on the Moray Firsth, a vast state-of-the-art malt distillery opened in 2009 by Diageo to satisfy the thirst for whisky in emerging super-economies such as China, India and Brazil.

The Famous Grouse with its younger siblings, The Black Grouse and The Snow Grouse.

The creation of these two supergroups had two knock-on effects. The first was the appearance of other smaller but still formidable conglomerates, nearly all foreign-owned. Many of them were formed from distilleries that the two major players had to discard to satisfy the competition authorities. They include Inver House (Pulteney, Balblair, Knockdhu, Speyburn, Balmenach), owned by a Thai company, International Beverage Holdings; Burn Stewart (Bunnahabhain, Deanston, Tobermory), bought by Distell of South Africa in 2013; Whyte & Mackay (Dalmore, Jura, Fettercairn), bought by United Breweries of India in 2007; John Dewar (Aberfeldy, Royal Brackla, Glendeveron), owned by Bacardi; Morrison Bowmore (Bowmore, Glen Garioch, Auchentoshan) bought by Suntory in 1994; and Glenmorangie (Glenmorangie, Ardbeg), part of the LVMH luxury goods group. Four other malt distilleries are individually owned by foreign investors, including Campari and Asahi; twenty-nine more are independently or family owned, the biggest concerns being William Grant (Glenfiddich, Balvenie) and the Edrington Group (Highland Park, The Macallan, Glenrothes, Glenturret, Tamdhu; also The Famous Grouse).

In 2001 Grant’s revived the tradition of maturing its Founder’s Reserve blend in old sherry casks. It subsequently started using ale casks as well.

William Grant & Sons was the first company to seek and win national distribution for a bottled single malt with the launch of Glenfiddich in the home market in 1961. An export version was launched in 1963.

Grant’s Monkey Shoulder, launched in 2005, is what used to be known as a ‘vatted malt’. It’s a compound of Glenfiddich, Balvenie and Kininvie, blended without grain whisky.

The second effect of the corporate chess-game was that in the 1970s whisky began to lose sales at home. The corporations had their eyes firmly on the bulk sellers: standard and premium blends. All of these were mature brands, in many cases approaching their centenaries; their quality and their tradition were rather taken for granted and there was little or nothing in the way of innovation to make Scotch appealing to new consumers. Much as traditional ales were losing ground to lager, dark spirits were being eclipsed among younger drinkers by the easy-drinking and very mixable vodka. Soaring exports – worth over £4 billion in 2012, with new markets such as China and Brazil catching up with North America and the European Union – were seen as more important than the home market. But the industry has shown much more willingness to innovate in recent years. In the 1980s Glenfiddich, hitherto almost the only single malt with nationwide distribution, was joined by others on the supermarket shelves, and The Glenlivet, The Macallan, Laphroaig, Cardhu and Highland Park became familiar names. In 1986 United Distillers launched its Classic Malt range. In the 1990s distillers started experimenting with different ages and expressions, rediscovering the method recommended by William Sanderson a century earlier of ‘finishing’ whisky in sherry casks. More recently still, premium extensions of standard blends, such as Black Grouse and Snow Grouse, and rather less staid premium blends such as Monkey Shoulder have started appearing on the shelves.

And, even more encouraging, there have been a number of new distillery openings. Many of the newcomers – Loch Ewe, Daftmill, Speyside, Abhainn Dearg – are artisanal in inspiration and hark back to those distant times when distilling was a cottage industry, evoking in spirit, if perhaps not in their marketing material, the line from Robert Burns’s poem ‘Earnest Cry and Prayer’: ‘Freedom and whisky gang the gither!’

Kilchoman, the first new distillery on Islay since 1908. Founder Anthony Wills’s aim is to source all his ingredients from the island itself.

Isle of Arran Distillers, opened in 1995, was one of the first of a new generation of privately owned distilleries aiming to recapture the values of artisanal rural distillers of the past.

Opened in 2008, Abhainn Dearg on the Isle of Lewis is the first licensed distillery in the Hebrides since 1840.