19 Jan
2004
Aficionados' whisky club swallowed up
THE SCOTCH Malt Whisky Society has been forced to accept a buy-out by Glenmorangie because it cannot raise enough capital for its own survival and has difficulties in sourcing malt whisky for its members, The Scotsman has learned.

A senior source at the Leith-based club has admitted it had no other option but to accept the £2.2 million offer because it could no longer meet the financial commitments of expansion.

The source conceded the deal would effectively consign the exclusive society, to being "just an arm of a bigger company". He said: "The amount of money that is required to run the society is enormous. At the end of Easter we will expand into additional premises on Queen Street - that is costing us £1 million just to get it in order.

"We don’t run at a huge profit, we never have, and it would take us years and years to pay off a bank overdraft.

"Glenmorangie already do all our bottling and distribution at Broxburn and that contract is up for renewal. One of the factors we had to consider when they came in for us is what they would have charged for that contract."

The society was set up as a private members club in 1983 by a group of whisky enthusiasts to search out interesting casks of whisky and bottle them for their own appreciation.

From an initial membership of just a few hundred it has ballooned into an international organisation with more than 24,000 members worldwide, many of whom use the club primarily as a supplier of fine and rare whisky.

But the growth in malt whisky sales within the last ten years - more than 12 per cent in the ten years between 1992 and 2002 - has given rise to a plethora of companies offering a similar service to the society.

As the demand for malt whisky has risen, distillery stocks have depleted to such an extent that some can no longer meet demand and are reticent to sell valuable supplies to the society.

The dilemma recently forced Diageo to rebrand its blended whisky, Cardhu, as a pure malt in order to meet demand in the Spanish market.

The source added: "There is an awful lot of competition in the market doing what we have been doing for years. We are having great difficulty buying whisky just now.

"There are companies whose stocks of malt are so low they have stopped supplying us with it. Where we are going to get the whisky from I do not know. We hope Glenmorangie has more clout than we have, but it is up to Glenmorangie to work it out now."

But a proprietor of one of Scotland’s largest whisky producers yesterday said Glenmorangie may find it difficult to persuade rival distilleries to sell to the society under its ownership.

He said: "The industry is a bit baffled about how Glenmorangie will be able to take the business forward. We were happy to sell individual casks to the Scotch Malt Whisky Society because we knew that they would not put the name of the distillery on it and they were not a direct competitor of us.

"But under the ownership of Glenmorangie, distillers will be less keen to sell to them."

The deal is expected to go through at the end of this month after more than 80 per cent of the society’s 566 shareholders voted in favour of the takeover at a fractious extraordinary general meeting held at the society’s headquarters on 6 January.

Many of the society’s members, who include politicians, authors and leading business figures, have reacted in horror to the sale because they fear it will change the ethos of the club.

The whisky industry also has sounded a cautious note, fearing Glenmorangie - which enjoyed a 10 per cent growth in malt whisky sales last year - will use the society as a vehicle to promote its three malt whisky brands, Glenmorangie, Ardbeg and Glen Moray.

One distillery owner who asked not to be named said: "Glenmorangie is primarily interested in promoting and marketing its brands direct to the consumer.

"It has done this very well through its website.

"Its motivations for buying the Scotch Malt Whisky Society is to build on this and promote its own brands direct to the consumer. With this deal they will receive a worldwide list of 24,000 Scotch whisky connoisseurs which is something I would like."

Douglas Mackay, the immediate past chairman of the Scotch Malt Whisky Society insisted the deal was good news for the society and he was surprised it did not happen six years ago.

He said: "Glenmorangie have guaranteed that they will run the society at arms’ length. If they don’t they will have made a disastrous investment.

"Ten years ago if we sold it we have got nothing. It is only in the last few years that we have added any value to the society.

"What is wrong is that the society has grown too big, but members should not worry - the same directors will be present after the sale."

Article Courtesy of The Scotsman
scotsman.com