Makers of the Famous Grouse and the Macallan whisky brands have unveiled “better than expected” results for the year despite being hit by a triple whammy of Brexit, US trade tariffs and the global pandemic.
Edrington, which is owned by a charitable trust set up by three sisters in the 1960s, reported a “material decline” in revenue and profits in the year to the end of March 2021, as duty free shopping in airports contracted and bars and restaurants around the world were forced to shut during the pandemic.
However, while US consumers saw the price of single malt Scotch rise as a result of retaliatory tariffs imposed by former President Trump, Edrington said its leading single malt brand, the Macallan, found new markets online. While its American wholesalers destocked, the business “pivoted” to accelerate progress in new ecommerce channels and enjoyed “strong performances” in China, South-East Asia and Russia, Edrington said.
The company added that its UK bestseller, the Famous Grouse, proved “resilient in its core markets in northern and eastern Europe and extended its lead as Scotland and the UK’s favourite whisky”.
A good outcome in the circumstances
Scott McCroskie, the company’s chief executive, said he had forseen the turbulent times ahead but suggested it could have been worse.
He said in a statement: “In last year’s annual report, I anticipated a decline in profitability after several years of consistent growth, as a result of the coronavirus pandemic and tariffs on single malt scotch whisky in the USA, our largest market. Our reported results confirm that this was indeed the case, although I believe that the relatively modest declines represent a good outcome in the circumstances.”
He said the company had maintained a “relatively high” level of investment in its brands despite the hits on sales and profits. Although money spent – £118.9m – was down 8% on the prior year, this represented 21% of core revenue, up from 19% in 2020.
He said: “The reduction in net sales reflects pandemic-related restrictions as well as trade destocking primarily in the USA. Our decision to maintain relatively high levels of brand investment meant that core contribution reduced by more than net sales, although that was mitigated by a range of cost reduction measures. Our free cash flow and net debt both improved as a result of these measures, and I am pleased that the company remained well within its lending limits and banking covenant tests.”
I am proud of the way our people have responded to the pandemic, and of the results we have achieved.”
Scott McCroskie, CEO, Edrington
He added: “I am proud of the way our people have responded to the pandemic, and of the results we have achieved. The fundamentals of our business are strong, and our brands are in good health. Although the pandemic will continue to impact our business for some time to come, I am encouraged by the growth in sales we have seen in the first quarter of this financial year. I am confident we can navigate the challenges we face and that we are ready to progress from a position of strength.”
The 25% US levy on Scotch imports was imposed in October 2019 as part of a wider trade dispute between the US and EU on aerospace industry subsidies. These were suspended in March by the Biden administration.
Edrington said it was also a “challenging year” for its other single malt brands, including Highland Park and The Glenrothes.
The company said “core” revenue from Edrington-branded products at constant currency fell 15% from the same period last year. Profit before tax was down 21% to £178.4m. Nevertheless the firm reported that its net debt of £375.5m enjoyed an improvement of £76.3m versus the prior year.
Chin chin for No.3 gin
The company also announced a deal to take a “significant” minority stake in No. 3 London Dry Gin, a gin brand owned by Berry Bros. & Rudd (BB&R), a family-owned business that is well known for wine sales and distribution. Edrington said it has had a “long and successful partnership with BB&R” dating back nearly 100 years.
The agreement, which it said is expected to conclude “imminently”, will see No. 3 distributed across Edrington-owned distribution markets including the USA, APAC, global travel retail and the Nordics. BB&R will continue to distribute in markets including the UK, Germany, Italy, Spain, Australia, and Belgium. The companies are not disclosing the financial terms of the agreement.
Mr McCroskie added: “I am really pleased that Edrington will enter into a strategic partnership with our long-term partners Berry Bros. & Rudd on the No. 3 London Dry Gin brand. No. 3 complements the existing Edrington portfolio of exceptional ultra-premium spirits adding an award-winning and a beautifully elegant, classic London Dry Gin to our line-up of single malt Scotch whisky, rum, American whiskey, blended Scotch whisky, and tequila.”
Elspeth, Agnes and Ethel
Edrington is headquartered in Glasgow and employs over 3,500 people in its wholly-owned and joint venture companies, with over 70% employed overseas.
Edrington’s principal shareholder is the Robertson Trust, which was founded in 1961 by the Robertson sisters – Elspeth, Agnes and Ethel – who donated their shares in the family businesses, which was founded and developed by their grandfather and father.
Edrington said the trust has donated £301million to charitable causes in Scotland since its foundation.