Operators serving scotch and other whiskeys distilled in the United Kingdom are expecting an initial price decrease in the wake of Brexit—the decision by British voters to exit the European Union—but are unsure how the vote will affect the long-term price and availability of the spirits.
The uncertainty of Britain’s future has caused the value of the pound to plummet to a 31-year low.
“A weaker pound means a better price, so at the end of the day our dollar buys more goods, but I think that is very short term,” says Jimmy Yeager, proprietor of Jimmy’s and Jimmy’s Bodega restaurants in Aspen, Colo. Despite a more affordable price for the Scottish offerings populating Jimmy’s whiskey list, Yeager sees little urgency to seize the opportunity. “I don’t think there is enough of a dislocation [to] force me to buy more.”
The U.K.’s restaurant industry is expected to take the biggest hit in profits as consumer demand decreases and costs rise, according to London-based foodservice data company Horizons. The depreciation of the pound against the dollar may mean more goods and cheaper travel now, but the lasting effect on the economy could have more serious consequences for drink menus.
“If the British economy gets very weak and goes into a depression, then we’re at risk of distilleries going into debt and closing. That could be the biggest problem for whiskey drinkers,” says Yeager.
Another risk Brexit poses is the loss of protection for scotch and other consumables produced in regional-specific areas. Under current European Union regulations, only whiskey distilled in Scotland can be categorized as scotch. Brexit will require the U.K. to renegotiate the terms of protection legislation; some countries outside of the EU may be resistant.
“The EU’s weight and expertise in international trade helps give us fair access to overseas markets through the agreements it is able to negotiate with [non-EU] countries,” David Williamson, public affairs director of the Scotch Whisky Association, told CNBC.
If the U.K. is unable to keep Scotch whisky protected, imitators may flood the market and disrupt exports of the spirit.
Whiskey continues to be a fan favorite among American consumers, causing a steady increase in new adult beverage offerings and pairings. Whiskey saw menu growth of 20.4% in the last quarter of 2015, according to data from Technomic’s Whiskey on the Menu report. In addition, the modified Moscow—or “Irish”—Mule proved to be a driver for whiskey, growing 289% year over year on menus.
In May, the Scotch Whisky Association reported an optimistic outlook for growth despite the concerns over Brexit. According to the report, the U.S. continues to be the biggest export destination for scotch, reaching almost $968 million in exports for 2015.