Whisky Boom Stresses Remote Scottish Island

Islay’s famous Scotch is expanding fast, but residents say the growth is unsustainable

[Source: WSJ]

Inhabitants of this remote Scottish island say its celebrated whisky industry is getting too big as new distilleries open and existing ones expand, placing its communities under strain.

While many locals cherish Islay’s historic distilleries and value the jobs they provide, some warn that expansion risks turning the picturesque island into a corporate whisky factory where younger residents can’t afford to buy houses and local businesses can’t hire staff.

“They’re carrying on a tradition that is well-loved in Scotland of creating great whisky,” resident Jim MacCalman, whose family has been on Islay since the 17th century, said of the distillers. “But they’re making decisions based on the bottom line, not based on what the community needs.”

Advocates say the expanding whisky industry offers the island a future. “We have to play to the strengths we have,” said Donald MacKenzie, an Islay native who is building a new distillery here. “Islay’s is knowing how to make the best single malt in the world.”

Islay—pronounced eye-la—has been one of Scotland’s whisky heartlands since at least the 1700s. Once a cottage industry, making Scotch here is now big business: global giants Beam Suntory Inc., Diageo PLC, DEO 0.62%▲ LVMH Moët Hennessy Louis Vuitton SE LVMUY 0.34%▲ and Remy Cointreau REMYY 1.73%▲ SA all operate distilleries on this wild and rugged island off Scotland’s Atlantic coast.

The island only made a fraction of the 1.3 billion bottles of Scotch produced last year, according to the Scotch Whisky Association, but its single malts—known for their smoky, peated flavor—are highly prized. In July, a cask of rare 1975 whisky from Ardbeg, LVMH’s Islay distillery, fetched £16 million at auction, smashing previous records.

Until recently Islay was home to eight distilleries, including iconic names like Laphroaig (owned by Beam Suntory) and Lagavulin (Diageo).

A ninth, Ardnahoe, started production in 2018, sparking a growth phase that is unprecedented in the island’s modern history. Three more distilleries are now being built, including Mr. MacKenzie’s new Laggan Bay, with a fourth awaiting approval from the local council.

Among them is Port Ellen, a fabled distillery that closed four decades ago and is being revived by Diageo. Nearby, LVMH recently doubled production capacity at Ardbeg.

The boom on Islay is representative of broader growth in Scotch amid a trend toward higher-end spirits. Of Scotland’s 139 working distilleries, 11 opened in the past five years, the Scotch Whisky Association says, with 20 more being built.

Scotch exports hit a record £4.9 billion in 2019, according to the Scotch whisky Association, having roughly doubled over the preceding decade.

Three more distilleries are being built now including Port Ellen, a fabled distillery that closed four decades ago and is being revived by Diageo PLC.

Exports have since dipped amid the Covid-19 pandemic and a 25% tariff on Scotch imposed by the U. S.—the liquor’s top export destination—during a recent trade spat with the European Union. The U.S. removed the tariff in July.

Expansion has roared ahead regardless, though, with whisky-making a decidedly long-term enterprise. Ardnahoe, Islay’s newest working distillery, won’t release its first whisky until around 2024, nearly a decade after its inception, said Scott Laing, its director, thanks to the practice of aging Scotch in oak barrels for several years before bottling.

While whisky has become a pillar of the local economy alongside farming and fishing, some locals say its growth is stretching the island’s limited resources, chiefly housing.

Like many of Scotland’s windswept isles, Islay has wrestled for years with a declining population. From a 19th century peak of more than 15,000 inhabitants, Islay—roughly 10 times the size of Manhattan by land area—is now home to around 3,000 people.

While its thriving distilleries mean it has more jobs than many of its island neighbors, locals say young families often leave the island because they can’t afford houses. People from the British mainland can afford to pay more, while tourism—most of it whisky related—has swallowed up much of Islay’s housing stock for use as vacation rentals.

Alarmed by these trends, several locals launched a Change.org petition in 2019 protesting the industry’s expansion, which they submitted to the council. It gathered 222 signatures, a sizable figure for the island.

Opponents say the whisky industry’s expansion on Islay should be frozen until action is taken on housing, including limiting the number of Airbnb rental properties.

“Foreign enterprises are here trading on the Islay name, but they’re distorting the social structure of the island,” said resident Bronwen Currie, one of the signatories.

Opponents say the whisky industry’s expansion on Islay should be frozen until action is taken on housing, including giving locals priority when houses are up for sale and limiting the number of properties that can be rented on Airbnb ABNB 0.03%▲. They also want improvements to overstretched ferry services and roads.

Argyll & Bute Council approved the new distilleries because they provide “high-quality jobs,” a council spokeswoman said. The council aims to improve housing options for local people by building new properties and is encouraging distilleries to do likewise, she said.

Scotch makers have said they plan to build houses for workers, talked up the economic benefits of their distilleries and donated money to local causes—Ardbeg in July for instance donated £1 million from its £16 million cask sale.

Whisky expansion could help keep young people on the island by offering them a career path at a local distillery, said Ewan Andrew, Diageo’s president of global supply and procurement. Housing is a problem, he said, pledging to consult with local communities to help find solutions.

Mr. MacKenzie said his company, Islay Boys Ltd., which makes blended whiskies and owns Islay’s brewery, aimed to build six to eight houses to accommodate workers as part of its new distillery project, which received planning permission in July.

“We have to have enough houses for locals. The only way is to build them,” he said.

Thomas Moradpour, chief executive of the Glenmorangie Co., the LVMH unit that owns Ardbeg, said housing was also a problem for his distillery. “We’re constrained both for visitors and staff,” he said.

Some islanders argue that more whisky revenues should stay on the island.

“Only a small part of the whisky money trickles back to the island,” said Mr. MacCalman, who runs a local taxi firm. “The money isn’t serving the place where that wealth is created.”

Over 90% of Scotch is sold outside the U.K., and most of the distilleries are owned by global companies based elsewhere. Whisky sold in the U.K. is heavily taxed at 70% of the retail price, but that money goes first to the British government in London before filtering down to officials in Scotland and then local councils.

“If Islay was an independent state, its GDP per head would be enormous—it would be like Monaco,” said Blair Bowman, a whisky consultant.