Thank you for your letter of 25 January seeking additional information on two of the points raised during our appearance before the Committee.

INTERCOMPANY TRADE

  Just over 90 per cent of Scotch Whisky sales are sales of blended Scotch Whisky. A typical blend may consist of around 40 individual whiskies. No company owns that many distilleries, and while one company comes close, even it requires the spirit from rival companies' distilleries as a constituent part of its own blends. This puts the Scotch Whisky industry on an unusual footing. Brand owners fight vigorously for market share in the high street against competitors upon whom they rely for some of the constituent parts of their own product and for the maintenance of their own product quality.

  The trade between companies will be conducted either by a cash payment for spirit supplied, or through reciprocal fillings under which companies will swap from different distilleries between each other.

  The importance of blended Scotch Whisky is such that virtually no distillery would remain economically viable if it had to rely solely on sales of bottled Single Malt. For example, it is our understanding that between 50 per cent and 60 per cent of the business of one very best known malt distilleries—in the top five sellers world wide—is the supply of fillings for other companies.

EMPLOYMENT

  There are a number of points to make here. The SWA gathers employment data from its members each year. In 1999 and 2000 the number employed remained around 11,200 people. Clearly this represents only those people employed by SWA member companies. While these account for well in excess of 95 per cent of the industry, distilleries and related operations at Springbank distillery, Loch Lomond distillery and other similar operations would not be included.

  The industry data is however more robust that the "official" figures that have historically been relied on by government departments, based on SIC codes. These always understate the employment levels, as evidenced by Scottish Parliament Rural Development Committee's recent report into rural employment, which puts forward a figure of 9,000 jobs in the industry. I understand that one of the reasons for the difference is that SIC codes do not pick up smaller operations which have few employees.

  Turning to the specific point about employment numbers being affected by job transfers from Scotch Whisky companies to other operators, notwithstanding that there has been no change in job function. The particular case we had in mind in making this point, was that our 1999 employment figures suggested a drop in sales staff employed in Tayside. An analysis of the figures showed that few of these jobs has actually disappeared. While some staff had relocated to other parts of the UK, the major impact was due to Highland Distillers' sales staff transferring to a new joint venture sales company that Highland had established with Jim Beam Brands and Remy. These staff were no longer on the Highland payroll (and thus not in our statistics), but were doing the same job—representing and selling the company's Scotch Whisky—and were based in Stirling instead of Perth.

  In this case some 60 people were involved. Smaller numbers, but no less important given the role distilleries play in rural communities, may be involved where a SWA member sells a distillery to a non-member. For example, in the last year JBB (Greater Europe) plc has sold Tomintoul distillery (Speyside) and Bruichladdich distillery (Islay) to companies that previously did not own a distillery and are not members of the Association. Thus, the employees at these locations will apparently `disappear' from the statistics, but their jobs will continue to exist.

  I hope the above is helpful, but if you have any further queries, please do not hesitate to contact me.

The Scotch Whisky Association.

February 2001