CASE STUDY

SCOTCH WHISKY
The Culture Of The World’s Leading Spirit

Presented by –
SONUKA AGARWAL

(M.B.A.)
 IDENTIFICATION OF THE ISSUE

• The underlying issue in this case study concerns the labelling

processes for internationally marketed products that are named for
the region, area, or nation where they are produced
• Naming a specific commodity on the basis of the culture, region,
or area where the item is produced has created some controversy in
recent years
•“Scotch” is named after Scotland and it refers to the whisky
produced in the country
• Scotland has successfully been able to obtain sole ownership of
the label "Scotch" for its most famous export, ‘Scotch Whisky’ after
having been gone to battle with the EU and other international
bodies to protect the integrity of their product, as an expression of
Scottish culture, taste, and cleverness
BRIEF DESCRIPTION ABOUT SCOTCH WHISKY
• ‘Scotch whisky’ is one of Scotland's most favorite cultural
products as well as one of its most profitable trade items

• Scottish distillers have been perfecting production processes of

the world's leading spirit for 5 centuries and deservedly have
earned the right to be sole owners of the label "Scotch"
• Scotch Whisky are of 2 types, malt whisky and grain whisky. But
malt whisky is more popular than the later
• This case concerns Scotland's intellectual property rights to its
nationally-labeled trade item and protection of the cultural
traditions associated with the production of Scotch whisky
• Scotch is a lucrative business with an estimation of 2.5 billion
litres of pure-alcohol whisky and the value of a liter of pure alcohol
was approximately 8 pounds sterling, therefore the stocks were
worth 20,000,000,000 pounds sterling at sale.
 LEGAL CLUSTERS

• The Scotch Whisky Association announced

concerns over unfair tax discrimination of
scotch, particularly in Asia and brand protection
• SWA urged the European Union and WTO to
consider the issue in the next round of talks
• Scotch whisky trade is an enormous part of the
British economy with about $4.84 billion worth
Scotch Single Malt
of trade annually and thus cannot afford to
Whisky
suffer tax discrimination in parts of Asia like
Korea, and cheap imitations in places like India.
• Intellectual property rights are related to this
case study since the product itself is actually
named for its origin, it is especially important
that only Scotland be allowed to market "Scotch"
whisky
 DISPUTES AND STATUS

 Brand Protection Issue

• The most recent dispute relating to usage of the name ‘whisky’
involves a 1997 case with the British national courts concerning
the selling of ‘Manx whisky’,
whisky’ that which was produced and
marketed by a distiller on the Isle of Man, an island near Scotland
• The Scottish distillers realized that Glen Kella’s production
company was distorting the "whisky" label in and around the UK
as the term "scotch" or "whisky" automatically creates association
with the traditional spirit of Scotland
• Glen Kella was taking Scotch whisky and performing a third
distillation which was removing the tar and color from
traditional Scotch and creating a colorless form of pure alcohol
• This caused tremendous controversy
among SWA who stated that "whisky must
retain the colour, aroma, and taste derived
from its distillation and maturation" and that
somehow the third distillation process
destroys the essence of the whisky

• Finally, the British High Court Judge ruled

on 24 March 1997 that the production
process of Manx whisky fell outside EU
regulations and it would pose threat to the
integrity and of the reputation or aura of
true whisky

• Glen Kella could no longer market its

Production Of Malt
product as true whisky, and Scotland was Whisky
able to uphold the integrity of the whisky
which dominates world markets
 IMPORTANCE OF BRAND PROTECTION

Brand Protection of Scotch Whisky is very important for Scottish

people because :-
• This whisky has been the world’s leading spirit for centuries
depicting the undying spirit and cultural traditions of Scotland
and cheap imitations would destroy the cultural wholeness of
Scotch
• Also, if another country produces a malt with different
processes and ingredients and names it as ‘Scotch’ then
essentially that country would be deceiving its would-be
customers as no other country has spent centuries mastering
Scotch distillation
 Trade Restriction Issue
 Economic Data

*mlpa – million liters of pure alcohol

• The above figure suggests that Scotland exported much more

Scotch in 1997 than in 1998
• Although the numbers for 1998 show a percentage drop, overall
the Scotch trade is growing, 3% to the EU
• 1997 was an exceptional year for Scotch as there was dramatic
increase for Scotch demand that year
• As reported by the Scotch Whisky Association, the following
were the (as of September 29, 1999) tax rates in Korea for spirits :-
Type of Spirit       Tax Rate
Soju                                35%
Liquers                          50%
Vodka, Gin & Rum       80%
Scotch Whisky           100%

• The Director General of the SWA took issue with the unfair
discrimination of tax rates by working with other European spirits
producers and the United States to urge the Koreans to reform their
tax rates
• Later, the Dispute Settlement Body ruled that Korea is violating
international obligations by discriminating against imported and
domestically produced distilled spirits and gave an ultimatum to
reform its tax rates
• Finally, korea increased the tax rates for all types of soju
(domestic product) and lowered tax rates for whisky and
brandy(foreign product) by 58%.

• Geographic Domain :
Europe

• Geographic Site :
Western Europe

• Geographic Impact :
United Kingdom
 IMPORANCE OF TRADE ISSUES
Trade issues are also particularly important for the country because :

• For Scotland, Scotch is the business.

• Each year Scotland exports food and drink products worth 2.7
billion pounds and 84% of this is whisky.

• Also, 12% of all Scottish manufactured exports are whisky and

the industry employs some 16,000 people.

• Thus, Scotch whisky does around $4.84 billion worth of trade

annually and cannot afford to suffer tax discrimination in any part
of the world.
‘China Gave Scottish Whisky Trademark Legal Protection’
The Latest Scotch Whisky News related to brand protection is that
‘China Gave Scottish Whisky Trademark Legal Protection’
• Whisky producers in Scotland have been celebrating after the
Chinese Government said that it would grant legal protection to its
drink by enshrining the phrase 'Scottish Whisky' in the country's
patent laws
• It added that the cover would apply to the words ‘Scottish
Whisky’ and its Chinese translation
• The legal recognition will now allow whisky makers in Scotland
to take any alleged counterfeiters of their product to court in
China
• A SWA legal adviser described the decision as “positive” and
that it would help protect producers from counterfeiters
• With this China is expected to become the fourth largest
blended whisky market in the world