Highland hints at a Christmas price war: Cut-price whiskies 'compounding the difficulties'

JOHN GOODWIN, chairman of Highland Distilleries, has increased speculation that a price war will be waged by whisky producers this Christmas.

Mr Goodwin said the emergence of cut-price 'commodity' whiskies was compounding difficulties created by shrinking nationwide sales and overproduction.

His comments came as Highland, responsible for the Famous Grouse brand, posted a 35 per cent increase in pre-tax profits.

'The whisky market could become quite competitive at Christmas,' Mr Goodwin said.

However, he said Highland would resist pressure to cut the retail price of its product, now the second-best-selling whisky in the country. 'The worst thing we could do is cut the price of Famous Grouse,' he said. 'It would mean that we would lose margin and lose reputation.'

Last week another distiller, Burns Stewart, also said that a price war was looming and Guinness, owner of the best-selling Bell's whisky, plans a Christmas promotion.

The average price of a bottle of Famous Grouse is pounds 11.71 comared with pounds 11.19 for a bottle of Bell's. Supermarket own-label spirit sells for an average of pounds 9.12 and the new low-quality 'commodity' products are priced at pounds 8.41.

Pre-tax profits at Highland for the year to 31 August were pounds 38.8m, up from pounds 28.7m. Most of the increase came from a change in the accounting treatment of Robertson & Baxter, the rival distiller in which Highland owns a 35 per cent stake.

For the first time Highland included a share of R&B's profit in its accounts, in proportion to its shareholding. Profits discounting R&B rose to pounds 31.4m from pounds 28.7m.

Underlying profits rose 9 per cent, thanks largely to an increase in exports, which were boosted by a distribution agreement with the French drinks group Remy Cointreau. Exports now account for pounds 30m in total sales of pounds 171m.

Highland's share of the British market fell from 14.1 to 14 per cent.

Mr Goodwin also reiterated industry calls to the Chancellor to alter the tax regime, which Scotch producers claim is unfairly biased against them.

During the year Highland paid off a French franc loan equivalent to pounds 31m out of cash resources. Brian Ivory, managing director, said the group felt the move was prudent in the light of uncertainty over exchange rates and French interest rates.

Year-end gearing, however, was 1 per cent, compared with 6 per cent at the same time in 1992.

Earnings per share increased from 15.1p to 16.2p and the full-year dividend was lifted 10 per cent to 6.6p from 6p.

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