CASE STUDYCASE STUDY

SCOTCH WHISKYSCOTCH WHISKY

The Culture Of The World’s Leading SpiritThe Culture Of The World’s Leading Spirit

Presented by –

SONUKA AGARWALSONUKA AGARWAL

(M.B.A.)

IDENTIFICATION OF THE ISSUEIDENTIFICATION 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”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""Scotch" for its most famous export, ‘‘Scotch Whisky’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 BRIEF DESCRIPTION ABOUT SCOTCH WHISKYWHISKY

• ‘‘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"

• 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 CLUSTERSLEGAL 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 of trade annually and thus cannot afford to 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""Scotch" whisky

Scotch Single Malt Whisky

DISPUTES AND STATUSDISPUTES AND STATUS

Brand Protection Issue

• The most recent dispute relating to usage of the name ‘whisky’‘whisky’ involves a 1997 case with the British national courts concerning the selling of ‘Manx whisky’‘Manx 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""scotch" or "whisky""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 product as true whisky, and Scotland was able to uphold the integrity of the whisky which dominates world markets

Production Of Malt Whisky

IMPORTANCE OF BRAND PROTECTIONIMPORTANCE 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’‘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

• 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

*mlpa – million liters of pure alcohol

• 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 ISSUESIMPORANCE 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 China Gave Scottish Whisky Trademark Legal Protection’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''Scottish Whisky' in the country's patent laws

• It added that the cover would apply to the words ‘Scottish Whisky’‘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