Islay Whisky Facing Peated Malt Shortages

The supply from Port Ellen maltings to non-Diageo distilleries will be restricted in 2023 and might be terminated totally in 2024, according to a tip from an unnamed source on Islay. So we looked around a little. When we questioned Bowmore and Laphroaig's owner, Beam Suntory, about the Port Ellen problem, Robbie Millar responded, "We are aware of the situation and have been working to remedy the repercussions of Diageo's decision to restrict shipments."

Supply

A significant Islay distiller afterwards informed us that "Diageo has significantly reduced all of their external clients for 2023, and I have not yet had a talk with them about 2024, but it is a distinct possibility." Anthony Wills from Kilchoman was willing to speak with us but declined to speak on the record: "My understanding is they [Diageo's clients] have been warned they will not be able to deliver the quality of malt they presently obtain from 2024."

Diageo's head of corporate communications, Ian Smith, responded that he "would not deny what you are saying" when we put this to him. "We can't comment on the specifics of commercial supply arrangements, but it is true that we have witnessed a significantly increased demand for malted barley from our Port Ellen maltings," he said in a later statement. The maltings are therefore running at full capacity, and we are controlling supplies as a result. We cherish our relationships with our clients and fellow distillers very much, and we are doing everything we can to help them within the restrictions of the supply while also thinking about potential future solutions.

Demand

The issue is that Diageo's Islay distilleries are experiencing an unprecedented amount of demand for peated malt from Port Ellen maltings. For a large portion of the pandemic, Caol Ila was closed; it is currently open seven days a week. You have a dilemma when you add that to the fact that distilling at Port Ellen has resumed for the first time since 1983 and the ongoing demand for Lagavulin.

Capacity expansion at Port Ellen Maltings was previously discussed, but for unknown reasons it was never implemented. "It was foreseeable, everyone saw it coming, yet Diageo took the option not to grow," said Georgie Crawford, previously of the Port Ellen and Lagavulin distilleries and currently at Elixir on Islay. Off-the-record, another Islay distiller said, "They should grow. Why not, you ask?

It's not only an Islay issue, he continued: "Overall malting capacity is a problem. The seams are creaking. "Securing malt supplies for malt next year is really tough," Anthony Wills of Kilchoman remarked. An industry-wide squeeze is present. Wills claims that Bairds Maltings has just increased its capacity by 57 tonnes, while Simpsons is requesting approval for new Speyside maltings. He continued, "Everyone is at maximum capacity. An additional obstacle to the supply of malt was a fire at Crisps in Portgordon's peated kiln.

Supply Chain Issues

"The amount of queries we are having to walk away from, it's more than I have seen in the last 30 years," a sizeable Scottish maltster said us, "it's more than I have seen." In light of all the growth, he continued, "the industry is in a tight place." He claimed that Beam Suntory and Glenmorangie had both came to him for malt. He anticipates that the increased demand would force Diageo and other maltsters to grow.

Even if distillers can obtain materials from the mainland, traveling to Islay is challenging due to the island's aging transportation system, which is centered on CalMac vessels. CalMac does not now have the capability to carry the necessary additional freight.

Additionally, a lot of distilleries rely on Islay malt specifically for their flavour profile and marketing. Peated malt varies widely. Anthony Wills claims that Laphroaig alone requires five to six shipments of malt each week, weighing about 28 tonnes. If all of that were to come from the mainland, that would have a huge carbon footprint.

It appears that the lack of malt extends beyond Scotland and even the United Kingdom. According to reports, some maltsters in Germany had to completely shut down due to energy difficulties. What would happen if there was a European beer shortage instead of a whisky one? Winter is on its way. Maybe it's time to feel a little nervous.