It almost goes without saying that 2020/21 was a challenging year for Edrington. As well as facing severe disruption from the COVID-19 pandemic, we had to navigate Brexit and the impact of US tariffs on Single Malt Scotch Whisky. Whilst our results show a decline after several years of strong growth, I am pleased that we were able to hold this to a moderate level and emerge from a difficult year in sound financial health.
Our people around the world responded admirably to the pandemic. They demonstrated personal resilience and a caring and supportive approach both to colleagues and the societies in which they live and work. They also showed an agile and collaborative approach to work, which allowed the company to reshape our business to make the most of the opportunities which emerged. I am especially grateful to our manufacturing employees, who were unable to work from home, for their efforts in keeping our products flowing from our distilleries and bottling plants to consumers across the globe.
I would also like to thank our shareholders for their support during the crisis. We appreciate the impact that pausing dividend payments has, but that has allowed us to get through the pandemic with a strong balance sheet and at the same time invest in our brands and capabilities. I believe that this gives us a strong base from which to grow the business in the coming years.
In my last report, I anticipated a significant decline in global sales and profits. After four consecutive years of profit growth, Edrington’s core contribution declined by 19% last year, reflecting the impact of COVID-19 and tariffs on Single Malt Scotch Whisky in the USA.
Whilst the decline in profit is disappointing to see, it was less severe than we initially anticipated as consumer demand remained solid in most markets. A significant proportion of purchases previously made in bars, restaurants and Duty Free shops moved to retail stores and online channels. The company adapted quickly to maximise the opportunities, principally by redirecting inventory and reallocating people and investment to growth areas.
Trade destocking caused a significant proportion of the year on year profit decline, driven by the USA. Trade buy-in ahead of the introduction of tariffs in October 2019 and concerns in early 2020 about the reliability of supply chains led to a high level of trade stock at the start of our financial year. As the pandemic caused on-trade closures, our customers sought to manage stocks down and as a result their purchases from us were lower than sales out to their customers. We believe that we start the new year with in-market stocks close to optimal levels in most markets.
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