Gavin Hewitt CMG is the chief executive of the Scotch Whisky Association. A former diplomat Hewitt is employing all his diplomatic skills on behalf of the association to lobby the HKSAR government to reform the current excise duty. I sat down with Hewitt to learn more about the issue and of course to talk about whisky and food.

The main reason for your visit is to lobby for Excise Duty Reform, what for you are the key factors in the debate?

Ultimately we feel that any duty imposed should apply to all alcohol, not just alcohol with a higher content than 30%. The current tax is 100 per cent ad valorem, which means that a $250 bottle of whisky costs the consumer $500. This does influence consumer choice as the price is distorted by the tax. 

We are not aiming for zero tax we just want the duty policy to be fairer. We are not against a tax we just feel it should be a tax for all. We believe that the Hong Kong consumer or visitor to Hong Kong is missing out under the current system. Frankly, Japan, Korea and even mainland China would be surprised at the price of whisky in Hong Kong and what you get for your money.

Author's Note: For a summary of the key points regarding reform see * below.

Have you held any meetings with the government yet?

We are currently talking to those in the industry and potential partners to package our case and are targeting next year's budget. We intend to present our case before the end of the year. The key focus of this trip was to work with industry people and other persuaders.

We understand the need to be sensitive to the market and we do need the support of Legco. We need to consider the current revenue from spirits, be sensitive to the China spirits market, and find a structure that supports both Hong Kong and the China spirits market. Ultimately we just want to level the playing field. The benefit is not just for Whisky producers but for all premium spirit makers. And we want to give the consumer premium spirits for a reasonable cost.

We have received signals from the government that it is open to discussion. So we are not without hope, but it will require all our persuasive skills. 

How important is the Hong Kong market?

The Hong Kong market has always been a slow growing market, but we have seen strong growth when changes in the tax have been implemented in the past. At the same time there has not been the expected growth at the premium end, which we believe is connected to the current tax system. 

It is a very different market to mainland China. Whisky is seen as a statement drink in mainland China, a drink of aspiration and massive growth is expected. 

One area of growth that we expect in Hong Kong is the whisky auction market. If the tax structure is changed we believe that Hong Kong could become the centre of whisky auctions in Asia.

Would the Hong Kong market see an increase in cask strength whisky if the duty was changed?

Yes, definitely. Cask strength whisky can go as high as 58 per cent compared to the standard 40 percent. There is a very big market for cask strength whisky and we believe it would be popular in Hong Kong if it was more affordable. It is considered a prestigious, exclusive whisky because of its limited production.

Whisky has experienced a revival as a fashionable drink, has the industry responded to this by introducing any changes, such as marketing strategies, labelling, brand building etc?

The industry responds more to patterns in individual markets. For example Italians love the 5yr old whisky, while in China they prefer a blended whisky. In Taiwan both single and blended malts are popular and Korea it is very high-end blended whisky that is the best seller. We are also looking to new markets such as mainland China, South Africa, Brazil and Russia.

Whisky is the number one premium drink in all markets. I think that any so called "trendiness" comes from the drink's long history and its reputation as a premium drink. That said there has been an increase in whisky based cocktails and this helps to give whisky a new, modern image, helping us to capture new markets and cementing old. There has also been an increase in using digital marketing campaigns.

Enough with the serious side of whisky, let's talk more about the drink itself. There are five key areas in Scotland that produce whisky, does the taste vary depending on the region?

Yes the terrior does come into play. What the actual science behind this is we don't know. Some believe that the taste all has to do with the water and the type of rocks etc that the water flows over, for example granite or limestone. The distilling process also influences as does the fermentation. Even the Still height can change the flavour profile.

As I said we don't know the exact science, but the natural factors at play, such as the water source, is one reason why distilleries are so reluctant to change processes that have been in place for many years.

One of the biggest character builders of whisky is the maturation in casks and what the cask was used for previously, plus the type of wood, all adds to the character.

What is your favourite whisky?

In my job I am not allowed to have a favourite. I can say though that I have 30-40 different whiskies at home and have developed a real love for whisky...I also like all categories of whisky and all ages...all good whisky has something to offer.

Many people think that whisky is traditionally a drink to be enjoyed at the end of an evening, what is your view?

The French drink whisky before a meal to set up the appetite, with a meal, and after. It really is a matter of personal taste when you drink whisky or how you drink whisky - ice no ice, mixed with green tea, like wine it really is a matter of personal choice with no right or wrong.

Do you think that whisky can be paired with food like wine?

Most definitely and in terms of Asian cuisine and its complex and layered flavours believe that it pairs better with whisky than wine.

Whisky pairing is a fantastic thing to do. In Spain and Greece it is very common to drink whisky (with 50% water - brings out the flavour of the whisky) all through the meal.

I think a peaty, dry whisky works well with seafood, such as scallops. Venison and other rich meats work very well with a sweeter whisky. Blue cheese also works well with a peaty whisky.

One of my favourite matches is a chocolate mousse paired with a blended malt whisky that is kept in the freezer.

Some of the distilleries in Scotland hold special whisky tasting dinners on a regular basis.

I think whisky pairing will become more common, especially now that the same descriptive language that is applied to wines is now being applied to whisky.

*SWA's Spirits Excise Duty Reform

Calling for reform of Hong Kong's excise duty arrangements for spirit drinks.

A simple, combination system is proposed; with either a $100 per litre of pure alcohol or a 100% ad valorem rate on product value applied, whichever is lower.   

This would reduce excise duty on premium spirit drinks to a more reasonable level, with benefits to consumers, government and industry. It would also ensure local rice spirit drinks do not pay any additional taxes.  

Case for Reform 

Consumers face an unfair, punitive tax on high quality spirit drinks, such as Scotch.  

Spirit drinks are subject to a 100% ad valorem excise duty.  In contrast, the Hong Kong SAR Government abolished the excise duties on wine and beer in 2008. 

High prices are driving consumers to lower tax jurisdictions, such as Macau and Shenzhen, reinforcing Hong Kong's expensive reputation in the eyes of mainland visitors. 

The spirits duty - based on value rather than alcohol content - is a tax on quality and cannot be justified on health grounds.

Benefits of Reform 

Local alcohol tax would be based on alcohol content, recognising ‘alcohol is alcohol'.  Supports the local economy by stimulating consumer spending in Hong Kong rather than in other lower tax jurisdictions. 

A reformed system would be fairer to producers, support consumers, and benefit the SAR Government. 

The proposed system would be more transparent, easy to implement, and reduce the administrative burden on the tax authorities. 

The combination of specific and ad valorem tax arrangements recognises the local situation in Hong Kong, whilst bringing the excise regime into line with international practice.  The proposed reform would be compliant with international trade rules.  

There would be no extra tax burden on local rice spirits nor would taxes on cheaper spirits fall.   

Whisky Basics

The following information was provided courtesy of the SWA. Scotch Whisky is a distilled spirit drink made in Scotland from cereals, water and yeast. 

It is broken down into five categories: 

Single Malt Scotch Whisky: A Scotch Whisky distilled at a single distillery, 1) from water and malted barley without the addition of any other cereals, and 2) by batch distillation in pot stills. The industry is also seeking legislation that would require Single Malt Scotch Whisky to only be bottled in Scotland.

Single Grain Scotch Whisky: A Scotch Whisky distilled at a single distillery 1) from water and malted barley with or without whole grains of other malted or unmalted cereals, and 2) which does not comply with the definition of Single Malt Scotch Whisky.
Blended Scotch Whisky: a blend of one or more Single Malt Scotch Whiskies with one or more Single Grain Scotch Whiskies. 
Blended Malt Scotch Whisky: a blend of Single Malt Scotch Whiskies, which have been distilled at more than one distillery.
Blended Grain Scotch Whisky: a blend of Single Grain Scotch Whiskies, which have been distilled at more than one distillery.

The five regions are so called due to the geographic location of the distilleries: Lowland, Highland, Speyside, Islay, and Campbeltown. Each group has clear defined characteristics, ranging from the lighter Lowland, to those distilled on Islay, which are generally considered the heaviest Malt Whiskies.

For more information on Scotch Whisky, including cocktail recipes visit www.scotch-whisky.org.uk