Navigating duty hikes: strategies for distillery process efficiency

The effects of the August 2023 alcohol duty hike continue to be felt among distilled spirits manufacturers. This increase – the largest in 50 years – has impacted the entire supply chain, significantly reducing profit margins at a challenging time for the sector. Yet this challenge will be further aggravated in February 2025, when the duty rate is set to rise by another 2.7 percent in line with Retail Price Inflation.  

Combined with hikes in raw material and energy costs, the financial pressures facing distillers are clear. Yet while the sector must adapt to rising commodity prices caused by global trends, operational measures can be taken to mitigate increasing energy costs. By doing so, spirits manufacturers could potentially add some breathing space into profit margins already squeezed by spiking duty rates.

Precision in performance

Informed specification of decentralised energy equipment offers a way forward in this scenario. Selecting the latest generator technologies and energy-efficient HVAC equipment in manufacturing can help site stakeholders reduce operational costs through greater efficiency.

This is especially pressing at a time when fluctuating grid power prices continue to expose the energy-intensive spirit-manufacturing sector to additional financial risks. In contrast, decentralised solutions are not subject to this level of volatility, insulating site stakeholders from potential instability in this area.

Given that distilleries rely on precise power and temperature control to maintain production continuity and product quality, any improvements to this manufacturing process could also greatly impact bottom lines when replicated at scale. To fully capitalise on these opportunities, decision-makers should seek additional expertise to maximise on-site efficiencies. Such in-depth technological knowledge can be leveraged from within the supply chain and by engaging in ongoing dialogue with sector experts.

Shrinking budgets, growing need

Indeed, given the energy demands of pumps, mixers, chillers, heaters and control systems in fermentation, this combination of informed specification and efficiency gains can amplify savings across entire sites. Yet the duty hike has also impacted this area, with increased financial outlays resulting in smaller equipment purchasing budgets.

This conclusion is supported by data on sector sentiment gathered following the previous duty hike. According to the Survation UK Distillery Report 2023, 71 percent of distillers reported being less able to invest in business improvements such as increasing production capacity or adopting innovative technologies following the duty change. This situation is likely to have been further amplified a year on, following additional price rises and economic uncertainty.

Consequently, distillers are facing a dilemma over 2025. Though upgrading to higher quality, more efficient equipment can help offset price rises from the duty hike, the same hike has constrained the capital budgets needed for such investments. As a result, site stakeholders may find themselves in a worsening position and without the means to extricate themselves from it. Decentralised energy provision may offer a route forward, but prohibitive financial obstacles still exist that prevent site decisionmakers from realising this approach’s full potential.

Overcoming cost hurdles

In these circumstances, strategic equipment hire could become an increasingly attractive strategy. By procuring the latest industrial power generation, process cooling equipment such as chillers, and oil-free air compressors on a temporary basis, distilleries can more effectively reduce energy consumption, costs and emissions during key industry applications, including fermentation.

Crucially, hired equipment is counted as an operational expense, eliminating the high upfront costs associated with purchasing permanent solutions. By removing this barrier, site stakeholders are well-placed to decentralise power provision or supplement on-site power and temperature control systems during shutdowns or seasonal peaks.

The power of remote monitoring

To maximise the benefits of this approach, it is critical that distillers engage suppliers that can provide a wide range of industrial generator and process cooling equipment. Access to an extensive portfolio of HVAC and generator solutions is crucial to ensure that equipment procurement is dynamic enough to meet the ever-evolving needs of individual spirit manufacturers.

This combination of flexibility and modularity can allow distilleries to be more agile in their approach, scaling power and temperature control provision up and down with a greater level of control. Indeed, this level of control should not be regarded as a benefit at distilleries, but rather a necessity. It can be further augmented however by the use of advanced, remote equipment monitoring to maximise efficiency and energy savings.

Through specialised remote monitoring services, plant stakeholders can better integrate 24/7 monitoring into their operations, alongside rapid emergency response, proactive maintenance and fuel services. The provision of live data for hired, on-site equipment can also help inform actionable insights, identifying stoppages, faults or inefficiencies to be resolved.

In turn, these actions can help prevent downtime and ensure the operational reliability of industrial generators and manufacturing HVAC systems used at distilleries. In the challenging environment facing spirit manufacturers, exploring these additional cost-saving avenues can help alleviate financial pressures as the impact of rate hikes becomes clearer over 2025.

Innovating for the future

As the industry navigates these challenges, embracing innovation and efficiency improvements will be crucial for sustaining profitability and growth in the coming years. Confronted with rising costs and duty hikes, distillers must consider all available options to improve efficiency and reduce operational expenses.

By focusing on informed specification of decentralised energy and temperature control equipment, while leveraging strategic equipment hire expertise within the supply chain, site decisionmakers can better reduce financial pressures exacerbated by these twin concerns. Engaging with suppliers who offer a wide range of generator and HVAC equipment and technologies can provide the flexibility and control needed to adapt to changing demands. This approach will not only help in maintaining operational reliability but will also ensure distilleries can continue to produce high-quality products while managing costs effectively.