After six years at PepsiCo Paul Skehan, the former Spirts Europe head, returns to the association as director general with a clear view of the challenges and opportunities facing this buoyant sector.

Paul Skehan has spent nearly 30 years in Brussels, so he is used to being recognised. His return to Spirits Europe as director general, announced last month, still drew a warmer reception than he expected. “I’m not too sure about me being the popular or successful,” he smiles.

“I think I’ve just been around long enough that people know me now.” He is more candid about the response itself. “It was very gratifying. I was very chuffed and very humbled by some of the comments that were coming in.”

He takes over from Mark Titterington, whom president Patrick Piana thanked for leaving the organisation “with strong foundations for the future”. Skehan led Spirits Europe from 2011 to 2017, then moved to PepsiCo, where he became vice president of EU Affairs.

The organisation says that stint added strategic experience within a multinational business to a CV already built on European and global public policy, government affairs and communications.

Piana describes the combination as “a unique blend of sector knowledge, association leadership and in-house corporate experience”. The timing matters. Producers face a political and economic landscape shaped by competitiveness, trade tensions, shifting consumer expectations, sustainability and the debate over responsible alcohol consumption.

Skehan makes clear that coming back was a choice about the sector as much as the job. “The opportunity came up to work in PepsiCo for a few years, which I enjoyed and took,” he says. “But honestly, to come back is the greatest delight, to a sector that I love and appreciate.”

He gives three reasons. The first is the product: “It’s full of products that have come down to us through centuries, through tradition, through heritage, through master craftsmen fine-tuning what they’ve done over decades or centuries.”

The second is the people, who he finds “quite interesting”. The third is policy. Alcohol, spirits and food and beverage more broadly are, he says, “a fascinating set of subjects at the moment. You can really get your teeth into that.” He doubts a move into mechanical engineering or pharma “would have had any of the same appeal”.

A changing spirits landscape

Skehan’s first impressions of the spirits landscape are one of change. “The sector is in a tricky place at the moment, and trickier than when I left,” he says, citing a concentration of pressures that are “some of them commercial, some of them political or regulatory, and some of them geopolitical”.

European spirits are unusually exposed to this, he argues, because the sector is “so open and so dependent on external markets”. When he left, the American market was booming and China was doing well. “You now have both of those markets with differing problems attached to them. They’re still hugely important for the sector, but they have challenges attached in terms of either tariffs or non-tariff barriers.”

But when Skehan looks at the producers that Europe boasts, he is awash with optimism and admiration. “I see a huge amount of innovation, and I see a huge amount of entrepreneurship in the sector.” He recalls an Irish Spirits Association annual meeting around 2011 or 2012 with about perhaps four companies at the table. “If I went back to that this year, there’d be 30, 35, 40 companies. And all of these are doing interesting things, and not just in Ireland.”

Many of those new distilleries are rooted in their communities. “There’s a story behind it. There’s a narrative,” Skehan says. Distillery tourism now brings in “millions of people around Europe”, and the visitor shop can become “almost like a mini market” for local cheese makers and other artisans. Some distilleries, he says, are becoming “a nucleus for local tradespeople, local agri producers”.

The harder commercial question is how the sector responds to changing drinking habits. Skehan welcomes part of the shift, noting that underage drinking figures are “decreasing right across Europe”, which he calls “an extremely positive trend and one that we’d absolutely support”. Among adults he sees “a trend towards more moderate consumption, which we would broadly support”, with people “choosing to drink less, but maybe sometimes better”.

He sees that as an opening for spirits, particularly cocktails. “People are moving away maybe from volume, some of the bigger volume products like beer, but going towards smaller volume, something that’ll last, something where there’s a bit of a sense of occasion around it.” He is clear that the pressure falls on the whole alcohol sector, wine and beer included.

He identifies three strategies among European producers. The first is premiumisation: “If they’re not selling more in terms of volume, they’re looking to sell higher quality products.” The second is innovation, including lower-strength spirits that address the demand for “fewer drinks, maybe less alcohol, less calorie”. The third is finding “where in other parts of the world is there still scope to expand”. And for many producers, India represents a huge growth opportunity.

Skehan’s trade-policy instincts are most visible on labelling and categories. Consumer clarity, he says, is “terribly important in the overall scheme of things”. He accepts that current rules are there “for a good reason”, though he concedes they restrict how some mixed products can be marketed, which he calls “a challenge”.

The English whisky geographical indication prompts his sharpest warning. Consumers, he notes, may not know the regulation or the definition, but “they should have a fairly clear idea of what it means” when they see single malt on a shelf. His concern is placing “some Scotch single malts beside some future potential English single malts, but which have different production processes behind them”.

He is careful not to oppose innovation. “I’m not trying to stymie innovation in any way. I think innovation is a fantastic thing.” But he draws a line. “If you’re going to be innovative about process and the final product, there’s a kind of onus on you to be a bit innovative about what you call it as well. I would not be supportive of calling it the same thing as another product that has gone through a completely different process.”

Quiet, local innovation

On sustainability, Skehan stresses that distilling sits at the centre of a wide ecosystem. Raw materials arrive from local farmers, and the challenge, as for any food and beverage producer, is “how do we take care of our own emissions, and how do we help our suppliers also reach the standards that we want”.

He points to Scotch whisky’s firm net-zero targets, and to distilleries in Cognac, Ireland, Poland and Germany exploring electrification in place of fossil fuels. He also cites water stewardship, “how the water can be reused and so much less being used”, and spent mash returned to farmers as fertiliser. “There’s tons of ways there that the sector is innovating in quiet, local ways, which I find fascinating.”

He is frank that this is a communications gap for the association. It is something spiritsEUROPE “probably needs to tap a little bit more and understand a bit better, to be able to communicate”.

Finding common ground

Skehan says there is no such thing as a typical day in the job, but one theme recurs: the sector is not a single voice. “When I sit in front of people in the Commission or the European Parliament and they say, ‘Oh, but your sector wants to do this,’ I go, ‘Well, not all of my sector wants to do that.’ It’s by no means a homogenous single entity. On a day-to-day basis, my members are killing each other in the marketplace.”

The association works because members still share policy interests. “It’s always pre-competitive. We never get into price, we never get into market.” The aim is to find “clever solutions that are not dumbed down so much that they become meaningless”, then show policymakers the consequences.

“We know what you’re trying to do here, we support what you’re trying to do. But if you do it in the way you’re proposing, here is the effect potentially on 1.2 million employees in our sector. Or if you do it in a slightly different way, you can achieve what you want to achieve, but you won’t kill us in the meantime.”

He considers this advocacy a duty rather than a nuisance. “It’s a legitimate and absolutely essential part of the democratic process,” he says, adding that at a time when democracy is “under a bit of duress and threat around the world”, European leaders need to “stick to the democratic principles on which everything is based”. For his own part, “I take great pride in it. I enjoy the challenge of finding the common interest. It’s not always easy.”

Skehan’s ambition for his second term is to make policymakers see the sector as he does. The numbers back him up: 1.2 million jobs, €60 billion in gross value added and €25.3 billion in annual tax revenues, plus an estimated five to six million jobs further back in agriculture, bottling and the wider supply chain. He also values how rooted the industry is: “at a time when there’s so much movement towards the bigger cities”, it is “rooted into their local communities”.

Then there is the export story. “If you look at any bar from Singapore to Cincinnati, and you look at the display behind, a significant percentage of those bottles will have come from Islay or Connemara or Cognac. I find great pride in that. Here is a sector that is a champion sector for Europe. It turns up in all of the trade data. We export far more than we import.”

His task, he says, is to make sure Brussels understands that. “Collectively we need to share that pride more with the legislators and the policymakers, have them also understand the background to the sector, see it for what it is, and help the sector to become more successful. That is our challenge for the coming years, and one that we look forward to with Patrick’s help.”