Six of the top 10 export destinations for Scotch Whisky are now in Asia.
(Bloomberg) — If you’re invited to a wedding in Southern China you might see couples perform an unexpected ritual. First their hands are bound together, then the pair imbibe a shared toast of Scotch whisky. Its an invariably heart-warming symbol of shared destiny that might seem to hark back to ancient Celtic lore.
In fact, according to Chivas Brothers Chief Executive Officer Jean-Etienne Gourgues, the whole thing is a modern invention by his firm’s parent company French drinks giant Pernod Ricard SA — promoted to wedding planners who work with the brand to boost its premium booze to couples who’d otherwise toast with Chinese Maotai (a fiery distillation of fermented sorghum).
The yearslong efforts by Pernod, Diageo Plc and other major whiskey producers to get Asian drinkers to spend more on their premium spirits are finally paying off, just as sales in established markets in the US and Europe show signs of slowing. Last year, the Asia-Pacific region overtook the European Union to become the biggest buyer in the £6 billion ($7.5 billion) Scotch whisky export market, according to the Scotch Whisky Association. In the first half of this year, six of the 10 largest export destinations for the vaunted spirit—which must be distilled in Scotland following specific processes to have a “Scotch” designation—were in Asia.
“Asia is where the longer-term growth will be, especially as you convert people from whatever the local whiskies are or the cheaper blends to more expensive whiskies over time,” said Bloomberg Intelligence consumer goods analyst Duncan Fox. Euromonitor International valued the global market for whiskies at $139.5 billion in 2022.
Asians will soon become the world’s biggest drinkers of all whiskies, Fox added. That’s as long as countries there don’t introduce additional hurdles, such as the alcohol bans in some states in India or the government-led drives against conspicuous consumption sometimes seen in China.
“You’re probably looking at a five-year horizon because they will just buy more,” Fox says about the potential timeline for Asia becoming the largest consumers of the spirit.
Recent earnings reports bear this out. In late August, Pernod announced that Scotch sales had increased 17% for the year ended in June to hit a 10-year high; Asia was the biggest contributor to that growth, with sales up 21% there. Chivas’ Royal Salute, whose bottles can sell for tens of thousands of dollars each, saw revenue rise 32% — an increase Gourgues says was mostly driven by rising Asian consumption. And while Johnnie Walker distributor Diageo only saw 2% growth in the the volume of Scotch it shipped, net sales leapt by 12%—evidence that more buyers in places like Asia are willing to pay more money for less volume.
The process of getting Asians to spend increasingly large sums on whiskey, even as the global economy slows, has been a blend of education, marketing and wile. Diageo and Pernod—two of the world’s largest liquor companies—have spent huge amounts on digital and traditional marketing and promotional events, even launching production distilleries in India and China.
Take Pernod’s $150 million the Chuan Malt Whisky Distillery on Mount Emei in the Sichuan province of China. With its sleek concrete and stone structures embedded into the mountainside and subterranean whisky lounges, the focus is very much on luxe experiences rather than mass production.
Understanding the hyper-niche areas in Asia’s markets has been key to beverage producers making inroads in the region. India’s cultures and regulations vary state by state, while the Chinese market requires focusing on individual cities and age groups divided into targeted five-year segments (Gourgues argues generational tastes in Europe, by contrast, coalesce into 20-year blocks). That’s why weddings have been such a good opportunity for the whisky industry, bringing together cultures and generations. Pernod’s research showed nuptials in Guangdong province are often elaborate multi-day affairs with several dinners offering more drinking opportunities than the lunch banquets common in the Sichuan region.
“What is interesting with the whisky category is that it’s where consumers are more attracted to try new brands or products—usually three times the average compared to any other spirits in the world,” says Gourgues, who led Pernod’s operations in China until 2021. “The beauty of a place like China is that you have a lot of consumers and opportunities and possibilities. It’s not a question of purchasing power. It’s much more a question of cultural relevance.”
The tiny city-state of Singapore is an example of the strategy’s success: an increasingly wealthy community buying more high-priced liquor as they also buy the stories behind them. Take James Phang who, as a young corporate consultant in 2015, was introduced by friends to the world of premium whiskies, when most Singapore bars served relatively generic pours available in supermarkets.
“It was pretty dead—there were seven or eight bars for whiskey and they didn’t bring in many different products,” he says.
So Phang joined with friends and fellow fanatics to get better options. He created a Facebook page for bottle swaps and sales while organizing gatherings where connoisseurs shared their collections and knowledge. Eight years later, Singapore is replete with whisky-focused bars and even private members clubs focused on the spirit such as 35A Scotts. Phang is advising a whiskies and cognac investment vehicle set to be called the JAG Liquid Gold Fund.
The island nation has even become the world’s third-largest Scotch whisky importer behind the US and France. In the first half of 2023, sales rose 59% from a year earlier, to £165 million. Some of this business is due to Singapore’s position as a regional hub for distributing goods across Southeast Asia, where sales are rising overall. But local interest is at an all-time high.
In November, fans of the spirit will make their way to the annual Whiskey Live Singapore event at the Singapore Flyer, an observation wheel that dominates the bay-front skyline. There, they’ll have the chance to experience a ritualistic toast where participants yell “dram full” before they down their glass. It’s an invented take on the celebratory, and extended, Yam Seng cry that’s a staple of weddings in Singaporean and Malaysian Chinese communities.
The popularity of such events is yet another indication of the region’s increasing devotion to whiskey. “Asia’s share of the market will go up, because you’ve got 50% of the [world’s] population or more there and a huge percentage of newborns are in Asia,” BI’s Fox says. “It’s just going to be bigger in terms of math, and it should grow in value as well as volume.”
–With assistance from Andy Hoffman.
More stories like this are available on bloomberg.com
©2023 Bloomberg L.P.