Chinese develop taste for Scotch
Demand rises rapidly among the young and affluent who drink spirits and favor e-commerce
Chinese consumers’ evolving taste for highend spirits pushed their spending on Scotch whisky to a record high over the past two years despite disruption to the trade caused by the COVID-19 pandemic.
Latest figures from the Scotch Whisky Association show that since 2019, the Chinese mainland has recorded the strongest growth for whisky produced in Scotland, with the total value of this market last year reaching 198 million pounds ($258 million), a rise of 123 percent compared with two years ago.
Global exports of Scotch grew to 4.51 billion pounds last year, with the mainland one of the key emerging markets contributing to such growth, which rose by nearly 85 percent in 2021 alone, making it the fifth-largest export market by value, according to the association.
Graeme Littlejohn, the association’s director of strategy and communications, said, “Some markets, such as China, have gone against the grain and demonstrated strong growth in spite of COVID-19.
“In recent years, China has seen a shift toward premium products, with Scotch whisky among them. Single malt Scotch now makes up over 60 percent of exports to this market, which may explain the strong growth seen during the pandemic.”
John McDonough, chief executive of Speyside Distillery, said he believes the main reasons for the growth of Scotch whisky exports to China are primarily the increased education, awareness and appreciation of single malts from Scotland.
Spey, the distillery’s single malt brand, has experienced strong growth in the past 18 months. The company operates mainly in Xiamen, a port in Fujian province, to take advantage of the trend for whisky consumption there and its proximity to Taiwan, where there is also strong demand.
McDonough said the recent success of single malt in Taiwan is influencing mainland consumers, along with global demand for this type of whisky.
“A growing number of consumers in China are making discerning choices involving a wide range of consumer goods — with top quality being the driving force. Scotch whisky is benefiting from this growing trend,” he added.
Every second last year, 44 bottles of Scotch were shipped from Scotland to some 180 markets worldwide.
Sohail Shaikh, minister counsellor at the United Kingdom Department for International Trade in Shanghai, said, “There is no better testament to the quality and popularity of the world’s No 1 internationally traded spirit.
“Chinese consumers recognize quality. As the economy grows, so does consumers’ desire to explore the higher end of the whisky market.”
Shaikh added that there has also been a shift in what used to be perceived as a male-dominated drink, with many more women now enjoying whisky.
In 2020, Chinese consumers spent more than $2.4 billion on spirits with international status — those that retail for $100 or more per bottle — in the domestic duty paid channel and the new duty-free enclave of Hainan province, according to IWSR, a leading
source of data and analysis on the global alcoholic beverages market.
Thorsten Hartmann, custom analytics director at IWSR Drinks Market Analysis, said, “China was one of the few countries where spirits with international status had a relatively good year in 2020.”
While premium baijiu dominates the Chinese market for high-end spirits, Hartmann said there are clear opportunities for Scotch whisky — particularly single malt, which took market share from blended whiskies in 2020.
The two basic types of Scotch whisky are single malt and single grain. While single malts exclusively use malted barley, grain whisky is typically produced from maize, wheat or rye. All Scotch whisky must be matured in oak barrels for a minimum of three years.
Blended Scotch, which contains malt whisky and grain whisky, accounts for about 90 percent of all Scotch output. According to analysts, without blended whisky the industry would not exist on its present scale.
Whisky is a rapidly growing area of the high-end spirits market in China. Demand continues to rise among urban and high-income consumers, especially the younger generation. Chinese view Scotch as the peak of sophistication and are attracted to its heritage and history.
Sebastien Borda, marketing director for business acceleration at blended whisky company Chivas Brothers, said, “Demand for Scotch is rapidly growing among affluent Chinese who drink spirits.
“The growth of disposable income among the wealthy and the millennial spirit drinkers, together with their desire to discover new products with authentic provenance and heritage, are two of the reasons behind the success of Scotch in China,” he added.
Borda said China continues to be a priority for Chivas Brothers, evidenced by the company’s JulyDecember financial results, which saw 30 percent growth in this market as more consumers sought authentic products with strong brand heritage.
He added that changing demographics in China, such as the rise of the middle class, are also stimulating consumption growth for the company’s whiskies.
Chivas Brothers is the Scotch whisky business of Pernod Ricard. In a move to cement its position at the forefront of the Chinese whisky market, the French alcoholic beverages giant unveiled The Chuan Malt Whisky Distillery in November, which is set to produce the first Chinese malt whisky. The distillery is located in the forested foothills of Mount Emei in Sichuan province.
Diageo, the multinational alcoholic beverages company headquartered in London, controls about 55 percent of the Scotch whisky market with Pernod Ricard. Diageo has also made great strides in China during the pandemic, especially in e-commerce sales.
Ian Smith, the company’s head of corporate relations for Scotland, said, “E-commerce is a growing channel where we are expanding our presence and visibility. China is the world’s largest and most mature e-commerce alcohol market. In 2021, we maintained our leadership on (Chinese online retail platform) Tmall with a 24 percent share of whisky retail sales.”
He added that whisky is widening its reach in China — not just in bars and karaoke lounges but in homes and restaurants, and also as a gift.
Last year, the brand’s Johnnie Walker Super Deluxe and Scotch malt whisky achieved double-digit growth, driven by focused investment, innovation and market expansion, including increased urban coverage and new distribution channels, Smith said.
He believes that China is one of the most exciting global markets for spirits producers. “The potential has always been clear, but it has been fantastic to see how consumers in China are increasingly embracing luxurious, international-style spirits — particularly Scotch whisky, which is proving especially popular with younger consumers,” he added.
Smith said the growing appreciation for Scotch among Chinese consumers can be seen with the emergence of whisky bars and boutiques across the country, the growing popularity of whisky auctions, and the successes of “whisky summits” and similar events.
Oksana Pevtsova, regional president for eastern Europe and Asia at Bacardi, one of the world’s largest privately held spirits companies, said the Chinese market is extremely dynamic and consumption trends in the country continue to evolve.
“We are seeing the next generation of consumers displaying significantly higher levels of interest toward Western spirits, so we believe there is a very bright future in China and we are gearing up to capitalize on this growth,” she said.
In October, Bacardi launched Whisky Emporium, its world-first permanent boutique in Hainan, a significant milestone in the company’s mission to expand its whisky business in China.
Pevtsova said: “Bacardi will strategically extend its geographic footprint in China over time. The initial focus will be on covering the four first-tier cities and the southern provinces of Guangdong and Fujian. In the next phase, we will extend our reach to other key provincial markets.”
According to the Scotch Whisky Association, desire among Chinese consumers saw the value of single malt whisky exports to the country rise from 3.4 million pounds in 2010 to more than 66 million pounds in 2020.
Francois Saurel, Macallan’s regional managing director for Asia Pacific, said, “Overall business performance in China has grown rapidly in recent years, with consumer demand across the market increasing fast.”
As it continues to gain traction at venues and events in key cities, including Shanghai, Hong Kong and Beijing, the company sees China as the market with most potential in the Asia-Pacific region.
Saurel said that compared with consumers in other parts of the world, Chinese tend to be more diversified and quicker to adapt to new trends and products. They have a preference for premium products and enjoy a high-quality lifestyle.
“We are also seeing the emergence of more young consumers in the Scotch whisky market across China, who are social media-savvy and more open to e-commerce shopping,” he said.
In addition to the rapid growth in Scotch imports, industry experts believe China will become an exporter of its own whisky.
Shaikh, from the UK Department for International Trade, said, “Many companies are developing their stills and using Scottish technology and know-how to help get their distilleries up and running.”
He believes that whisky will become an area of shared expertise and mutual appreciation.
With support from the Scotch Whisky Association and several major whisky companies in Scotland, Shaikh said, “China is currently drafting new standards for recognizing the uniqueness of Scottish whisky … ensuring that its recognized quality is not diluted, and that products coming out of China can match the excellence of the products entering the country from Scotland and the rest of the UK.”