Jenny Chan 陳詠欣
Nov 11, 2013

Asia says: ‘Make mine a single malt’

SECTOR STUDY: Changing consumer habits have slowed whisky sales in some markets but prestige brands are gaining ground on single malt and higher-end blended whiskies.

New tastes: Introducing Asians to pricier whiskies
New tastes: Introducing Asians to pricier whiskies

Whisky’s giddy heyday of bulk sales in Asia may be drawing to a close, and to make up the difference, brands have turned to selling higher-priced prestige single malts and whisky blends to discerning consumers. 

If a Scottish film about whisky, The Angels' Share, showing at mainstream cinemas and winning the coveted Jury Prize at the Cannes Film Festival last year isn’t enough to convince you that consumers have a thirst for single malt, then Diageo’s assertion that sales volume of its single malt brands went up 25 per cent in 2012 might do it.

Diageo’s single malt labels (which include Singleton, Lagavulin, Glenkinchie, Glen Elgin, Royal Lochnagar, Talisker, Clynelish and Caol Ila) grew rapidly as consumers explore some of the super-premium variants, says Mark Sandys, category director of whisky and reserve at Diageo Asia-Pacific.

Overall, single malt sales volume in Asia-Pacific grew 14 per cent last year, according to International Wine & Spirit Research data, but this growth is from a relatively small base. Euromonitor expects blended Scotch to grow 3.5 per cent annually until 2017 (to 20 million litres) compared to a compound annual growth rate for single malts of 3.1 per cent (to 1.2 million litres). 

The main factor driving the sector is the rapid increase in the number of Asia’s wealthy, Sandys told Campaign Asia-Pacific. According to the Capgemini/RBC World Wealth Report 2013, the number of high-net-worth individuals in Asia grew 31 per cent since 2007 and their wealth jumped 27 per cent. Although whisky-makers have been banking on Asia for growth, the truth is that a government drive to reduce conspicuous spending in China and changing consumption habits in South Korea have impeded Scotch whisky sales in those markets.

“Blended Scotch has lost its appeal in South Korea. Consumers have moved away from the traditional on-trade establishments of hostess bars, which used to drive whisky sales,” says Euromonitor’s global alcoholic drinks analyst, Jeremy Cunnington. 

In response, Diageo has moved to selling more upmarket blended whiskies via its Johnnie Walker Houses in Seoul, Shanghai and Beijing. Agencies Love and Asylum designed these concept houses to educate clientele and upsell the whisky experience with exclusive rare labels of the blended whisky. 

Despite these efforts, it is Diageo’s single malt brand Singleton that leads sales with a 22 per cent rise, while arch rival Pernod Ricard’s single malt brand, Glenlivet, also reported strong Asia-Pacific sales, up 21 per cent, particularly in Taiwan — the second-largest single malt market worldwide after the United States.

Although often overlooked, Taiwan’s taste for whisky is so sophisticated, the nation has produced its own award-winning single malt, Kavalan. In August this year, New World named Kavalan its whisky of the year in the Whisky Bible — beating Scottish brands in blind tasting tests. 

('000s of litres)

Markets 2012 2013
Asia-Pacific 7,374 7,693
Taiwan 4,151 4,314
Japan 1,568 1,602
China 493 548
South Korea 564 580
India 118 141
Hong Kong 154 161
Malaysia 100 110

Source: Euromonitor

Asia’s other notable whisky-drinking nation is, of course, Japan which is home to some of the best whiskies in the world. This list includes Suntory-owned Yamazaki, as well as Nikka’s Yoichi and Miyagikyo single casks. 

Hong Kong is another example of a market that has higher-than-average single malt consumption, says Patrick Fong, the Hong Kong brand manager for Pernod Ricard. While the group’s sales of blended whiskies have been flat for the past four years, single malt advanced at a six per cent average rate in the same period. 

This sophisticated target audience wants brand interactions to “tie in with their own values of discernment, quest for knowledge and exquisite experiences”. It is no longer sufficient to hold one-off events that pique their interest for a short period of time, but that consumers quickly forget,” says Fong.  

Part of this strategy is a rising number of limited-edition bottles released in time for gift-giving seasons, says Ipsos ASI executive director Michael Joyce. Whiskies now beat out other more mass-market spirits such as vodka, which no longer qualify as sufficiently luxurious gifts for friends and family, he says.

EXPERT OPINION Know your Whisky

Sales of high-end single cask malts have grown in Hong Kong over the past five years. Education is key; even with blended whiskies (the most popular type among Asian drinkers), most people don’t know the subtle difference between vatted and blended malts.

Vatted malts are single malts mixed together, while blended malts can include single malts and other grain whiskies which are not made of barley, but of other grains such as rye.

While more consumers are becoming better educated about what they drink, some large whisky houses are fighting this educational trend by striving to promote their brands over everything else, even the whisky.

An example of this is the practice of removing the age statement on a lot of bottles, and the introduction of terms such as “whisky makers’ edition” and “premium selected” that have no legal meaning. These whisky houses resort to these tactics largely because of a shortage of quality whisky, which makes it more expensive and rare. Unable to meet the demand, brands are using this and other gimmicks to make up the supply.

A whisky can only be called whisky, according to Scottish whisky regulations, if it has been aged in the barrel for at least three years. So by not disclosing the age, brands are able to sell a young whisky with additives like sugar and caramel to make it taste smoother, and look older than its true age with a darker colour. However, brands risk losing consumer trust if they continue in this practice.

Kevin Ling is a director at Spiriteca, a single malt whisky distributor in Hong Kong


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