Whisky, with its rich history and diverse flavors, has had a long-standing uphill battle in China’s spirits market dominated by baijiu. However, recent trends indicate a shifting preference among young, middle-class, urban, educated, and increasingly female consumers in China. This growing demand for whisky has prompted international brands to invest heavily in the Chinese market, with sales projected to triple by 2027. While this presents a lucrative opportunity for whisky producers, challenges lie ahead in terms of production capacity, aging processes, and the emergence of local distilleries.
Baijiu, a traditional Chinese liquor made from fermented grains, has been the drink of choice for centuries during Lunar New Year gatherings and other social events. With an Alcohol-By-Volume (ABV) as high as 60%, baijiu holds over 90% of China’s spirits sales, generating annual revenues of around $160 billion. However, the growing popularity of whisky, which typically has an ABV of 40%, poses a threat to baijiu’s dominance.
In 2022, whisky sales in China reached $2.3 billion, according to Euromonitor International. This figure is expected to nearly triple by 2027, surpassing the global growth rate by five times. The surge in whisky consumption is driven by young, urban, educated, and increasingly female drinkers who are favoring less alcoholic spirits from outside China. This shift in consumer preference has encouraged international brands like Pernod-Ricard and Diageo to invest heavily in the Chinese market.
Pernod-Ricard, the French drinks giant, plans to invest $140 million in a production base near Emei Mountain in Sichuan Province, while Diageo has opened a distillery in Yunnan Province and plans to establish an Asia-Pacific Innovation hub in Shanghai. These investments reflect the long-term prospects seen in the Chinese whisky market, driven by its vibrancy and the demand for a diverse range of whiskies, including single malts, blended whiskies, and imported varieties.
However, challenges persist in the Chinese whisky market. Local distilleries are still in the early stages, with approximately 80% of whisky aged for two years or less. There is a shortage of barrels and a lack of professionals with expertise in whisky production. Overcoming these hurdles is crucial for the market’s growth and credibility.
Despite these challenges, history has shown that China’s wine industry experienced a similar trajectory. Once it matured, the demand for Chinese wines skyrocketed, becoming the second most preferred option after French wines. This trend could potentially be replicated in the whisky market as China’s production matures. Domestic whisky production may witness a rise in demand, complementing the existing interest in imported whiskies.
The growth of the whisky market extends beyond China, with increasing demand observed in other parts of Asia. Maison du Whisky, a spirits retailer in Singapore, expects a boost in sales from Chinese tourists during the Lunar New Year festivities. The celebratory nature of the event prompts consumers to buy memorable gifts, making whisky an attractive option. Additionally, the emergence of whisky collectors further fuels the market, as these individuals hold bottles of whisky as an investment, anticipating their future appreciation in value.
While the potential for growth is immense, caution must be exercised in navigating this evolving market. Ensuring an adequate supply of aged whisky and nurturing a skilled workforce are essential for local distilleries. International brands must strike a balance between capitalizing on the growing demand and preserving the integrity of quality whisky production. As the popularity of whisky continues to challenge baijiu’s dominance, the spotlight is on China’s whisky market, ready to embrace a new era of diverse flavors and spirited competition.
