Spirits in the East

9th July, 2012 by Chris Mercer

Would anyone care to name the fastest growing spirits market in the Far East over the past five years?

Top Deck West Bar, Hong Kong

The Top Deck West Bar in Hong Kong

Step forward Vietnam. It might not match China’s scale, but a surging economy has put the country in the mood to drink, and drink well.

Foreign distillers are happy to oblige. Spirits sales in Vietnam reached US$425 million in 2011, up by 120% since 2006, according to Euromonitor International. While the country remains one of South East Asia’s smallest spirits markets, its glittering growth has attracted big names. Diageo is on board via a joint venture deal with the country’s leading branded spirits player, Hanoi Liquor Joint Stock Company, offering an instant distribution network.

What price for a Diageo takeover within five years? Pernod Ricard is also at the party. “You really can’t underestimate the strength of Scotch in Vietnam,” says Peter Prentice, vice president for Asia-Pacific at Pernod Ricard’s Chivas Brothers business.

What’s driving the growth? “The Vietnamese are extremely perspicacious,” Prentice tells The Spirits Business. “Vietnam was like a goldfish bowl with a one-way mirror: you couldn’t look in, but they could look out. They’re aware of what’s going on in China.”

What’s going on in China and other emergent powerhouses across South East Asia is that affluent young consumers, officials and business leaders are developing a taste for the finer things in life. Why else would Diageo transfer the headquarters for its superpremium Reserve Brands portfolio to Singapore, as it did last year?

Centre stage for Scotch

Even Japan, an old head, is rediscovering its love for whisky thanks to the Highball phenomenon. The figures show this super-premium trend is now being replicated in Vietnam.

Total whisky sales in the country are up 91% in value versus five years ago, while volumes have risen by a relatively paltry 40%. No wonder that Prentice picks out the US$70-a-bottle Chivas Regal 18 Year Old Gold Signature as a key performer. Scotch whisky is already taking centre stage in this piece. It’s nigh-on impossible to chart South East Asia’s emergence on the international spirits scene without raising a dram in Scotland’s direction. Beyond the Cognac superlatives, old colonial ties and trading routes have provided fertile ground for Scotch distillers to build a Far East empire in their own right.

To add some context, the wider region of Asia-Pacific, which includes India, accounted for almost a quarter of global Scotch sales by value in 2010, according to Sanford Bernstein analysts. “Asia-Pacific and Latin America have accounted for over 70% of the growth in premium Scotch over the last 10 years,” the analysts note. In the Far East, Singapore, Taiwan and South Korea are in the top 10 Scotch markets by value in the world. In 2011, Scotch Whisky Association (SWA) figures show that exports to Taiwan jumped by 45% on 2010, to £155m (US$250m), overtaking Germany.

Scotch exports to Singapore, which acts as distribution hub for the rest of the region, rose by 44% to £318m, maintaining its position as the third-largest destination for Scotch behind the US and France.

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