Fall in whisky sales pushing producers out of South Korea

Dwindling whisky sales in South Korea have driven several leading spirits producers out of the Korean market in the past year, according to IWSR Drinks Market Analysis.

Whisky Highballs are helping to boost the popularity of American, Irish and Japanese whiskies in South Korea

Last year, Diageo revealed plans to close its whisky bottling plant in Incheon, South Korea.

According to IWSR Drinks Market Analysis, while imported beers, mixed drinks and wine have experienced “strong success” in South Korea, the whisky category – the majority of which has historically been Scotch – “continues to see its market share dwindle”.

Earlier this week, Edrington confirmed it will close its office in Seoul at the end of March this year.

However, as Edrington’s sales in South Korea were largely focused on single malt Scotch – “which is a growing category in the country”, IWSR said – its decision to close its office in the region was likely not down to struggling Scotch sales.

Tommy Keeling, IWSR research director for Asia Pacific, said: “Since peaking in 2002, Scotch volumes have fallen by 75%, driven by declines in brands aimed at the traditional on-trade market, such as Diageo’s Windsor and Pernod Ricard’s Imperial.”

Blended Scotch is finding Korea a tough market to navigate. IWSR noted that the traditional on-trade, including karaoke bars or hostess bars, is still the main channel for Scotch whisky sales.

Keeling continued: “The past decade, however, has seen the traditional on-trade channel shrink dramatically due to a slower economy, stricter anti-corruption laws and a change in attitudes among younger people.

“While the modern on-trade channel, which includes venues such as high-energy clubs, western-style bars and gastro lounges is growing, it is not at a fast enough rate to compensate for the decline in the traditional on-trade.”

Low-ABV whiskies – those bottled at around 35-36% ABV – have also posed a threat to Scotch sales in Korea, with low-ABV whisky sales surpassing Scotch sales for the first time in 2018, IWSR reported.

Keeling said: “Low-ABV whiskies are perceived as being healthier and easier to drink, which has made them popular with TOT hostesses who are key in driving sales in the TOT.

“While volumes have largely been restricted to the traditional on-trade, brands are increasingly bringing them into the modern on-trade and off-trade.

“It is possible that consumers will eventually tire of low-ABV whiskies, but whether they move back to Scotch remains to be seen.”

Optimism to be found

In spite of Scotch whisky’s struggles in South Korea, other whisky categories are finding pockets of opportunity in the region.

American, Irish and Japanese whiskies are growing, boosted by the increasing popularity of Highballs. At-home consumption and the modern on-trade is also helping standard Scotch brands to sell.

IWSR also noted some brands are tapping into the global wellness trend in South Korea and innovating with new products to cater to this demand.