Whiskey hopes to dent baijiu pie

More Chinese businessmen prefer whisky to baijiu because they associate the peaty liquor with elegance. [Provided to China Daily]

Makers and distributors of Scotland's national drink have optimism on growth prospects

"Do you want that straight?" If a waiter were to ask Jason Zheng how he wanted his green tea served, he would likely reply, "I'll take that with a shot of Chivas, please."

Zheng, 30, an image-conscious sales manager in Beijing, has a thing about the unique fragrance of the blend flavor of Chinese tea and Scotch whisky. For him it is a refreshing drink that gives a respectful bow to Chinese tradition but that at the same time sounds impressively modern.

Zheng is exactly the kind of Chinese consumer the Scotch whisky is wooing - the young and the rich.

In China, more and more middle-class people like Zheng are developing a taste for what for them is an exotic drink, one that sometimes comes with the smoky aroma of burnt wood and that is always high in alcohol. Rising domestic demand has made China one of the world's fastest-growing markets for Scotch whisky, and distilleries in Scotland are making inroads into the Chinese market.

Figures from the Scotch Whisky Association, the UK-based trade association for the Scotch whisky industry, show that the value of China's imports of Scotch whisky rose from $2.9 million (2.15 million euros) in 2001 to more than $85 million last year, and annual consumption rose from 142,250 cases (a case contains 12 nine-liter bottles) in 2000 to 1.72 million cases last year.

The association's international affairs manager, Martin Bell, says exports of Scotch whisky to China rapidly increased when China's economy started to take off after its accession to the World Trade Organization 10 years ago.

Bell believes whisky made in Scotland has commanding supremacy in China because of its international prestige and its more than 500 years of history.

"More affluent Chinese are looking for quality international brands with history. Scotch whisky is just the drink that can represent their superior status."

Bell says that while exports to China are still relatively small as it only accounts for 3 percent of the liquor's global sales, China is a promising market with enormous business potential.

"As the world's largest fastest-growing economy and with the huge population, China is a very aspiring market for international spirits producers."

Bell says the association hopes exports of Scotch whisky to China will double in the next five years and expects the demand for premium whisky to grow.

In China, Scotch whisky has already outperformed spirits from other countries to become the most popular imported alcoholic drink, something that was once the preserve of cognac from France.

Liu Yuan, vice-chairman of China National Association for Liquor and Spirits Circulation, says Scotch whisky now accounts for more than 50 percent of all foreign-produced spirits sold in China by volume with sales climbing quickly.

Liu attributes the success of Scotch whisky to the smart marketing strategies by the Scotch distillers and their distributors in China, who have successfully encouraged the growing middle class to draw on the drink's established reputation to reflect their wealth and to present themselves as cultured people.

"More Chinese entrepreneurs and businessmen are enjoying Scotch whisky because they regard it as an upscale drink and would love to cultivate a taste for it as part of an elegant lifestyle."

Liu also ascribes the unique appeal of Scotch whisky to its similarity in flavor and smoothness with China's national drink, baijiu, a distilled sorghum or rice-based alcoholic beverage that has dominated Chinese dinner tables for thousands of years.

"Scotch whisky is a natural product made from cereals, water and yeast, so for a country that is fond of baijiu, its taste is much acceptable than that of other alcoholic beverages," Liu says.

He says Chinese drinkers were first attracted to blended Scotch whiskies, but now more want to move up to the older and stronger single malts.

Not content to win over various kinds of Chinese taste buds, the distributors of Scotland's national drink are trying to gain a following in a broader market by tapping China's regional markets.

"Instead of focusing only on the established markets in cities like Beijing, Shanghai and Guangzhou, Scotch whisky has also reached drinkers in the less developed far-off western regions," says Hu Wei, deputy general manager of Beijing Zhong Tang Wines Selling Co Ltd. He has been in the Scotch whisky business in China since 1995.

Hu says that the growth in sales of Scotch whisky in western Chinese cities is not as fast as in the well-off east, sales have boomed in some western provinces and cities, such as the Xinjiang Uygur autonomous region and the cities of Chengdu and Xi'an, in recent years.

Compared with consumers in eastern China who buy more premium whisky products, Hu says cheaper whiskies, such as Johnnie Walker Red Label, at about 150 yuan ($23.60, 17.4 euros) a bottle, are more popular in western China.

"The consumption of whisky is directly related to regional economic conditions, so with the increase of people's disposable income, the sales of Scotch whisky are also improving in western China."

Hu says Scotch whisky experienced a sales boom in China from 2003 to 2005, when it began to make huge inroads into nightclubs and karaoke bars.

Sales slipped in 2008 and 2009 as distilleries in Scotland reduced production because of the impact of the financial crisis.

But as the global market has recovered gradually, the Scotch business has regained its momentum in China, he says. His company's sales of Scotch whisky were 40 percent higher last year than in the previous year, and an even more impressive figure is expected this year.

Hu says that while the price of Scotch whisky has risen steadily over the past decade and will continue to do so, he does not think that will affect sales in China.

"Rising prices of raw materials together with rising market demand have driven up market prices but the product is still reasonably priced and the rises are reasonable if you look at domestic baijiu brands."

Hu says that while most people still regard Scotch whisky as an upscale drink, it is much cheaper than some well-known brands of baijiu, which has helped sales in China.

Along with the booming sales of medium- and low-priced whiskies, premium whisky brands also have grown more popular as some whisky makers eye the ultra rich in China.

Diageo, the world's largest alcoholic beverage producer, with headquarters in London, opened Johnnie Walker House in Shanghai six months ago.

The flagship center, in a converted villa, sells the limited-edition Johnny Walker 1910 for $2,000 a bottle, and invited guests are able to get access to the upper floors to learn the art of whisky making and taste the pricey drops.

The center is said to be the first of its kind in the world, illustrating the size of the liquor giant's ambitions to drum up new business in China for its Johnnie Walker brands.

Diageo's strategy of targeting super rich Chinese seems to be working. The company, talking of its performance in China, said in a recent annual report that "Diageo's scotch gained volume share in the standard, deluxe and especially the super deluxe segment, where incremental marketing spending drove 41 percent net sales growth in the segment".

Nevertheless, industry experts are warning distilleries in Scotland that they need to better understand the Chinese market before drawing up any market plans, including being aware of pitfalls.

"China is so big and we are still testing the waters of the market," Bell says.

He says that compared with what is spent on baijiu and wine, Chinese spend very little on whisky because it is mainly served in bars, pubs or other entertainment venues rather than in the home.

"It is long and arduous work for foreign brands to develop in the Chinese market. We need more time and market research to know more about different Chinese regions with varied market conditions so as to encourage more Chinese to develop an interest in Scotch whisky."