Whisky attempts to break into China's Baijiu-dominated market

The Lunar New Year is a time when people in China gather with their loved ones to celebrate and indulge in food and drinks. For centuries, the drink of choice during these festivities has been baijiu, a strong clear spirit made from fermented grains. Baijiu, with its high Alcohol-By-Volume (ABV) of over 60%, is often consumed straight and at social events like weddings and birthdays. It dominates China's spirits market, accounting for more than 90% of sales and generating around $160 billion annually. However, there has been a growing trend of Chinese consumers, particularly young, educated, urban, and middle-class individuals, opting for imported spirits over baijiu. Whisky, in particular, has gained popularity, with sales reaching $2.3 billion in 2022. This figure is expected to nearly triple by 2027 as the Chinese whisky market grows at a rate five times faster than the global average. Many young drinkers, especially women, are gravitating towards less alcoholic spirits from outside China. The increasing demand for whisky has prompted international brands to establish distilleries in China. For example, Pernod-Ricard, the French drinks giant, plans to invest $140 million in a production base near Emei Mountain in Sichuan Province. Diageo, a UK-based rival, has already opened a plant in Yunnan Province and aims to be fully operational later this year. These companies recognize the long-term potential of the Chinese market and believe there is ample space for different types of whiskies, including local and imported varieties, to flourish. The whisky market is also expanding in other parts of Asia. Maison du Whisky, a spirits retailer, expects a boost in sales during the Lunar New Year as Chinese tourists visit Singapore. Whisky has become a part of the festive celebrations for many Chinese, who see it as a memorable gift to mark the occasion. Moreover, there is a growing number of collectors who buy and hold bottles of whisky for their potential value appreciation. Despite the promising prospects, there are challenges that China's whisky market faces. Local distilleries are still in their early stages, with most whiskies aged for two years or less. There is a shortage of barrels and industry professionals to support production. Nonetheless, considering the success of China's wine industry, there is optimism that Chinese-produced whiskies may experience a similar rise in demand as their production matures. Overall, the preference for imported spirits, particularly whisky, is a notable shift in China's drinking culture during festive occasions. This trend presents opportunities for both international and domestic whisky producers, although challenges exist in terms of production and supply. Nonetheless, as the market evolves, there is potential for Chinese whiskies to gain the same popularity as Chinese wines.