South Korea’s whisk(e)y market is expected to remain flat in volume terms between now and 2028, data shows.
World whiskies like Japanese whisky are anticipated to see the fastest growth – though from a smaller base than Scotch – according to analysis from GlobalData, Just Drinks’ parent company.
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In value terms, meanwhile, Scotch whisky and other world whiskies are predicted to see slight increases.
Last week, drinks major Diageo revealed it would raise prices of several whisky SKUs by an average of 18% in South Korea, from 1 July.
The changes impact Scotch brands Mortlach and Copper Dog, as well as Tequila brand Don Julio. Diageo said the hikes were part of its regular portfolio reviews.
In the six months to 31 December, Diageo’s business in north Asia, comprising South Korea and Japan, saw net sales decline 6%. At the time, the fall was attributed to falling sales of Scotch.
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By GlobalDataIn February, it emerged Diageo was rolling out an early retirement programme for its workers in South Korea amid falling whisky sales.
GlobalData alcoholic beverages research director David Harris said growing competition from world whiskies in South Korea was damaging products from traditional regions like Scotch.
Competing whiskies produced in India and China “often copy Western brands but at a lower price point”, he said.
“This has created noise in the market that many Western brands find it difficult to cut through. Copycat brands also have the potential to damage the brand equity of Western brands where they are explicitly copied by these new entrants but with a lower overall quality.”
Long-term macroeconomic factors and “demographic issues” have also added to stagnating consumption of whisk(e)y, Harris said.
“South Korea’s birth rate is shockingly low, and where older consumers are cutting down on alcohol consumption due to health issues, they simply aren’t being replaced by younger consumers.
“Furthermore, even if younger consumers would like to experiment with Diageo’s premium whiskies, poor work-life balance, low salaries, somewhat-high taxes and extremely high accommodation costs all impact their affordability.”
Other priorities?
While at the time of the voluntary retirement scheme, a Diageo spokesperson told Just Drinks South Korea was still a “strategically important market”, Harris said the company’s focus will be on other, more lucrative markets.
Indeed, for the group’s wider Asia Pacific region, net sales grew 2% in the second half of 2023, driven by growth in China. Growth was partially offset by the sale of its South Korean whisky business, Windsor Global – first announced in 2022.
“South Korea simply isn’t the most attractive market in Asia for Diageo to focus on,” he said. “While it is seeing modest growth, it is far outpaced by India which is a much larger market.
“China is a fairly small market (though still larger than South Korea) but has far more long-term potential and is seeing stronger growth. Thailand, too, is something of an opportunity market, with less domestic competition than either China or India and strong growth.”
While Diageo said it remained “fully committed to the Korean market”, flat predictions for whisk(e)y in the market suggest it may not be the top priority for the group in the years to come. “There are far larger prizes which Diageo while be thinking represent a better potential return on investment,” Harris added.
