Whisky Ventures into China’s Baijiu-Dominated Market
During the Lunar New Year, a festive time for family gatherings and celebrations, baijiu is traditionally considered the drink of choice in China. Baijiu, a potent clear spirit made from fermented grains, has been a staple for centuries during such occasions, often consumed straight at social events. Boasting an Alcohol-By-Volume (ABV) that can surpass 60%, baijiu stands out with its strength compared to spirits like scotch whisky and tequila, which typically have an ABV of around 40%.
Despite its enduring popularity, the dominance of baijiu is facing a challenge from international spirits, particularly whisky, in the world’s largest spirits market. In 2022, whisky sales in China reached $2.3 billion, and this figure is projected to nearly triple by 2027, growing at about five times the global rate. The surge is propelled by a demographic shift, with young, urban, educated, and increasingly female drinkers opting for less alcoholic spirits from outside China.
The demand for whisky has led international brands to establish distilleries in China. French drinks giant Pernod-Ricard, owner of Jameson Irish whiskey, is investing $140 million in a production base in Sichuan Province. UK-based Diageo has also opened a plant in Yunnan Province and is set to be fully operational later this year, along with establishing an Asia-Pacific Innovation hub in Shanghai.
Diageo’s Managing Director in China, Atul Chhaparwal, expresses optimism about the market’s potential, citing strong demand and ample room for growth in various segments of the whiskey category. Currently representing less than 2% of total spirits consumed in China, there is significant potential for both local and international players.
However, challenges lie ahead for China’s whisky market. Local distilleries are still in the early stages, with 80% of the whisky aged for two years or less. Issues like a shortage of barrels and a lack of professionals for production may impede the industry’s smooth progress. Yet, the parallels with China’s wine industry, which experienced a surge in demand for domestically produced wines as it matured, suggest a promising future for China’s whisky production as it evolves. As China’s whisky market continues to develop, it may follow a similar trajectory, gaining popularity both domestically and potentially internationally.
Comment Template