Doug Bagley speaks with us about Scotch, Ecommerce, and the current trends in Travel Retail and Asia-Pacific.
While single malt’s growth in Asia started in Taiwan, it seems to be radiating out. Can single malt supplement 12yr blended Scotch as best-in-class in Asia in the future?
Bagley: There is strong evidence that the consumer trend for single malts in Taiwan is spreading into China. Value sales of single malts are growing 29% in China (IWSR 2017) and we are seeing especially strong demand for malts in the southern and eastern Chinese city clusters which are close to Taiwan. Supporting this trend is the growth in on-trade single malt whisky bars.
Its authenticity, provenance and flavour diversity are attracting a younger, affluent and more discerning consumer into single malt. There is potential to recruit young consumers directly to single malt through core range.
Beyond Taiwan and China, double-digit growth — Singapore 29%; South Korea, Thailand and Vietnam 12% — gives us real confidence in the future for single malt across the wider APAC region. With Glenfiddich and The Balvenie, two of the top five single malt whisky brands in Asia, William Grant’s has a great advantage.
What important trends are you seeing in China?
Bagley: Single malt is trending across Asia, but especially in China. The performance of Glenfiddich and The Balvenie is testament to this. As people want to drink less but better, we are seeing recruitment into our 12yr single malts from standard whisky and Cognac.
The boom of online and ecommerce is providing a great opportunity to reach out to more consumers across China, beyond tier-one and tier-two cities.
The luxury single malt whisky segment is performing very well in China, particularly at the Cognac XO price point, as consumers buy for the gifting as well as meal occasion. The boom of online and ecommerce is providing a great opportunity to reach out to more consumers across China, beyond tier-one and tier-two cities.
An increase in more casual drinking occasions, rather than formal business entertainment, is exciting for us with our unique and irreverent Scotch, Monkey Shoulder. This taps into a younger consumer who is interested in whisky but less keen to tread the default path of starting with blends as their first experience.
How important is ecommerce in China to today’s Scotch market?
Bagley: China is the largest ecommerce market in the world, with retail sales (all products) of about £900bn ($1,137bn) in 2017 (42% of the world total) — a figure that is expected to grow to around £1,400tn ($1,824tn) by 2022. There are currently 650m online shoppers, representing 50% penetration, with a strong skew towards young people.
The core demographics for buying spirits online are younger legal-drinking-age consumers in urban centres.
China is the largest alcohol ecommerce market in the world, with retail sales of £5bn ($6.5bn) in 2017, growing 15% on the prior year. Total China whisky value share in 2017 is $758m (from IWSR 2017), with 10.2% sold online which is $77m, and makes China the fourth-largest online whisky market after the UK, the US and France. The core demographics for buying spirits online are younger legal-drinking-age consumers in urban centres. It has high potential not only as a sales channel, but also as an alternative route to consumer — as a way to penetrate cities not covered by our own distribution network. It also provides a great platform for recruitment at scale — connecting data, sales and education through relevant communications.
What trends are you seeing in Scotch whisky purchasing within the Chinese outbound travel-retail market?
Bagley: We are seeing a shift in interest and purchases from Cognac to leading single malt brands by Chinese passengers. This is leading to growing sales among leading single malts, which includes Glenfiddich and The Balvenie. While brand exploration is limited, Chinese passengers are hungry for education and paying increasing attention to awards such as the International Wine & Spirit Competition, whisky bibles/books and auction results. Contrary to popular belief, while retail pricing across airports and domestic markets is increasingly transparent, price is not that big an issue to Chinese consumers. The ability to purchase limited editions or travel-retail exclusives in airports is a strong factor for purchase.
Is there one thing you would like to see in the travel-retail environment?
Bagley: The biggest opportunity is the four-party collaboration over data and digital commerce. If airlines, airports, retailers and suppliers all enabled a rich data source from passenger traffic and used it to better inform a digital and physical retail offer, the opportunity would be significant.
India is obviously the other great regional market. How do you see the malt market evolving there?
Bagley: The growth in international travel for tourism, business and education has led to increased consumer awareness of international brands and exposure to food brands, and exposure to food and drink cultures globally. There are 50m outbound Indian tourists expected by 2020, while 350,000 Indians are educated abroad each year. This is leading to experimentation. This extends beyond whisky and there has also been increased interest in premium gin. Hendrick’s, for example, grew by over 80% in India in 2018.
Whisky remains a core feature of the great Indian wedding. The big Indian wedding business is estimated at $40bn each year and growing at 20% a year, according to a KPMG report, it is a key opportunity for parents to demonstrate their status. Wedding hosts are increasingly offering more varied choices of whisky — we regularly receive orders for Glenfiddich 26yr at some of the more lavish occasions. Our whisky sales in the first two months of 2019 in India have doubled this year due to an increase in the number of auspicious days for weddings.
The love for whisky cocktails in the country has risen tremendously thanks to unique concept cocktail bars in the country. The consumption pattern of whisky is transforming with Millennials, who are taking a liking to the spirit, courtesy of distinct flavour profiles and the appearance of whisky at pop-ups, events and social soirees. These are positive signs for our brands, especially Monkey Shoulder and Grant’s Distinction which are made for mixing.
With rising pressure on age-ready quality single malt stocks, will there be more allocation of this product in Asia?
Bagley: Demand for high-end single malts is increasing. The IWSR reports the prestige and prestige-plus segments to be growing 19% across the region. We are also seeing continuing demand from travel retail where these segments have risen 24%. With the strong market growth and rising demand for aged whisky, Asia will take an increasing proportion of our available whisky stocks.
With the strong market growth and rising demand for aged whisky, Asia will take an increasing proportion of our available whisky stocks.
Given the scarcity of quality single malt, is there a case for moving up pricing — particularly in Asia where it competes directly with Cognac?
Bagley: The price of our rare malts takes into account the scarcity of the liquid, the uniqueness of the particular cask, the age and, of course, the exceptional work from our master blenders.
Are there opportunities for ‘entry-level’ Scotch? Some competitors are having success in this primary market.
Bagley: Entry-level whisky is important to us — blended Scotch brand Grant’s is a significant contributor to our business in Australia and the region. In 2018 we changed the name of Grant’s signature blend to Triple Wood, to better communicate the superiority of the liquid and its rich and mellow taste. This has given us a reason to talk to the trade about this segment, drive momentum and a reappraisal of the brand.
India is forecast to be one of the biggest contributors to global whisky growth over the next five years.
In India we have just launched Grant’s Distinction, tapping into the increasing demand for international spirits in India. Launched with an RRP of INR1,275 ($17.50), this is an entry to international whisky for the next generation of Scotch drinkers.
India is forecast to be one of the biggest contributors to global whisky growth over the next five years. The blended Scotch market is expected to grow to 5m cases by 2021. Early signs are that Grant’s Distinction has been well received by trade and consumers alike.
This content is courtesy of Global Drinks Intel magazine and provided to the IWSR with permission for publication.