SPIRITS IN ASIA PACIFIC

February 2019
INTRODUCTION
REGIONAL OVERVIEW
LEADING COMPANIES AND BRANDS
FORECAST PROJECTIONS
COUNTRY SNAPSHOTS
INTRODUCTION

Scope

Disclaimer
Much of the information in this
briefing is of a statistical nature and,
while every attempt has been made
to ensure accuracy and reliability,
Euromonitor International cannot be
held responsible for omissions or
errors.
Figures in tables and analyses are
calculated from unrounded data and
may not sum. Analyses found in the
briefings may not totally reflect the
companies’ opinions, reader
discretion is advised.

Dominating global volume

sales of spirits, Asia Pacific is a
major driver of the category.
However, due to the low
disposable incomes of most
consumers in the region, sales
are dominated by cheap local
spirits. This is gradually
changing as prosperity spreads
and gives consumers the
chance to broaden their tastes,
as they are starting to do.

© Euromonitor International ALCOHOLIC DRINKS: SPIRITS IN ASIA PACIFIC PASSPORT 3

INTRODUCTION
Key findings
Big countries and their
local products dominate
growth
Off-trade dominates
consumption
Big two distillers strong
thanks to India
Future potential for
international spirits
categories
© Euromonitor International
The region’s volumes are dominated by four key markets: China, India, South
Korea and Japan. Of these, China accounts for around 40% of Asia Pacific’s
volumes. Current and future growth are particularly reliant on the healthy
performances of all. Of the four, all except Japan have performed well, driven by
local products: baijiu in China, whisky in India, and soju in South Korea.
International spirits categories have also done well, notably whiskies.
In most markets, and certainly the big two, China and India, off-trade
consumption dominates sales. This is due to the low disposable incomes of
most people. Nevertheless, in certain markets, such as Singapore, where this is
less of an issue, on-trade dominates. Within the off-trade splits there is a mixture
of channels which are dominant, with supermarkets and hypermarkets big in
large markets such as South Korea and China, but where the retail sector is
more fragmented, such as India, specialist and independent retailers are key.
Diageo and Pernod Ricard are two of the leading players in the region thanks to
their strong positions in its second-largest market. However, apart from these
two companies, the rest of the top 10 is dominated by local players, whose
health is based on the performance of their local products domestically.
China, and to a lesser extent India, and their locally produced spirits, will still be
the key growth drivers for the region. However, particularly in whiskies and
cognac, there are possibilities for growth.
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INTRODUCTION
REGIONAL OVERVIEW
LEADING COMPANIES AND BRANDS
FORECAST PROJECTIONS
COUNTRY SNAPSHOTS
REGIONAL OVERVIEW

Dominant with room to grow

 Asia Pacific is the key growth

driver for global spirits. In 2017
it accounted for 60% of global
spirits volumes and saw the
second-fastest rate of growth
over the review period, after the
much smaller Middle East and
Africa region.
 This is not surprising due to
having so many populous
countries, but also that in all the
major markets in the region,
such as China, India, Korea and
Japan, spirits have traditionally
been the alcoholic drinks of
choice. However, thanks to a
mixture of low disposable
incomes, growing consumer
choice in mature markets, and
in some markets cultural issues,
per capita consumption is
relatively low, being only the
fourth-largest region.

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REGIONAL OVERVIEW

Continued steady growth

 Since 2012 Asia-Pacific has

continued to grow. The dip in
2016 was due to declines in the
high-volume markets of Thailand,
Japan and South Korea, but
these markets recovered to
varying degrees in 2017.
 The major growth drivers remain
the two largest markets: China
and India. Both have and will
continue to see steady growth
throughout the forecast period,
but will be assisted by other
markets.
 Growth in many markets has
been driven by rising disposable
incomes, which have encouraged
the region’s consumers to move
into legal consumption, but also
enabled them to afford to drink
more and higher quality products
– a trend that is set to continue.

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REGIONAL OVERVIEW

Local spirits dominate Asia Pacific volumes

 Spirits produced in specific

countries dominate volume sales
in the region. Four out of the top
five markets are dominated by
such types, led by baijiu in China
and soju/shochu in Japan and
South Korea.
 In markets with more
conventional spirits categories
such as in India and the
Philippines, where whiskies and
rum have large volumes, these
categories are dominated by
cheap, locally-produced products.
 Despite this, premium categories
and products are present, for
example cognac in China, Taiwan
and Malaysia, while Scotch
whiskies, particularly single malt
products, are growing strongly in
India, China and Japan.
However, their volumes are
comparatively low.

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REGIONAL OVERVIEW

Small growth goes a long way with big volume base

 Although they have relatively low

rates of growth the massive volumes
of local spirits consumed means that
they continue to drive volume sales.
While the majority of that growth is
low-value products, it is worth noting
that in China premium and super-
premium baijiu was the key growth
driver for the category in 2017.
 India has the second biggest actual
volume growth, driven by whiskies.
This is mainly local whiskies, but
from relatively low bases both
blended and single malt Scotches
are doing well.
 The country with the third highest
volume growth was South Korea,
with tits volumes driven by
soju/shochu. Despite the category’s
maturity, producers’ capacity to
adapt to the latest trends, eg lower
ABV variants and the threat of
flavoured vodka, has allowed the
category to grow.

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REGIONAL OVERVIEW

Growth by category in key markets

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REGIONAL OVERVIEW

Other spirits and whiskies key to growth

 Major volume categories in Asia-Pacific saw fluctuating fortunes over 2012-2017. The relatively strong
performances in China, India and South Korea of local products contrasts with that of Japanese shochu,
which suffers from an ageing consumer base. The Philippines saw declines in its local rum, brandy and gin
categories for a variety of historic reasons, including large excise duty hikes.
 On the positive side there has been the increasingly broad-based growth of whiskies, particularly
international variants. Excluding India, Japan has seen the healthiest increases in volumes. Driven by its
native whisky it has also spread to other variants, especially Scotch, where the blended variants saw the
fastest rate of growth. This strong growth originated in Japanese whisky, and the desire to look to the past
with the popularity of the Highball cocktail. Scotch has also seen strong growth in India and the Philippines,
and is recovering somewhat in China. In the latter market, single malt Scotch is thriving due to its high-end
positioning, while blended Scotch is benefitting from price rises in premium and above baijiu, which is
making people who cannot afford the new high prices switch to blended Scotch.
 The major international spirits category in China, cognac, is also seeing a return to growth. In the first half
of the review period the category was hit very hard by an anti-corruption and anti-gifting drive, as much of
the growth was driven by corporate gifting/entertainment. Consumption of cognac has now switched to a
more sustainable personal consumption model.
 Although not showing up in the figures, other international spirits categories, such as English gin and
vodka, are growing from low bases in a number of markets. This is being driven by premiumisation and the
growing popularity of cocktails, for example in China, Hong Kong and Indonesia.

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REGIONAL OVERVIEW

Broad range of consumption habits

 In Asia Pacific consumers drink Spirits in Asia Pacific: % Volume Sales Through
in a wide variety of locations, Off-Trade 2011-2016
either at home or in on-trade 100

establishments. In Pakistan, due 90

to the strong religious sentiment
against alcohol, consumption is 80
almost entirely at home.
70
 By contrast, less than 20% is

% volume share
consumed at home in Singapore 60
– a trend exacerbated by the
50
strong rise of the cocktail culture.
 The decline of the off-trade share 40
in Malaysia is due to a big push
30
of international spirits categories,
eg whiskies, cognac and gin, 20
primarily through on-trade.
10
 Indonesia suffered a decline in
off-trade shares due to the 0
banning of alcohol sales through 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017

traditional shops, the main Azerbaijan China Hong Kong, China India
outlook for local spirits, and thus Indonesia Japan Kazakhstan Malaysia
Pakistan Philippines Singapore South Korea
saw an overall volume decline. Taiwan Thailand Uzbekistan Vietnam

© Euromonitor International ALCOHOLIC DRINKS: SPIRITS IN ASIA PACIFIC PASSPORT 12

REGIONAL OVERVIEW

Small specialist stores dominate most markets

© Euromonitor International ALCOHOLIC DRINKS: SPIRITS IN ASIA PACIFIC PASSPORT 13

REGIONAL OVERVIEW

Eclectic off-trade retailing environment

 The two major consumers of alcohol in the region, China and India, have very different pictures for off-trade
alcohol consumption. China, despite its size, has a strong concentration of sales in supermarkets and
hypermarkets. By contrast, India’s dependence on specialist retailers reflects a combination of tight
regulation and control of alcohol sales in the many different states, but also the general fragmentation of
retailing and lack of chained retailers.
 Specialist retailers are also dominant in both Pakistan and Uzbekistan, for similar reasons to India.
However, Pakistan has the added issue of the cultural difficulties of drinking alcohol in a strict Islamic
environment.
 In those markets with a large proportion of sales via supermarkets and hypermarkets, such as South Korea
and Singapore, this reflects the concentration of their retail environments.
 Local independent stores are major outlets for spirits purchases in a number of markets, such as
Indonesia, Vietnam and Malaysia. However, they have all suffered declines in share, especially in Malaysia
and Indonesia. This is predominantly due to the decline in local spirits, for which independent stores
represent the main outlet. This decline is due to a mixture of changing consumer habits as they shift to
more premium international spirits, but in the case of Malaysia excise duty rises, which disproportionally
impacted cheaper local spirits.
 In many of these markets, such as Indonesia, there is a major split in terms of where products are
purchased, with cheap local spirits being bought in local independent stores, while premium international
spirits are purchased through supermarkets/hypermarkets, where the better off increasingly tend to shop.

© Euromonitor International ALCOHOLIC DRINKS: SPIRITS IN ASIA PACIFIC PASSPORT 14

INTRODUCTION
REGIONAL OVERVIEW
LEADING COMPANIES AND BRANDS
FORECAST PROJECTIONS
COUNTRY SNAPSHOTS
LEADING COMPANIES AND BRANDS

National consolidation

 Many of the large volume

countries have highly
consolidated markets, most
notably in South Korea, Thailand
and Philippines, where large
companies dominate. In South
Korea it is focused on which
region companies dominate,
while in the Philippines it is by
category (gin, rum or brandy). In
Thailand it is the one major
player Thai Beverages. The one
large market which remains
fragmented is China, the huge
size of the country meaning there
are lots of regional players.
 Private label is almost non-
existent. This is due to the
retailing set up, where either on-
trade takes a large portion of
sales, or alcohol is mainly
through independent stores
rather than large grocery outlets.

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LEADING COMPANIES AND BRANDS

Local companies dominate the rankings

 Only two of the top 10 distillers in

Asia Pacific are international
companies. Diageo in first and
Pernod in fourth are only there due to
their large volumes of local spirits in
India.
 All other companies in the top 10 are
there due to their large shares in
domestic markets. Three are from
South Korea, two from the Philippines
and one each from China, India and
Thailand.
 The performances of these
companies are all dependent on local
conditions, such as tax hikes,
economic woes etc.
 In the case of Diageo, its decline in
share was due to struggles turning
around its Indian United Spirits
division, which for years suffered from
lack of investment by its predecessor,
and low-margin products. Diageo is
trying to re-position its portfolio to be
more upmarket.

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LEADING COMPANIES AND BRANDS

Narrow geographic spread for all the leading companies

 The consolidated nature of the

leading companies’ volume profile
is emphasised here. The most
diverse company of the top 10 is
Pernod Ricard, with only 90% of
its region’s volumes in its main
market of India. This is
predominantly due to its strength
in China. The company’s broader
spread is due to Pernod’s historic
strength in the region, and unlike
its rival Diageo, it has remained
fully focused on Asia despite
various economic crises. Post the
1998 economic crisis, Diageo
pulled back from the region, only
re-engaging from the mid-2000s
 A couple of the South Korean
companies have volumes in
Japan, due to the fact that
soju/shochu are similar products.
Their brands there primarily focus
on Korean ex-pats.

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LEADING COMPANIES AND BRANDS

Cheap local brands rule

 All the 11 leading brands in Asia

Pacific are cheap local brands
focused on one specific market.
 The leader is the South Korean
brand Chamisul. The brand’s
volumes are focused in the most
populous part of the country,
around Seoul.
 Second placed McDowell’s is an
Indian brand, but made up of a
range of variants in different
categories – whiskies, rum and
brandy.
 Of the remaining brands, Filipino
ones are strongly present with
Emperador, San Miguel and
Tanduay. Each of the brands
dominate their respective brand,
gin and rum categories. As with
Chamisul, the two Korean brands
(Choumchorum, Joeunday) are
focused on a particular region in
Korea.

© Euromonitor International ALCOHOLIC DRINKS: SPIRITS IN ASIA PACIFIC PASSPORT 19

INTRODUCTION
REGIONAL OVERVIEW
LEADING COMPANIES AND BRANDS
FORECAST PROJECTIONS
COUNTRY SNAPSHOTS
FORECAST PROJECTIONS

Giants shape the region

© Euromonitor International ALCOHOLIC DRINKS: SPIRITS IN ASIA PACIFIC PASSPORT 21

FORECAST PROJECTIONS

Large markets shape growth prospects

 Over 2017-2022, Asia-Pacific will see volumes grow by a 1% CAGR (804 million litres). This is a slowdown
on the review period, but will continue to drive the growth of the global category.
 Unsurprisingly, it is the large markets that will drive growth, with India leading the way. Spirits sales in India
have struggled, and will continue to struggle due to outside factors, namely the introduction of the general
sales tax, the ban on alcohol sales next to major roads, and a general negative view of alcohol amongst
national and regional governments, which has seen mass on-trade closures in certain regions. This
negativity will continue to hold back growth. However, this will still be faster than China as the category
matures. What the country lacks in volume growth will be compensated for in part by value growth as
consumers to trade up.
 Growth in Thailand and the Philippines is very reliant on local social and political conditions. With the
former country in particular still showing signs of instability, these healthy prospects could change.
 South Korea is the market which will see the biggest decline as its major category, soju, continues to
decline, underpinned by the decline of the next biggest whiskies. Soju suffers from maturity, with its
consumers ageing and younger ones preferring more eclectic tastes. Japan will also continue to see
shochu decline, however the category’s overall fall will be mitigated by the continued healthy growth of
whiskies.
 Throughout the region international spirits brands and categories will continue to gain popularity, as
consumers become better off and desire more variety and better quality in what they drink. Whiskies will be
the main beneficiary of this, but so too will be more mixable/cocktail-focused categories such as vodka, rum
and gin.

© Euromonitor International ALCOHOLIC DRINKS: SPIRITS IN ASIA PACIFIC PASSPORT 22

FORECAST PROJECTIONS

China hard landing will hurt growth prospects

 The slowing but still large

volume growth expected in Asia
Pacific could be further
impacted if a sudden economic
shock occurs. There are various
scenarios, such as trade wars,
although the most damaging
would be a hard economic
landing by China. Although it
has less than 10% probability,
its impact could be
considerable.
 This is unsurprising as China is
the dominant market in the
region and it will suffer the most.
However, it will not be alone
with many of its neighbours,
such as Thailand and South
Korea, also suffering.

© Euromonitor International ALCOHOLIC DRINKS: SPIRITS IN ASIA PACIFIC PASSPORT 23

INTRODUCTION
REGIONAL OVERVIEW
LEADING COMPANIES AND BRANDS
FORECAST PROJECTIONS
COUNTRY SNAPSHOTS
COUNTRY SNAPSHOTS

China: market context

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COUNTRY SNAPSHOTS

China: competitive and retail landscape

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COUNTRY SNAPSHOTS

India: market context

© Euromonitor International ALCOHOLIC DRINKS: SPIRITS IN ASIA PACIFIC PASSPORT 27

COUNTRY SNAPSHOTS

India: competitive and retail landscape

© Euromonitor International ALCOHOLIC DRINKS: SPIRITS IN ASIA PACIFIC PASSPORT 28

COUNTRY SNAPSHOTS

South Korea: market context

© Euromonitor International ALCOHOLIC DRINKS: SPIRITS IN ASIA PACIFIC PASSPORT 29

COUNTRY SNAPSHOTS

South Korea: competitive and retail landscape

© Euromonitor International ALCOHOLIC DRINKS: SPIRITS IN ASIA PACIFIC PASSPORT 30

COUNTRY SNAPSHOTS

Japan: market context

© Euromonitor International ALCOHOLIC DRINKS: SPIRITS IN ASIA PACIFIC PASSPORT 31

COUNTRY SNAPSHOTS

Japan: competitive and retail landscape

© Euromonitor International ALCOHOLIC DRINKS: SPIRITS IN ASIA PACIFIC PASSPORT 32

COUNTRY SNAPSHOTS

Thailand: market context

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COUNTRY SNAPSHOTS

Thailand: competitive and retail landscape

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COUNTRY SNAPSHOTS

Philippines: market context

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COUNTRY SNAPSHOTS

Philippines: competitive and retail landscape

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COUNTRY SNAPSHOTS

Uzbekistan: market context

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COUNTRY SNAPSHOTS

Uzbekistan: competitive and retail landscape

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COUNTRY SNAPSHOTS

Taiwan: market context

© Euromonitor International ALCOHOLIC DRINKS: SPIRITS IN ASIA PACIFIC PASSPORT 39

COUNTRY SNAPSHOTS

Taiwan: competitive and retail landscape

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COUNTRY SNAPSHOTS

Vietnam: market context

© Euromonitor International ALCOHOLIC DRINKS: SPIRITS IN ASIA PACIFIC PASSPORT 41

COUNTRY SNAPSHOTS

Vietnam: competitive and retail landscape

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COUNTRY SNAPSHOTS

Kazakhstan: market context

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COUNTRY SNAPSHOTS

Kazakhstan: competitive and retail landscape

© Euromonitor International ALCOHOLIC DRINKS: SPIRITS IN ASIA PACIFIC PASSPORT 44

COUNTRY SNAPSHOTS

Pakistan: market context

© Euromonitor International ALCOHOLIC DRINKS: SPIRITS IN ASIA PACIFIC PASSPORT 45

COUNTRY SNAPSHOTS

Pakistan: competitive and retail landscape

© Euromonitor International ALCOHOLIC DRINKS: SPIRITS IN ASIA PACIFIC PASSPORT 46

COUNTRY SNAPSHOTS

Malaysia: market context

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COUNTRY SNAPSHOTS

Malaysia: competitive and retail landscape

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COUNTRY SNAPSHOTS

Azerbaijan: market context

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COUNTRY SNAPSHOTS

Azerbaijan: competitive and retail landscape

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COUNTRY SNAPSHOTS

Hong Kong, China: market context

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COUNTRY SNAPSHOTS

Hong Kong, China: competitive and retail landscape

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COUNTRY SNAPSHOTS

Singapore: market context

© Euromonitor International ALCOHOLIC DRINKS: SPIRITS IN ASIA PACIFIC PASSPORT 53

COUNTRY SNAPSHOTS

Singapore: competitive and retail landscape

© Euromonitor International ALCOHOLIC DRINKS: SPIRITS IN ASIA PACIFIC PASSPORT 54

COUNTRY SNAPSHOTS

Indonesia: market context

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COUNTRY SNAPSHOTS

Indonesia: competitive and retail landscape

© Euromonitor International ALCOHOLIC DRINKS: SPIRITS IN ASIA PACIFIC PASSPORT 56

FOR FURTHER INSIGHT PLEASE CONTACT
Jeremy Cunnington
Drinks & Tobacco Project Manager
jeremy.cunnington@euromonitor.com

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