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Diageo Takes Inspiration From Japan To Revive South Korea's Whiskey Market

South Korea is ranked as the third largest Asian market for Scotch whiskey , and has maintained its position in the top ten markets globally, by value, despite a 15% slump in 2015 to £99 million. The country was historically one of the top consumers of super premium whisky; however, the whiskey market has been on a downtrend in the country for the past several years. Major brands are searching for ways to revitalize the lackluster sales, which have fallen 38% between 2008 and 2015. The sales, which were at 3.5 million boxes of whiskey in 2002, fell to 2.8 million boxes in 2008 , and further to 1.7 million boxes in 2015. In lieu of this, Diageo ( DEO ), the leader in the whiskey market of the country, is confident of overcoming this by looking to the nearby Japanese market. The company is best known for distributing Johnnie Walker and Windsor, among others, in the country.

Whiskey Consumption- Japan & Korea

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The Japanese whiskey market, also, in the past suffered from declining consumption, plunging by as much as 72% between 1988 and 2008. A combination of factors, such as economic slowdown in the country, as well as trends prioritizing health and lighter drinks, pushed consumers away from strong liquors, such as whiskey. Significant efforts by whiskey distributors in the country helped the industry to rebound, selling 14.6 million units last year, a staggering 75% rise from its 2008 levels. The market has grown at an average annual rate of 8.1% since 2011. What helped the market was the marketing conducted by Japanese whiskey distillers, through television commercials and drama, which portrayed the drink as 'hip and trendy'. According to local whiskey giant Suntory, this strategy resulted in the number of bars selling highball (whiskey mixed with water or soda) from 15,000 to 40,000. A popular Japanese drama - Massan - centered on a woman's attempt to start a new whiskey company, also aided in the recovery of the popularity of whiskey consumption.

Popular Drinks- Japan & Korea

According to WHO statistics, the consumption of spirits accounted for 52% of all alcoholic beverages in Japan. However, the corresponding figure for Korea is a measly 2.9%. For the Korean market to progress, Diageo will benchmark what happened in Japan, as the bumpy road weathered in the latter offers a glimpse of the direction the company needs to take. If similar efforts are undertaken in the country, as in Japan, it can revitalize the whiskey market in the country. Currently, 90% of the consumption in Korea is done at restaurants, bars, and other establishments, resulting in a perception that hard liquor should be consumed in formal settings. On the other hand, in Japan, only 50% of the hard liquor consumed is through drinking establishments, with the other half consumed at home and such places. In order to change this mindset, the company plans to launch 200 milliliter bottles of Johnnie Walker in October, making it more readily available, by distributing through all possible channels, and more affordable, in order to target millennials. Normally, whiskey is sold in 450 milliliter or larger bottles. Moreover, with the huge popularity of the cheaper liquor Soju, which is typically light and fruit-flavored, whiskey makers in the country have followed suit. French whiskey manufacturer Pernod Ricard introduced Eclat by Imperial, which contains an alcohol content of 31%. Diageo also launched W Ice and W Rare by Windsor, which have an alcohol level of 35%.

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Notes:

1) The purpose of these analyses is to help readers focus on a few important things. We hope such lean communication sparks thinking, and encourages readers to comment and ask questions on the comment section, or email content@trefis.com

2) Figures mentioned are approximate values to help our readers remember the key concepts more intuitively. For precise figures, please refer to our complete analysis for Diageo .

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.


The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.