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With its expanding middle class population and increasing commerce with the West, Asia-Pacific has come to be seen as the Holy Grail by international alcohol brands endeavouring to navigate – and indeed take advantage of – its broad spectrum of cultures, traditions and culinary preferences.
But, it’s also a region fraught with pitfalls and hurdles, and metaphorical storm clouds can gather with little warning.
Often, these challenges arise as a result of political tensions – particularly relating to China. In late 2020, President Xi Jinping’s government imposed a tariff of up to 212% on Australian wine. The move, prompted by allegations that Australian winemakers were ‘dumping’ their products in the country – that is, selling their wine at artificially low prices – effectively closed the door to the industry’s most important export market. Australia refuted the claim, while political commentators connected the development to the country’s authorities’ call for an investigation into the origins of Covid-19.
While agreement was finally reached in March to scrap the tariffs, the damage has been significant and looks set to be long-lasting: Last year, Australian wine exports to China slumped by 52% in volume and by 17% in value. More widely, the country’s grape prices have plummeted as the industry struggles to get a hold on its massive oversupply issue – equivalent to more than 2.8bn bottles of wine – which analysts warn could last for years.
Could a similar fate befall cognac again? China’s implementation of anti-corruption measures in 2012 hit the category hard for a number of years, and now French brandy (which includes cognac) finds itself in the eye of another anti-dumping investigation by Beijing. In what appears to be a tit-for-tat move, China launched the investigation into brandy imports from the European Union following the commencement of the bloc’s own inquiry into Chinese electric cars.
While no tariffs have been imposed yet, the likes of Moët Hennessy, Pernod Ricard and Rémy Cointreau will be hoping it stays that way.
As a key market for champagne, cognac and single malt whisky, not to mention the premiumisation opportunity for beer, China has long been seen as the ideal destination for high-end alcohol brands. But consumer spending is falling as a property crisis grips the nation. IWSR Drinks Market Analysis has also noted a “‘new normal’ of cautious consumer spending and downtrading” in the country.
Nevertheless, there are bright spots. Despite the challenges, according to IWSR, “overall consumer optimism remains stronger [in China] than almost anywhere else in the world”. And, while protracted lockdown measures hit the on-premise hard, the channel’s resurgence has been strong. Meanwhile, the highly valuable global travel retail sales channel has roared back to life in recent months across the whole of Asia-Pacific.
In terms of volume dominance, it’s difficult to envision a market that could replace China for Australian wine, for example. In its latest report, however, trade association Wine Australia highlights 74% value growth in Hong Kong.
Since the special administrative region is a major trading hub, this suggests that exports are spreading across the continent.
In terms of the trends that are driving consumption in Asia-Pacific, the highball has become an important vehicle for whisky brands. While synonymous with Japanese bartending, the serve’s popularity is on the rise in another trend-setting Asian market: South Korea. As in most established markets, younger drinkers seeking both moderation and affordability are driving the trend.
More broadly, Asian consumers’ appetite for Western alcohol brands remains strong. Take scotch whisky: Asia-Pacific remains the most valuable export destination for the category, with 2023 shipments worth GBP1.8bn (US$2.3bn).
Another spirits category enjoying its time on the continent is gin. The segment is rising in prominence in established cocktail markets such as Japan and Singapore, while another huge opportunity is being unlocked in India. According to IWSR, the country will become a key asset to drive gin’s global growth moving forward, with gin brands expected to benefit from both a thirst for premium international brands as well as local craft products.
While consumers in Asia-Pacific are increasingly drawn towards international alcohol brands, there appears to be something of a cultural exchange taking place as Western drinkers become more interested in traditional spirits from East Asia. At the same time as putting twists on Western categories, Asian producers are approaching their own traditional beverages with pride, innovation and ambition.
In this vast region, where the goalposts are constantly shifting, nothing is certain. On the whole, however Asia-Pacific is still – and will continue to be – one of the most exciting and lucrative markets for beverage alcohol.
This article has been available to Global Drinks Intel subscribers since April. For details about how to join them, click here.
