Posted: Mon Oct 30, 2006 4:51 pm Post subject: Whisky galore for Chinese as Scots face price rise
Whisky galore for Chinese leaves sour taste as Scots face price rise
THE price of a bottle of whisky is set to rise by 10 per cent as growing demand for the spirit in China hits supplies in Scotland, distillers warned last night.
Exports to China soared by 86 per cent last year, making 2005 one of the best years for whisky exports.
And in the first six months of this year, exports to China rose by 30 per cent compared with the same period last year.
The Scottish Whisky Association predicts China will rank among the ten most valuable export markets for whisky in 2006.
But a report in The Grocer trade magazine today warns that the increased demand could push up prices by 10 per cent, an average of £1 per bottle on blended whisky.
In Scotland, distillers buy whisky from each other to make their own blends, which can contain as many as 30 different single malts.
Duncan Baldwin, regional director at Angus Dundee Distillers, told The Grocer: "We have noticed there is not much whisky available to buy any more and what there is sells at a much higher price. The bigger players have realised that sales forecasts for their brands in places such as China mean they need to guard their stocks to furnish this demand. Demand from China is not losing its momentum."
He added: "We have to increase our prices due to the supply and demand situation. You cannot survive if you do not adjust your prices accordingly."
Another industry source said: "It looks as though prices may have to go up considerably and we are not sure the situation will stabilise soon."
A spokesman for the Scotch Whisky Association confirmed that distillers had pricing concerns. "We have heard similar statements from distillers," he said. "We do not really know what will happen but continued growth in China is expected."
The spokesman said that some distillers were looking at increasing capacity as a long-term solution to the issue of rising demand.
Since China joined the World Trade Organisation in 2001, the import tariff on Scottish whisky has fallen from 65 per cent to 10 per cent.
Distribution rules have also been relaxed, making it easier to obtain.
Consumption is being driven by aspirational Chinese in large metropolitan areas such as Beijing, Shanghai and Guangzhou keen to try international products.
In recent years, Chinese consumers have found innovative ways to enjoy whisky - a particularly popular trend is mixing it with chilled green tea.
In 2005, exports of malt and blended Scotch rose 4 per cent in total, reaching a combined £2.36 billion. The US remained Scotland's most valuable market last year, worth £372.7 million - a 10 per cent rise - followed by France, up 3 per cent to £255.7 million, and Spain, down 18 per cent to £240.4 million. Exports to Asia surged 24 per cent in total, led by South Korea, Taiwan and Thailand.
However, the picture at home was not so rosy. The SWA reported a 6 per cent drop in UK sales to 107 million bottles, down from 114 million in 2004.
Concern about rising demand from Asia could intensify if the European Commission is successful in getting India, which has the potential to be a major export market, to scrap "additional duties" of up to 550 per cent on imported spirits.
According to Chivas Regal, which is the No 1 brand of whisky in China, UK consumers do not have to worry about supplies running out.
A Chivas spokesman said: "We are performing very well in China but we have an extensive stock of scotch whisky and quantity is not an issue. We have no concerns about meeting demand."
A spokeswoman for Tesco said that the retailer was "aware of pressures on bulk pricing for whiskies from higher energy costs and rising interest rates" but she added that prices for whiskies more than ten years old "do seem to be stable".
How Far East developed liking for wee dram
WHISKY was introduced to China at the end of the 18th century along with beer, brandy and vodka.
Traditionally, distilled spirits have been the preserve of men, with women opting to drink more wine and beer.
Chinese consumption styles are quite different from that of the average British whisky drinker. The normal order is not a measure but a bottle and it is drunk throughout the evening.
Pernod Ricard's Chivas Regal is currently the best-selling brand of Scotch whisky in China.
But Diageo, which is the world's largest beverage company, is battling to overtake its French rival and make Johnnie Walker the most popular brand.
As well as whisky, the demand for Cognac is also growing very strongly in China.
However, the European distillers may have their work cut out for them.
The locally made white spirit, baijiu, which is generally about 80 to 120 proof, remains hugely popular among locals.
It is also very cheap compared to imported whisky, which sells for 15 times the price of similarly sized bottle of baijiu. Adding medicinal herbs to rice wine and turning it into a health drink is also a popular local innovation that sells well in China.
Several companies in Southern China have begun producing their own whisky far below the quality of the imported spirits. While European whiskies have dominated the Chinese market, American brands such as Jack Daniel's are also competing strongly.
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