China Consumer

Year of the (sea) dragon

Scotland’s top distilleries see huge growth in China’s demand for whisky

Year of the (sea) dragon

Thirty rocks: Pattison unveils Bowmore’s rare Sea Dragon bottling

Aside from golf, Scotland’s most high-profile export to China is whisky. Morrison Bowmore is one of Scotland’s most prestigious distilleries and has been making whisky on the island of Islay since 1779. This week, the company’s Asia-Pacific head David Pattison discusses why an ultra-expensive whisky named the Sea Dragon has been targeted at the China market.

What’s the reason for your new whisky’s name, the Sea Dragon?

Islay is an island steeped in mythology. One is the legend of the Sea Dragon. It involves a passionate affair between an Irish princess and a Scottish prince, which was adulterous. They were forced to flee but their boat sank in a terrible storm just off Islay, and they drowned. Legend has it that a dragon protects their graves at the bottom of the sea and so today when you see the waves crashing in an angry way, locals say it is the Sea Dragon, protecting the prince and princess from intruders.

Obviously, the Chinese like dragons too. Is this particularly bottling specifically targeting the China market?

Yes, and it’s the first time Morrison Bowmore has launched a whisky ex­­­­­­clusively for the China and Asian region. There are only 518 bottles and it is not available in Europe, the US or elsewhere in the world. It’s a very limited and rare bottling that is highly sought after. Hong Kong’s airport will also be the only airport where it is available. Bottles will go on sale there in November at a price of HK$6,080 ($784).

How fast have Scotch whisky sales been growing in China?

Blended Scotch whiskies – such as Johnny Walker and Chivas Regal – have seen huge growth. However, that is starting to tail off. On the other hand, the single malt whisky category – at the premium end of the market – continues to grow fast. For instance, between 2006 and 2011 the compound annual growth rate for single malt sales in China was 169%. That means the market size for single malts has nearly trebled in five years.

This is creating its own supply and demand issues. Stocks of single malts – such as Bowmore – are under pressure from growing demand in emerging markets like China. Supply can’t grow at the same pace, because the whisky has to age in barrels for a decade or more. For example, an 18 year-old whisky has to age in the barrel for at least 18 years. Supply cannot adjust quickly to demand. The result has been that older whiskies – the Sea Dragon is a 30 year-old – are now very collectable.

So single malt – where all the whisky in the bottle comes from a single distillery – is an entirely different segment to blended. While the volumes are much lower, it commands much higher prices.

Where does Greater China rank in single malt sales?

In terms of volumes, Greater China – which includes Hong Kong and Taiwan – is fourth worldwide, after France, the US and the UK.

For Greater China, we feel that Taiwan and Hong Kong have a strong role in creating demand among mainland Chinese. There are a lot of Taiwanese living in mainland China – some estimate as many as one million. These Taiwanese will introduce single malts to their business counterparts on the mainland when they are entertaining. They will communicate the prestige of the whiskies and raise awareness of single malts among newly affluent Chinese.

Hong Kong also acts as a shop window. A lot of mainland Chinese travel to the city and so we at Bowmore feel it’s very important to have a strong distribution presence in Hong Kong. Not just in bars and hotels, but particularly at the airport which is a key purchase point for single malts.

Which are the biggest-selling single malt brands in China?

Macallan, Glenfiddich, Glenmorangie and Bowmore.

What is the split in volumes between blended and single malt sales in China?

In 2011 blended Scotch sold 1.69 million cases (each containing nine-litres of whisky) in China, according to the International Wine and Spirits Record. While 89,000 cases of single malt were sold. So it’s significantly smaller.

Blends are more concerned with volume, while single malts are very much being marketed in China as luxury goods, with high-price positioning. It’s all about image and being distributed in prestigious locations. At Bowmore we are very selective about where we are distributed. We are less concerned with chasing volume than making sure we have the distribution that fits with our brand image.

Then again, that is not to suggest we’re not seeing incredible growth. Sales of the Bowmore 18 year-old doubled in China this year. But we cannot sustain a situation where we are doubling sales of the 18 year-old every year. We just don’t have the stock. Our strategy has been – and will be – to increase prices to align growing demand with our limited supply.

The Sea Dragon is a 30 year-old. Previously you’ve marketed super-aged whiskies such as the 42 year-old Black Bowmore. Is this part of a strategy to position the brand as an ultra-elite whisky?

Absolutely. These very old whiskies play a significant brand-building role. Yes, they generate profit but in the case of the Sea Dragon we developed it purely to assist our brand in China and Asia. These older whiskies position Bowmore as collectable and prestigious. We want that image to rub off on more mainstream consumers who will then purchase the 12 year-old and the 15 year-old, which are the expressions we can grow at a higher rate.

I should add that collectors have done very well buying older Bowmores. The Black Bowmore that was released in the early nineties has increased more than fifteen-fold in value over 20 years. Bowmore and Macallan are arguably the two most collectable whiskies.

In a similar vein, we are about to launch a special bottling of Bowmore 1967 at the Beijing and Shanghai airports. There will be just 32 bottles and so that ought to appreciate in value considerably too. Initially we’ll sell it for the renminbi equivalent of £7,000. That may sound a lot to some of your readers, but the advantage of these old whiskies is that once bottled, they won’t deteriorate. In that respect they are like bars of gold. And due to the supply-demand issue I mentioned earlier, old whiskies will only get rarer in the coming years.

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