George Grant represents the sixth generation of leadership at the single malt whisky distillery Glenfarclas. Run by his family since 1865, the Ballindalloch-based whisky is regarded by connoisseurs as one of Scotland’s finest, and sold in a wide range of age expressions from a standard 10 year-old to the much pricier 40 year-old (WiC suggests the 21 year-old if you are looking for something in-between).
Here the Glenfarclas sales director talks about trends in the China market, the impact of Covid-19 on sales and how most of his local distributors in China are successful businesswomen.
Consumption of single malts has grown rapidly in the Chinese market for at least 10 years. Does the Scotch industry still see China as a major growth driver?
Yes, the Chinese market has been growing for the past decade, if not a little bit longer. We’ve definitely seen the growth in sales, initially in the larger cities. Now we are seeing it in the tier-two and tier-three cities as well. We’ve also seen a lot more Chinese tourists travelling to the UK to understand more about Scotch whisky.
But it is still a very difficult market to get into. And for the public at large, there is still some way to go in terms of understanding what whisky is.
On the back of the bottle ‘whisky’ is still translated as ‘wine’, which is obviously not correct. So there is still a long way to go in terms of brand recognition in China.
What has been the impact of Covid-19 in China? Have you seen sales rebound in more recent months?
The situation has been an interesting one, because the impact hasn’t just been on selling whisky there. At the end of December and January when Covid began to spread what initially impacted us was that we couldn’t get any packaging because all the factories closed down. That had a knock-on effect on our broader business. Then we also saw Chinese bars and clubs close, leading to a drop in orders from the Chinese market. But it has definitely rebounded much quicker than most other markets. The Chinese are very resilient and the people are very quick to adapt and move on.
What we did notice about sales was a massive swing in what people were buying. We had previously been selling more high-end products in China. Consumers there tended to buy an expensive bottle if they were going out with colleagues, or drink an older Glenfarclas if they were in a bar with friends. But when the shutdown happened, we saw sales of less expensive 10 year-olds and 12 year-olds and younger expressions increase. So people were buying to drink at home and didn’t feel the same need to impress, shall we say.
We saw exactly the same thing in Japan but in Europe the opposite happened – our higher-end whisky sales increased. People here would drink 10 or 12 year-olds if they were out but if they were at home they’d want something a little bit more expensive. So we saw a big swing in where our items were being sold.
How long was production affected for?
Production was impacted for a couple of months because of the issue of getting boxes from China. And then we went into lockdown ourselves in the UK. The distillery closed for seven or eight weeks. But we’d normally shut down for summer maintenance so we just brought that forward this year. Then production resumed as normal.
When did you see sales in China return to more normal levels?
It is very difficult to answer that precisely because we don’t ship to China every month but every quarter. So we’ll have to wait till the year-end to see the full extent of the damage. But having said that we used the time when China was locked down to look at new lines and brands for that market. We work with a chain of around 1,500 bars there and we talked to them about the new labels they’d like when they reopened. So we tried to use the time as constructively as possible.
When did Glenfarclas begin selling in China?
Not that long ago. We had done things in the market on a small scale but we only got our own distributor in the market about 10 years ago.
Was your route into the mainland helped by Taiwanese drinkers of Glenfarclas?
Yes, I recall in the early days we did several dinners in Shanghai, Shenzhen and Guangzhou. But the guests were primarily Taiwanese customers I had met before in Taiwan but who also had businesses on the mainland. They’d bring along one or two of their local business partners and introduce them to our brand. That really helped to spread the word.
In terms of your export sales, does China still lag the US?
I would say China has overtaken the US in terms of range and value, and it is seeing significant growth in volume. It’s primarily because of the chain of bars we have been working with for the past three or so years. The amount they are buying is just absolutely phenomenal. The Glenfarclas ‘105’ bar chain has outlets in five major cities now.
How have you positioned your whisky as a premium product?
We have gone down two routes. We have our standard expressions and then we do a series of expressions for a chain or a group, which will have their own distinct label.
The thing with the Chinese market is that everyone wants something that is “their’s”, something that is unique to them. That’s an area where we have been lucky and benefited. Because we are a relatively small, family-owned company, we are able to adapt our products a little bit faster. One of the higher-end things we are able to do is single casks. So if a customer wants to buy 300 bottles of say a 1987 cask, we can do that and put a private label on it – guaranteeing them that no one else can have that product.
That has worked very, very well. The customer knows you can’t find the whisky anywhere else. It is an item that is unique to them.
You are one of the last of the Scottish families to own a major distillery. Does that story play well with Chinese consumers?
They don’t really care, to be honest. You try to hammer the brand message and it may well get through to the big boss, but once it filters down to the average member of the public it’s not an important message that drives which whisky they buy.
Do you have a profile of who your main consumers are in China, i.e. men in their fifties?
No, and it is difficult to say. I think when we first went into China we thought like everybody else that we wanted to be in Shanghai and Beijing. But then we had a change of strategy. We are not Macallan or Glenfiddich. We are not Johnny Walker. We realised there was no point throwing money at the most competitive markets. So from the beginning we really went after tier-two and tier-three cities. We left Beijing, Shanghai and Shenzhen alone. We found we could spend the same amount of money and get a much bigger splash in a ‘smaller’ city – albeit places that still have 10 million-plus people.
So you were looking at cities like Chengdu?
Yes, and places like Changsha and Xiamen. What was interesting about these markets was that more than 70% of our distributors ended up being women. It was entrepreneurial women that had other businesses but saw an opportunity with spirits. For some reason we ended up working with a lot of them and they had a lot of friends who were women who drink whisky as well. Husbands would then be introduced to it too.
It was an interesting dynamic that we didn’t go looking for. But that was how it worked out.
Have you introduced super-premium limited editions in China, such as whisky aged more than 40 years? The sort of bottlings that do well at auction?
Yes, but it is not something we specifically go after. I know some companies do this to raise their profiles and we’ve had several bottles that have been auctioned in Hong Kong – such as a 50 year-old and a 60 year-old Glenfarclas.
It does help as the Chinese are impressed when the prices go very, very high and can see an opportunity to make money from whisky as an investment as well.
For individual clients in Hong Kong and mainland China there can also be some wow appeal when they get the chance to design their own bottle, label and packaging in special editions.
Pre-Covid were you getting many Chinese visitors to your distillery in Ballindalloch?
We got a lot. I’d say we received one or two VIP customers per month – coming over in private planes and so forth. That all disappeared this year and I really hope it doesn’t continue [i.e. the lack of visitors] as these are the sorts of individuals who are quick to move on to new styles and fashions. If they have found something else to spend their money on, maybe coming to the UK won’t be on their list of things to do next year.
It was a struggle initially to get some of these visitors over to the UK, because they needed to get a visa, even if they already had a Schengen one for Europe. These VIP Chinese are quick to decide they’re going to do something. Normally it is two or three days beforehand they’ll tell us they want to go to Scotland, and we have to tell them we need to at least two weeks to arrange their visa. They think everything can happen in a day and because of that we have not always been successful in getting some of the VIPs to visit.
Aside from selling through bars and more traditional routes, do you sell much whisky online via e-commerce channels like Tmall?
This is something we have been spending an awful lot of time on in the last 18 months. We have been through all the paperwork and closing other accounts down so that we have become the certified online shop for our product. This is giving us better control of our pricing. What was happening before was that anybody could have bought the product from anywhere and set the price, which hurt our business. We have managed to get that under control and we now work with Tmall and a couple of other e-commerce sites in the Chinese market.
Was that due to parallel imports?
Yes, it was all to do with that. And some sites would keep a price up, even if they had no stock. That’s why we went through all the work to become the certified online retailer.
Are e-commerce buyers younger?
It varies with the product, but we do find that if it is a new product and there has been a bit of buzz about it on weibo or WeChat it tends to be a younger group of people that flock to buy it. For the more normal, run-of-the-mill stuff it can be anybody.
What about the competition from high-end baijiu like Moutai?
It’s a question I really don’t know the answer to. The people I have been with in China will drink baijiu with a meal and then move onto single malt whisky. But I think 0.1% of all the spirits consumed in China are imported. We are still a tiny, tiny blip so I don’t know if we are directly competing with Moutai.
Are your stocks of barrelled single malts struggling to cope with growing demand, as seems to be the case for some of your rivals?
Not at the moment. We are fortunate that we can move our age products around a bit. Like at the moment, our two biggest expressions in China are our 11 year-old and 14 year-old. These are two ages we don’t sell anywhere else in the world. We did that because we looked at some of the expressions that we do in other markets and figured if there was a run on them, it would make things more difficult. So the decision in China was partly to do with stock control and partly with exclusivity for that market.
Some distilleries have sold bottlings without age statements, suggesting they are using younger whiskies because of those stock issues. What is the Glenfarclas position on this?
We will always put an age statement on our standard bottles. The exception is our cask strength brand 105, which doesn’t have one. When it first came out we didn’t put an age statement on it because we felt there were already too many numbers on the bottle.
For the rest of our range we want to include an age statement. I think it is something that has stood us in very good stead. If you are going to spend a couple of thousand renminibi on a whisky, you want to know what you are buying – i.e. that it is a 21 year-old rather than just some name stuck on it by a marketeer.
Glenfarclas has done very well in China with the 105 brand. Is it because of the price point?
It’s actually because we got very lucky when we named it. The number 105 translates very easily into Chinese. So in China people were able to call for “105” in a bar, while they struggle to pronounce Glenfarclas or even Johnny Walker.
We did have a Chinese translation of Glenfarclas but we grew very big in Taiwan and adapted the Chinese branding to the Taiwanese version. That was problematic – it created mistrust in mainland China as there were two different names for the same product. It took us about 18 months to get trust back and make clear that we had changed the name from ‘mountain fire spring’ to a slightly more genteel-sounding version we had used in Taiwan.
Another thing we’ve noticed with Chinese consumers is they often associate Glenfarclas with Penfolds wine, because their logo script is quite similar. Chinese think Penfolds is good wine! I use WeChat a lot and people often write to me saying “You have very good wine”.
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