Single malt Scotch still dominates one of the world’s most profitable liquor markets, but other players could compete by employing aggressive, long-term marketing campaigns.
STORY BY NIC ROGERS
When I left my seven-day quarantine in Taipei last year, I was in dire need of a wee dram to quench the thirst built up from a week’s isolation. I typed “whisky bar” into Google Maps and was delighted to discover an abundance of options, each with several hundred reviews and many with 4+ star ratings.
After expressing my satisfaction with the local whisky scene to some friends, several proudly told me that “Taiwan is the fourth-largest whisky market in the world!” TOPICS came to a similar conclusion (albeit specifically about Scotch whisky by value) in a 2015 article titled “The Blossoming of the Taiwan Whisky Market.”
In the eight years since that piece was published, Taiwan’s whisky market has maintained healthy growth. Taiwan has stepped onto the podium to claim third place in the import of Scotch whisky by value, according to the Scotch Whisky Association.
Spirit-makers have good reason to establish a presence in Taiwan; there is a great return on investment. Taiwan’s import taxes for spirits are based on alcohol content and volume, not value. This makes for more affordable products to consumers while encouraging distillers to market premium products. In fact, Scotch brands generate higher margins in Taiwan than most other export markets by pushing their higher-end bottles.
But as Taiwan’s taste for high-end Scottish single malts continues to grow, makers of American whiskey (the U.S. spelling is with an “e”) struggle to capture a significant market share. The U.S. Department of Agriculture reports that U.S. exporters supply only 2% of Taiwan’s imported demand. Scotland commands 92% of it, and Japan has a 4% share despite producing less whiskey than the United States.
So why are American whiskey brands struggling to make an impact on the market? One reason is the relatively limited attention that U.S. companies have given Taiwanese whiskey drinkers. Scotland, on the other hand, has consistently cultivated the market.
Attesting to the attention Scotland gives to Taiwan is Steven Lin, author of A Journey Around Whisky and owner of three Taipei whisky bars. “Scotch brands invest a lot in Taiwan,” Lin says, adding that they place great importance on market education. As an example, Lin cites single-malt Scotch whisky brand Balvenie, which offers a six-month educational program on whisky for bar owners and their staffs.
“The last two years my employees were top of their class, so they were invited to Scotland for a tour,” he says. “Last month I was invited to Scotland twice – I already have two trips planned for next year. Scotland is like my second home now.”
One person unfazed by the preference for Scotch is Robin Johansson, CEO of Vana Living and importer of the Swedish whisky made by Mackmyra distillery. “Taiwanese people are very open-minded – they’re willing to try new food and drinks,” Johansson says. But “it’s very hard to convince people to buy with words only,” he notes. “You have to start from the bottom and let people try your brand.”
To introduce Mackmyra to the Taiwan market, Johansson’s team showcased the whisky at industry expos and held their own events. The first customers were businessmen who were introduced to Mackmyra through special VIP dinners and tastings. After hearing Mackmyra’s story and enjoying a sampling, attendees would buy a few cases and hand out bottles as gifts or bring them for after-work drinks.
Senior professionals still account for about one-third of Mackmyra’s sales, but a growing segment is people aged 35-45 in search of something new. The Taiwan market is well-educated and more concerned about quality than price, Johansson notes. Importers can find success if they make their products interesting to local drinkers.
“Having a story is important – the more information, the better,” says Johansson. Mackmyra’s Intelligens AI:01 label, for instance, uses a recipe designed by a big-data algorithm from Microsoft. After compiling sales, data, and customer feedback on various Mackmyra malts, the distillery’s machine learning models recommended a mash bill and production techniques that would best satisfy customers in a given market.
Intelligens provides a cool creation story, and its spicy, crowd-pleasing taste backs it up. Johansson’s Taiwan stock of the label sold out quickly, and he is now preparing to introduce the AI program’s second recipe to Taiwanese consumers.
The success of Mackmyra, a small distillery from a country that’s new to the whisky game, is an encouraging story for producers looking to break into the Taiwanese market. Although the U.S. is not new to the game, American whiskey makers will likely need to follow a similar playbook to gain a foothold here.
What makes American whiskey special is the inclusion of ingredients native to North America. A bourbon malt must contain at least 51% corn to earn its title, while rye whiskey must contain 51% (you guessed it) North American rye. Along with varying amounts of wheat and barley, these grains give U.S.-made whiskey a sweeter flavor and a slick, syrupy mouthfeel.
Bourbon is a county in Kentucky named after the French royal family that supported America’s fight for independence. The corn-based spirit produced in that region carried on the name.
While their heritage isn’t quite as long as Scotland’s, America’s distillers still employ centuries-old techniques. The Buffalo Trace Distillery in Kentucky, for example, can trace its origins back to the late 1700s. Today the historic facility is owned by the Sazerac Company, which uses it to produce some of the most recognizable bourbon brands: E.H. Taylor, Eagle Rare, W.L. Weller, and, of course, Buffalo Trace. The distillery’s output also includes Sazerac Rye whiskey.
Marketing and distribution for Sazerac’s portfolio is managed by DXCEL International. Malcolm Tan, general manager of DXCEL Taiwan, says that when competing against Scotch, American whiskeys face two main challenges.
The first obstacle is simple economics. Given the huge domestic demand in the U.S. for the spirit, only a limited supply is available for export.
“The amount we get is very little – for some brands only 100 to 200 bottles,” says Tan. “We have to prioritize how they’re distributed because there’s not enough.” The company mainly uses the limited supply to educate the domestic market through samplings, trade shows, and masterclasses. Tan also cooperates with flagship bars to act as showrooms. Ounce, located in Taipei’s Xinyi District, is one place where consumers can find some of DXCEL’s finest bourbon.
Lin points out that whiskies are trendy in Asia. While Taiwan is the third-largest market for Scotch by value, the Scotch Whisky Association recognizes Asia-Pacific as the second-largest region for Scotch, following only Europe. Scotch producers invested in the APAC region early in search of new high-growth markets.
The last decade has shown consistent growth in domestic market demand for American whiskey, and the pandemic only fueled this trend. Whiskey sales are more than 60% higher now than in 2010. Kentucky is currently aging a record 10.3 million barrels, and the compound annual growth rate of bourbon between now and 2027 is expected to be 9.8%, according to research by CaskX, a whisky casks investment firm.
CaskX’s research also finds that premium and super-premium offerings are experiencing the highest growth rate. This is the product segment likely to do well in Taiwan.
Last July, DXCEL’s Tan was excited to receive 600 bottles of W.L. Weller 12 Year bourbon. Weller uses a unique blend of wheat in its mash bill to create a signature flavor, and the 12-year is quite rare. Tan says his entire stock was bought up by Taiwanese liquor connoisseurs within a month.
“Buffalo Trace [distillery] is expanding their capacity next year, but the bottleneck is the storage and warehousing of the barrels,” Tan says. Bourbon, and all whisky, must be stored in humid temperature-controlled environments during the aging process. The benefits of expanded production capacity won’t be felt for at least eight years.
“Whisky isn’t like beer,” Tan notes. “You can’t adjust quickly to increased demand.”
Besides supply concerns, DXCEL and other American whiskey distributors also face a greater challenge in Taiwan: that of demand. As Tan notes, “most people [in Taiwan] have an impression that bourbon is cheap and low quality.”
The Taiwanese appreciation for Scottish single malts thus works against American-made whiskey. The Weller 12 Year, for example, is the oldest age statement you’ll see on bourbons, while Scotch brands can boast aging of up to 50 years.
But the reason for the difference in age statements is not that Scotch makers are more patient than their American counterparts – they just use different maturation methods. One of the defining aspects of bourbon is the use of charred virgin oak barrels. In contrast, Scotch is matured in barrels that previously stored other spirits, often wine, port, or sherry.
Kentucky’s more extreme climate, with hot summers and cold winters, also speeds up the aging process, and over-aging can cause the fragrance of the wood to overpower the liquid it holds.
“Longer isn’t better,” Tan contends. “The cask interaction is different. A used cask is very mild, but a bourbon aged for more than 10 or 12 years would taste like wood.”
Whisky connoisseur Steven Lin notes that bourbon is disadvantaged by Taiwanese consumers’ tendency to focus on age statements. “Bourbon struggles from an image problem,” he says. “It’s seen as cheap, and it doesn’t have an age statement, so the market doesn’t trust its quality. In Taiwan, a 12-year single malt is entry-level.”
Representing a young distillery without age statements, Johansson encounters the same challenge selling Swedish whisky. To assure quality, Mackmyra uses casks one-seventh the size of typical aging barrels. This puts the oak in contact with more of the liquid and matures the whisky about three times faster. But it’s difficult for buyers to be convinced of this fact without an in-person explanation and a taste test.
Lin emphasizes the importance of age statements in Taiwan for the Scotch market as well. “Glenmorangie tried to teach the market that age statements don’t matter, but it failed,” he says. “McCallan launched a retail-only bottle with no age statement at the duty-free shops, and I had friends saying their quality was going down. It hurt their reputation.”
In 2015, Lin told TOPICS that bourbon couldn’t create a sense of specialness for Taiwan drinkers. Seven years later, he says not much has changed. As an example, Lin points to the American-founded, Japanese multinational Beam Suntory, which boasts a diverse bourbon portfolio.
“Suntory had a chance to make bourbon special – it had the money to do it,” he says. “But it focused on its affordable brands like Jim Beam to promote highballs in Japanese restaurants. It didn’t promote its luxury bourbon.”
For bourbon and rye whiskey makers to claim a fair share of the Taiwanese market, moneyed brands will likely have to pitch in to educate the market and overcome prejudices surrounding age, brand, and quality. But if the market reacts as it has to Japanese whiskies, there should be incredible potential for American producers that put in the time and effort.
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