Scotch blues

Sinking economy drowns whisky market

By Kim Tong-hyung

Korea is home to some of the world’s heaviest whisky drinkers but the dismal domestic economy now appears to be testing their affection for Scotch.

Industry figures show that whisky sales dropped by nearly 10 percent in the first sixth months of the year, battering both domestic distillers like Lotte Chilsung and Hite Jinro and foreign makers such as Pernod Ricard.

Already among the world’s largest markets for whisky, Korea sees the drink mostly enjoyed at bars, karaoke rooms, hostess clubs and other entertainment institutions. This has beverage companies targeting owners and ``madams’’ more than consumers in marketing efforts.

It’s plain as a pikestaff that most people will spend less on entertainment and alcohol during a credit crunch. So a true indicator of the state of the whisky market is the growing numbers of bars and clubs going bust in business and leisure districts like Gangnam.

One particular hostess club in southern Seoul, which was speculated to have the highest level of annual whisky consumption of any building in the country, was raided by prosecutors recently for unpaid taxes and charges of bribing the police.

A recent report by the Korea Agro-Fisheries and Food Trade Corp. indicated that these types of businesses are being hit harder than others under the current economic downturn.

In the group’s index for business activity, bars and clubs came in at 56.77 in the fourth quarter of last year, compared to 75.67 for Korean restaurants, 77.5 for Japanese restaurants and 93.8 for non-alcoholic beverages outlets like coffee shops. A reading below 100 indicates that business has worsened compared to the same period a year earlier.

``With the economy continuing to be sluggish, it has become awkward for anyone to suggest blowing money on a night of karaoke and whisky. Companies are also cutting back on their entertainment expenses for employees and business partners,’’ said a Lotte Chilsung official.

First-half whisky sales reached 1.05 million boxes, each one containing 18 0.5-liter bottles, down 10.1 percent from the first six months of 2011, according to companies and the Korea Alcohol and Liquor Industry Association (KALIA).

Lotte Chilsung, which markets the Scotch Blue brand, saw whisky sales drop by more than 11 percent during the same period. Whisky revenue for Hite Jinro, the beer giant that promotes the High Scott whiskies, fell nearly 27 percent.

Pernod Ricard Korea, the local unit of France's Pernod Ricard Group, saw sales of its Imperial Scotch sink 16.9 percent year-on-year in the first-half while Diageo Korea saw a 6.2 percent decline in its sales of Windsor.

Sales of Golden Blue, a Korean whisky with 36.5 percent alcohol content, lighter than conventional products, saw double-digit growth during the same period, however, this could prove a sample-size mirage as Golden Blue is rarely sold outside of Busan and South Gyeongsang Province.

The beer market appears to be hit by the subduing economy as well. According to KALIA, beer sales declined by around 3.5 percent in the five months through May from the same period in 2011, although the numbers from June may have improved due to the abnormally hot weather over the past two months. The sales of soju, the cheap Korean distilled beverage, inched up by an annual 1.85 percent from January to April.