Diageo Korea criticized for allegedly forcing unwanted drinks on local bars
Diageo Korea CEO Dan Hamilton, left, clinks a glass of Johnnie Walker whisky with global brand ambassador CL, a member of disbanded girl group 2NE1, at the brand's promotional event in Seoul, June 8, 2021. Korea times file
By Kim Jae-heun
Diageo Korea is facing growing criticism for allegedly forcing bars, nightclubs and other establishments to purchase unwanted liquor products in bundles with its popular whisky Johnnie Walker, according to industry officials, Tuesday.
On April 14, the Korean unit of the British Whisky brand sent a letter outlining its new sales policy to customers, in which they will have to buy all seven of its imported liquors, including Singleton, Talisker, Tanqueray and Don Julio, every month from May to July this year, to place an order for blended whisky brand Johnnie Walker.
“This new policy is designed to foster a continued growth in the domestic whisky market, in accordance with Diageo's global brand strategy. The detailed guidelines such as sales per product are formulated based on logical grounds,” the firm said in the letter.
The Johnnie Walker series has long been competing for the No.1 spot in the domestic market with Ballantine's, which is imported by Pernod Ricard Korea. But Diageo's gin and tequila products Tanqueray and Don Julio have been less popular among Korean consumers.
Whisky importers have long been using this tie-in tactic to boost the sales of unpopular products by bundling them with popular ones. But none of them had explicitly asked bars and restaurants to do so by sending letters in the name of company CEOs, according to an industry official on condition of anonymity.
Korea's Fair Trade Act prohibits such tie-in sales. Those who violate the law could face up to two years in prison or fines up to 150 million won ($112,000). The National Tax Service also restricts suppliers from forcing buyers to purchase unwanted products.
“It is not a good idea for Diageo Korea to require buyers to purchase all of its products if they want to get their hands on Johnnie Walker. If the unpopular products are left unsold, then they will have to charge their consumers more for Johnnie Walker and other products in high demand,” the official said.
Diageo Korea said it is true that the company sent an official document related to the new sales policy to its customers, but it denied forcing them to buy what they don't want to.
“Buyers can choose whether to participate in our sales program. It is not true that we forced the tie-in sale on them,” the company said. “They can order only what they need. It is an industry norm to inform price policies via official documents.”
This is not the first time for foreign liquor importers to sell unpopular liquor products bundled with those in high demand.
Earlier this year, DnP Spirits came under fire for selling 48 bottles of unpopular American whiskies with every 20 bottles of The Macallan, one of the best-selling single malt Scotch whiskies imported exclusively by the company.
Beam Suntory Korea also recently sold its popular Japanese whiskies The Yamazaki and The Hakushu under the condition that its customers also buy the lesser-known single malt whisky Auchentoshan.
However, the two importers did not make these demands official, especially in the documents signed by their CEOs. When DnP Spirits faced a backlash, the company avoided controversy by claiming it was a “mistake done by some salespeople.”