The South Korean whiskey market is expected to remain flat in terms of volume between now and 2028, data shows.
According to an analysis by GlobalData, the parent company of Just Drinks, global whiskeys such as Japanese whiskey are expected to experience the fastest growth, although these have a smaller base than Scotch whisky.
In terms of value, Scotch whisky and other world whiskies are predicted to see a slight increase.
Last week, drinks giant Diageo announced that it will increase the prices of various types of whiskey in South Korea by an average of 18% from July 1.
The changes affect Scottish brands Mortlach and Copper Dog, as well as tequila brand Don Julio. Diageo said the increases were part of regular portfolio reviews.
In the six months to December 31, Diageo’s North Asia operations, comprising South Korea and Japan, saw a net sales decline of 6%. At the time, the decline was attributed to declining sales of Scotch.
In February it was announced that Diageo was introducing an early retirement program for its employees in South Korea due to declining whiskey sales.
GlobalData alcohol research director David Harris said growing competition from world whiskeys in South Korea was hurting products from traditional regions such as Scotch.
Competing whiskies produced in India and China “often copy Western brands, but at a lower price,” he said.
“This has created noise in the market that many Western brands are finding it difficult to get through. Copycat brands also have the potential to damage the brand equity of Western brands when they are explicitly copied by these newcomers, but with lower overall quality.”
Long-term macroeconomic factors and “demographic issues” have also contributed to whiskey’s stagnant consumption, according to Harris.
“The birth rate in South Korea is shockingly low. And although older consumers drink less alcohol due to health problems, they are simply not being replaced by younger consumers.
“Additionally, even if younger consumers were willing to experiment with Diageo’s premium whiskies, poor work-life balance, low salaries, somewhat high taxes and extremely high housing costs all impact their affordability.”
Other priorities?
While at the time of the voluntary retirement program, a Diageo spokesperson said Just drinks South Korea was still a “strategically important market,” Harris said. The company’s focus will now be on other, more lucrative markets.
For the group’s broader Asia Pacific region, net sales grew 2% in the second half of 2023, driven by growth in China. The growth was partly offset by the sale of South Korea’s whisky business, Windsor Global, which was first announced in 2022.
“South Korea is simply not the most attractive market in Asia for Diageo to target,” he said. “Although it is showing modest growth, it is far surpassed by India, which is a much larger market.
“China is a relatively small market (although still larger than South Korea), but has much more long-term potential and stronger growth. Thailand is also a bit of an opportunity market, with less domestic competition than China or India and strong growth.”
While Diageo said it remained “fully committed to the Korean market”, flat forecasts for whiskey in the market suggest it may not be the top priority for the group in the coming years. “There are much larger prices that Diageo believes represent a better potential return on investment,” Harris added.
“In Data: South Korean Whisky Market Stagnating” was originally created and published by Just Drinks, a GlobalData brand.
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