Yesterday Diageo published their sales figures for the second half of 2013. They were worse than expected. While net sales still were up a meager 1.8%, sales in Asia declined 6%, and in China they were even slashed by 23%.
Not long ago, Scottish distillers were nothing short of euphoric with regards to the sales outlook in Asia, and China in particular. Especially the new generation of young successful business people was the prime target of the marketing campaigns, those who want to show their good taste and sophistication buy putting bottles of expensive Scotch on the table at the traditional after-work booze-up.
On the whisky front, Diageo opened luxurious “Houses of Johnnie Walker” in Shanghai and Beijing to promote their whisky in a prestigious setting. Diageo’s new Roseisle distillery and the recently announced £1bn expansion plan were largely motivated by the growth prospects in Asia, with analysts even talking about a “new ‘super-cycle’ in demand”.
While the published sales figures of course are only a snapshot of the current economy, they do show that the spirits business is not a one way street. It looks as if the distillers have to prepare for a rough ride, now that China’s economy shows first signs of cooling off. And the recent crackdown of the Chinese goverment on luxury spending of party officials only adds to this.
In April 2013 The Independent wrote in a report about the Chinese Johnnie Walker Houses: “The breakneck pace of growth of the world’s second-biggest economy may be cooling but there’s little sign of Chinese drinkers slaking their thirst.”. Only a few months later, the signs are evident.
A scenario where global demand for whisky would be significantly lower than predicted a few years ago is entirely possible. We are anxious to see how the whisky industry would react then after having built up big overcapacities.