Single malt Scotch whiskey still dominates one of the world’s most lucrative alcohol markets, but other players can compete by taking aggressive, long-term marketing campaigns.
The Nick Rogers Story
When I ended my 7-day quarantine in Taipei last year, I desperately needed a glass of wine to quench my thirst accumulated during the week of quarantine. I typed “whiskey bar” into Google Maps and was delighted to find a wealth of options, each with hundreds of reviews, many with 4+ star ratings.
After several friends expressed their satisfaction with the local whiskey scene to me, several proudly told me: “Taiwan is the fourth largest whiskey market in the world!” TOPICS in a 2015 article entitled “Taiwan Whiskey Market Boom” came to a similar conclusion (albeit specifically for Scotch values).
In the eight years since that article was published, the Taiwanese whiskey market has maintained healthy growth. According to the Scotch Whiskey Association, Taiwan has taken the podium, ranking third in Scotch whiskey imports.
There are good reasons for spirit makers to establish a business in Taiwan; the return on investment is high. Import duties on spirits in Taiwan are calculated based on alcohol content and volume, not value. This provides consumers with a more affordable product while encouraging brewers to sell premium products. In fact, Scotch whiskey brands make more money in Taiwan than in most other export markets by promoting high-end bottles.
But as Taiwan’s taste for high-end Scotch single malt continues to grow, makers of American whiskey (with an “e” in the American spelling) struggle to capture significant market share. The U.S. Department of Agriculture reported that supplies from U.S. exporters accounted for just 2 percent of Taiwan’s import needs. Scotland accounts for 92% of this and Japan 4%, although its whiskey production is lower than that of the US.
So why are American whiskey brands struggling to make an impact on the market? One reason is that American companies have relatively limited focus on Taiwanese whiskey consumers. Scotland, on the other hand, has been nurturing the market.
Scotland’s focus on Taiwan is evidenced by Steven Lin, author of The Whiskey Journey and owner of three whiskey bars in Taipei. “Scottish brands have invested heavily in Taiwan,” Lin said, adding that they put a lot of emphasis on market education. Lin cites the example of single malt Scotch brand Balvenie, which offers a six-month whiskey education program for bar owners and their staff.
“My staff have been at the top of their class for the past two years, so they’ve been invited to visit Scotland,” he said. “I’ve been invited to Scotland twice in the last month – and I’ve got two trips planned for next year. Scotland is like a second home to me now.”
Robin Johansson, chief executive of Vana Living and importer of Swedish whiskey from Mackmyra Distillery, isn’t worried about the Scotch preference. “Taiwanese are very open-minded — they’re willing to try new foods and drinks,” Johnson said. But “convincing people to buy with words alone is very difficult,” he noted. “You have to start from the ground up and get people to try your brand.”
To introduce Mackmyra to the Taiwanese market, Johnson’s team showcased the whiskey at industry expos and held their own events. The first customers were businessmen who were introduced to Mackmyra through a special VIP dinner and wine tasting. After hearing Mackmyra’s story and tasting samples, attendees buy a few cases and hand out bottles as gifts or take them with them for an after-get off work drink.
Senior professionals still account for about a third of Mackmyra’s sales, but a growing segment is the 35-45 year old looking for something new. Johansson points out that the Taiwanese market is well educated and cares more about quality than price. Importers can succeed if they get local drinkers interested in their product.
“It’s important to have a story — the more information, the better,” Johnson said. For example, Mackmyra’s Intelligences AI:01 label uses a recipe designed by Microsoft’s big data algorithms. After aggregating sales, data and customer feedback for the various Mackmyra malts, the distillery’s machine learning model recommends the mash list and production technique that best meet customer needs in a particular market.
Intelligences offers a cool creation story backed up by its spicy, delightful flavors. Johnson’s stock of labels in Taiwan sold out quickly, and he’s now preparing to introduce the AI program’s second recipe to Taiwanese consumers.
The success of Mackmyra, a small distillery from a country new to the whiskey game, is an inspiring story for producers looking to break into the Taiwanese market. While America is no stranger to the game, American whiskey makers may need to follow a similar strategy to gain a foothold here.
supply challenge
What makes American whiskey special is that it contains ingredients native to North America. Bourbon malt must contain at least 51 percent corn to earn its designation, while rye whiskey must contain 51 percent (you guessed it) North American rye. Along with varying amounts of wheat and barley, these grains give American-made whiskey a sweeter flavor and a smooth, syrupy mouthfeel.
Bourbon County is a county in Kentucky named after the French royal family, which supported the American struggle for independence. Corn-based spirits produced in the region carry the name.
While their traditions are not as old as Scotland’s, American winemakers still employ centuries-old techniques. For example, the origins of the Buffalo Trace Distillery in Kentucky date back to the late 1700’s. Today, the historic mill is owned by the Sazerac Company, which uses it to produce some of the most well-known bourbon brands: EH Taylor, Eagle Rare, WL Weller, and, of course, Buffalo Trace. The distillery’s products also include Sazerac Rye whiskey.
Marketing and distribution of the Sazerac product portfolio is managed by DXCEL International. Malcolm Tan, general manager of DXCEL Taiwan, said American whiskey faced two major challenges when it came to competing with Scotch.
The first hurdle is simple economics. Given the huge domestic demand for spirits in the United States, there is limited supply available for export.
“We get very small quantities – some brands only have 100 to 200 bottles,” Tan said. “We have to prioritize how they are distributed because there are not enough of them.” The company is mainly using the limited supply to educate the domestic market through sampling, trade shows and master classes. Tan also works with the flagship bar, which acts as a showroom. Ounce in Taipei’s Xinyi District is where consumers can find some of DXCEL’s finest bourbons.
Lim noted that whiskey is popular in Asia. While Taiwan is the third-largest market for Scotch whiskey by value, the Scotch Whiskey Association considers the Asia-Pacific region to be the second-largest after Europe. Scotch whiskey producers invested early in the Asia-Pacific region in search of new high-growth markets.
The past decade has shown that domestic demand for American whiskey continues to grow, and the pandemic has only fueled that trend. Whiskey sales are now more than 60% higher than in 2010. Kentucky is currently aging a record 10.3 million barrels, and bourbon is projected to grow at a compound annual growth rate of 9.8 percent between now and 2027, according to research by whiskey company CaskX Cask Investment Company.
The CaskX research also found that premium and ultra-premium products saw the highest growth rates. This is an area of product that is likely to do well in Taiwan.
Last July, DXCEL’s Tan was delighted to receive 600 bottles of WL Weller 12 Year Old Bourbon Whiskey. Weller uses a unique blend of wheat in its mash to create a signature flavor, and 12 years of aging is very rare. Tan said his entire stock was sold out within a month by Taiwanese wine connoisseurs.
“Buffalo Trace (distillery) will expand capacity next year, but the bottleneck is barrel storage and warehousing,” Tan said. Bourbon, and all whiskey, must be stored in a humid, temperature-controlled environment during the aging process. It will take at least eight years to feel the benefits of expanding capacity.
“Whiskey is not like beer,” Tan points out. “You can’t adapt quickly to increased demand.”
limited popularity
Aside from supply issues, DXCEL and other distributors of American whiskey face an even bigger challenge in Taiwan: demand. As Tan points out, “Most people[in Taiwan]think bourbon is cheap and low quality.”
Thus, the Taiwanese appreciation of Scotch single malt whiskey runs counter to American-made whiskey. For example, Wheeler’s 12 Year Old is the oldest aging claim you’ll see on a bourbon, while Scotch brands can boast up to 50 years of aging.
But the reason for the difference in vintage statements isn’t that Scotch whiskey makers have been more patient than their American counterparts – they’ve just used different maturation methods. A major feature of bourbon whiskey is the use of charred original oak barrels. Scotch whiskey, by contrast, is matured in casks that have previously stored other spirits, usually wine, port or sherry.
Kentucky’s more extreme climate, with hot summers and cold winters, also speeds up the aging process, causing the wood’s aroma to overwhelm the liquid it holds.
“Longer is not better,” Tan argued. “The interaction of the casks is different. A used cask is very mild, but a bourbon aged more than 10 or 12 years tastes like wood.”
Whiskey connoisseur Steven Lin points out that bourbon is at a disadvantage because Taiwanese consumers tend to focus on age specifications. “Bourbon is struggling with image issues,” he said. “It’s considered cheap and there’s no age statement, so the market doesn’t trust its quality. In Taiwan, a 12-year-old single malt is entry-level.”
Johansson, representing a young distillery without a vintage statement, faced the same challenge selling Swedish whiskey. To ensure quality, the oak barrels used by Mackmyra are only one-seventh the size of typical aging oak barrels. This exposes the oak to more liquid and allows the whiskey to mature three times faster. But without an explanation and a tasting in person, it’s hard for buyers to believe this fact.
Lin also highlighted the importance of Taiwan’s age statement to the Scotch whiskey market. “Glenmorangie was trying to tell the market that age claims didn’t matter, and it failed,” he said. “McCallan launched a retail bottle in duty free with no age statement and I have friends who say their quality is dropping. It’s damaging their reputation.”
In 2015, Lin told theme Bourbon fails to create a sense of specialness for Taiwanese drinkers. Seven years later, he says little has changed. As an example, Lin cites Beam Suntory, a US-founded Japanese multinational with a diverse portfolio of bourbon whiskeys.
“Sutory has an opportunity to make bourbon special — it has the money to do it,” he said. “But it focused on 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 gain a foothold in the Taiwanese market, well-heeled brands may have to invest in market education and overcome prejudices around age, brand and quality. But if the market responds as it did with Japanese whiskey, there should be incredible potential for American producers who put in the time and effort.
Drunk driving is prohibited.
