When the world outside of Asia thinks of Asian alcoholic drinks, the one that comes to mind most often is Japanese sake, thanks to some great marketing from producers. But there are so many more traditional drinks from different parts of Asia that are wildly popular but are only now entering the mainstream dialog. This week, we look at the potential for growth for these market leaders.

Yep, you read that right – market leaders.

69.4%

That is how much value share Chinese brands accounted for among the top 50 global spirit brands in 2023, growing by a percentage point over 2022. Of the top 10 spirits brands globally in 2023, six are Chinese and five of these are baijiu brands, based on value. The world’s leading spirits label, baijiu brand Moutai, grew in value by 16% over the previous year. 

Just to be fair, let’s also take a look at volume sales. The reigning champion here is Jinro, a soju brand from South Korea, according to The Spirits Business’ Brand Champions 2023 report, and not too far away in the top 10 is another soju brand, Chum Churum.

Top 10 best-selling spirits brands by volume (million 9 liter-cases), 2022

You would be forgiven for taking a glance at these numbers and thinking that somehow you’d missed these products at your local store, but baijiu and soju are relatively new to the party internationally. The bulk of sales for these traditional spirits has mostly been in their domestic markets, where they are massively popular. In global markets, the growth for Asian spirits is just getting started.

Let’s look at these two drinks in a bit more detail to see what’s making them tick. 

Value leader: Baijiu

Within China, baijiu, the global spirits leader by value, has seen significant evolution from a mass market spirit to exclusive products to be consumed at lavish banquets and given as premium gifts. In fact, baijiu today has become something of a status symbol in the country. The target market for this spirit has long been older Chinese men, who see this as mandatory during business meetings or other professional engagements. But this is changing as companies look to change this stereotype and appeal to newer audiences, like women, younger consumers, and global markets.

This popularity and exclusivity of baijiu in its home market is something manufacturers want to leverage and take abroad, particularly to Western markets. There are indications that this is happening with some brands, initially appealing to the diaspora, but also expanding to local audiences in these countries through various channels. Though it might also be linked to export sales from global travel retail (i.e., duty-free shops), where Chinese tourists buy these products for their tax-free benefits, where available. 

Even as recently as 2023, less than 1% of Chinese baijiu produced is exported, according to the China National Research Institute of Food and Fermentation Industries. The low international presence is seen as a positive as it means potential export opportunity. 

Baijiu makers’ interest in global markets started about a decade ago with the Chinese government’s crackdown on corruption and conspicuous consumption of luxury goods, including a ban on alcohol at government events. Manufacturers started to realize that putting all of their spirits in one basket was not the best business strategy, even though domestic sales have since stabilized. 

Moutai, the most valuable publicly traded company in China today, is said to be so popular outside China that the company has occasionally struggled to keep up with the exploding demand. This is primarily because the product can only be made in a specific region within China that has the right environment and water to give it its distinct flavor. This uniqueness has allowed Moutai to be positioned as a luxury brand with significantly higher margins than other spirits. Consumers around the world want such unique experiences when it comes to food and drink, and are quite happy to pay for the memories and bragging rights. 

Challenges to taking baijiu to new markets 

First of all, the flavor profile is very different from what Western consumers are accustomed to. So, these consumers need to be educated on how to consume these drinks and also why they are paying so much for them. 

• Some companies have also introduced milder versions for the export market to ease new consumers into the taste.

• Incorporating baijiu into other beverages has been popular within China and could be an inspiration for others. We’ve seen how Kweichow Moutai partnered with Luckin Coffee and created an incredibly popular coffee drink (check out our piece on coffee). There’s definitely scope for similar partnerships in other markets and not just with coffee.

Then there’s the issue of the growing costs of exporting the products. Export tariffs on baijiu are much higher than those for imported foreign spirits. By the time various duties and fees have been paid, many lower-priced baijiu brands find that their pricing no longer makes it worthwhile for consumers to buy the product. This is especially true when there are more affordable local products available or higher-end products for the same price range.  

Volume leader: Soju 

Soju’s overall volume sales have seen impressive growth over the last few years. While much of it is still mainly consumed in South Korea, export markets have also contributed significantly to the growth story of soju. According to the Korea Customs Service, the value of soju exports grew to US$93.3 million in 2022, up 13.2% from 2021. 

The leading brand in this space, Jinro, saw a nearly 30% increase in total volume sales between 2018 and 2022 to cross the 100 million case mark (100.8 million 9-liter cases). This is that iconic green bottle, often packaged as Jinro Chamisul, that everyone recognizes from whatever show they’re watching.

• Southeast Asia is the brand’s biggest export market for the brand owner HiteJinro Co., thanks to the interest in the region in Korean food and culture. 

• The company has also done well in Western markets. According to the company, soju exports to the UK grew at an annual rate of 42% during 2018-22. 

• In the US, the soju category is said to have doubled in sales, thanks to growing consumer demand for new products.

The second largest soju manufacturer, Lotte Liquor, has partnered with one of the top spirits suppliers in the US, Spirit of Gallo to expand its distribution in the US. Lotte offers a variety of soju-based drinks to appeal to new consumers, including the original unflavored soju Chum Churum brand), flavored soju (Soonhari), and even a zero-sugar soju (Saero).

How soju is being promoted

In addition to riding the K-wave, soju fits in very well with the current low-alcohol trend, given its low ABV (around 17%) for a spirit. Fruit-flavored versions have also been well-received, particularly by younger consumers, because of their lower alcohol content and approachable flavor profiles. 

The big soju players have also been investing in promoting soju globally to increase awareness and product recognition. Promotions have spanned from sponsoring various events to partnering with food service outlets to showcase the drink’s versatility. 

But as Rishi brought up, there are a lot of smaller players emerging that don’t have the deep pockets to export as the established players. The South Korean government even launched in 2023 the K-Liquor Promotion Council to boost alcohol exports from small and mid-sized companies. The council will provide these smaller local liquor companies with resources to aid their entry into new markets, including consults with established companies. 

Other Korean spirits have also benefited from the interest in all things Korean, and this segment reached export values of US$88.9 million in 2022, up 9.9% from a year earlier. This includes flavored soju.

But this doesn’t mean that there aren’t challenges. 

Craft variants and value-additions are likely to help justify the high prices in other markets, but the government’s new initiative might help smaller companies address this issue to compete in international markets. Rishi adds, “South Korea is being opportunistic about it, trying to ride the global Korean wave. They are seeing if they can promote soju as an export product and make it a fancier beverage. And it does have traction.” 

Like what you’re reading?

Shochu 

In Japan, a popular traditional spirit is shochu, usually made from barley, buckwheat, rice, sweet potato, and sugar cane. Unlike Japanese whisky and gin, shochu has not yet made many waves in the international market. But sales of shochu have been on the decline even within Japan. National Tax Agency data indicates that shochu consumption in Japan fell by 21% in 2019 compared to a decade earlier, as people consumed less alcohol. This has spurred the move for Japanese spirits companies to look abroad for new consumers.

Shochu is also typically a premium drink and there are few mass market products, which restricts access to a wider audience. The drink saw a bit of a revival in Japan recently after the market started to move to premium Chu-hi or shochu highball, says Koichiro.

Shochu is usually consumed with hot or cold water, ice, or soda, but it really shone in this cocktail made with shochu, soda water, syrups, and/or fruits. In particular, craft shochu highballs and the lemon sour (another name for chu-hi) helped drive the demand for high-quality premium shochu.

Chu-hi also gained a lot of popularity after casual and high-end bars started to serve it and its expansion into retail, indicating that shochu may have a future as a cocktail base. 

In fact, this is the route that some newer manufacturers are taking for shochu. Hamada Syuzou has launched a shochu brand, Daiyame 40, that sells exclusively overseas and features ingredients such as sweet potatoes and black koji malted rice.

Shochu still has a long way to go to establish itself abroad, especially with stiff competition from Japanese whisky and gin.

Benefiting from reflected glory

The growing popularity of baijiu and soju is also likely to benefit other traditional spirits from across the region, such as makgeolli (Korea), rượu (Vietnam), arak (Indonesia), feni (India), and others. These are emerging from their domestic markets, thanks to the much smaller and information-dense world we live in. And as consumers in Western markets become more adventurous and chase more authentic experiences, local Asian spirits hold a lot of potential in appealing to such consumers, especially with upscale packaging and ingredients as well as safe production techniques.

Take arak, for example. This is an Indonesian traditional spirit served during religious ceremonial or families gathering for the Balinese, crafted from different palm saps: coconut, arenga, lontar sap, etc. This local spirit is traditionally distilled individually, mostly through home-scale production and non-standardized distillation.

As some of these Asian drinks set their sights to export markets or even to a more upscale audience, one common strategy stands out.

While homegrown audiences grew up seeing these products and have inherited the affection towards them in their original formats, the same cannot be said of global consumers. So what we’re seeing these brands do is go out of their way to increase the appeal — with better packaging and quality ingredients as well as different variants, flavors, and ABV levels.

Such modern formats of traditional drinks like arak may have potential to be promoted to tourists as a stepping stone to exporting to other markets.

Takeaways

• Traditional Asian alcoholic drinks are set to go big on the global stage, as their sales see some slowdown in domestic markets.

• Interest in Asian cuisines and cultures will drive interest in alcohol as well, though new consumers will need to be eased into these products. 

• Premiumization is a strong strategic play here for new audiences and markets. And this feature can be highlighted through innovative interpretations of cocktails, flavors, ingredients, and modern production techniques.

• Challenges to address include finding the right export channels and appropriate pricing.

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