Over the past year or so, as trade has slowed significantly in key European and North American markets, whisky makers have been looking for avenues into alternative markets to sell their spirit.
Recently, a lot of focus has been given to India. The country has long been identified as a market with substantial potential for growth, but spirit imports into the country face steep tariffs (though a recent trade agreement between the UK and India has reduced these tariffs, a move welcomed by the Scotch whisky industry. A comparable trade agreement between the US and India has also reduced tariffs on alcohol exports between the two nations).
The wider Asian market also gets considerable attention. In a similar way to India, the growing middle class in many Asian countries - particularly China - has presented an opportunity for spirits manufacturers to increase sales of their premium or luxury goods in the region.
However, China’s economy has shown signs of shrinking and has led to a decline in luxury drinks sales in the country. This has left many producers looking elsewhere for opportunities in the wider Asian region.
Enter the Artisanal Spirits Company (ASC), owners of the Scotch Malt Whisky Society (SMWS), who have opened up a new franchise in Vietnam. The new site joins recently opened subsidiaries in Korea and Taiwan as well as longer-standing establishments in Japan and China.
ASC have identified Vietnam as a key growth market in the region and have expanded into the country as part of their plan to increase their presence there. Citing data from IWSR, ASC state that Vietnam is one of the world’s top ten markets for premium whisky in terms of value, with the market believed to be worth US$239 million.
Speaking on the new franchise, CEO Andrew Dane said: “The addition of the new market in Vietnam further expands our footprint in Asia and gives us direct access to one of the top 10 ultra-premium Scotch whisky markets, helping us to capture demand for our unique combination of ultra-premium and limited edition whiskies and outstanding experiences and knowledge.”
In the group’s most recent financial results, the ASC reported a 20% drop in sales in the Asian region. This was largely attributed to challenging market conditions in Japan and China, with sales falling by a little over a third in the latter country.
However, there were glimmers of hope in their Asian outlook. For example, sales in Taiwan increased by 150%. Although the country makes up a relatively small part of the AWC’s overall business, this increase was still enough to help offset the decline experienced in other countries. Additionally, SMWS membership rose across the region by 12%.
With healthy sales in their newer franchises and increased membership throughout Asia, it seems like SMWS Vietnam is well positioned for success. Unfortunately there is a small dark cloud that is casting a shadow over this optimism.
Not long after ASC announced their expansion into Vietnam, news broke that the National Assembly of Vietnam had approved a proposal to substantially increase alcohol taxation in the country.
Vietnam already has high taxes of 65% on beer and spirits over 20% ABV. This figure is set to rise to 70% by 2027, and 90% by 2031. Understandably, this is expected to present challenges for the drinks industry, both domestically and internationally.
High taxes have already hit the beer sector. Beers sales have dropped in the country in recent years, resulting in shares for Vietnamese beer company Sabeco falling by nearly 4%. International brewing powerhouse Heineken have also been affected, announcing in June 2024 that they planned to ‘temporarily suspend’ production at one of the six breweries they operate in Vietnam.
The ramifications for the whisky industry - particularly how this will affect sales of exported goods to the country - remain to be seen. With these tax increases in mind, it wouldn’t be unfair to assume that Vietnam may not hold its place in the top ten countries for premium whisky sales.
And as for the SMWS, who proudly specialise in premium whiskies and luxury experiences, will the gamble pay off?
The company has forecast growth in sales throughout Asia and they have explicitly stated that this predicted growth does not rely on a return to strong sales in China. This suggests that they are banking on the continued success of countries such as Taiwan, and now Vietnam.
Despite the news of increasing tax, Vietnam is still considered a safe bet for the whisky industry. One estimate suggested that the market will continue to grow rapidly and could be worth an incredible US$440 million by the end of 2025. This estimate was made long after the Vietnamese government first revealed their intention to increase the tax on alcohol.
So even though there’s a valid reason to be cautious, the latest SMWS venture seems poised for success. Which is something worth raising a Viet-dram to!
