Korea Intoxicated by Whiskey... Importers' Smiles Widen

1Q Scotch Imports Reach $50 Million, Up 14% YoY
Sharp Increase Also Seen from US, Japan, Ireland
Importers Respond with Price Hikes... Rapid Performance Improvement
Most Net Profit Distributed as Dividends to Headquarters

This year’s first-quarter imports of Scotch whisky exceeded $50 million for the first time in 13 years, continuing the whisky craze that started last year. As more people seek whisky, importers are raising prices one after another, clearly rowing hard while the tide is in their favor. While responding to increased demand with price hikes and rapidly boosting performance, it has been revealed that most of the net profits are paid as dividends to the headquarters.

[Image source=Yonhap News]

According to the Korea Customs Service export-import trade statistics on the 3rd, the import value of UK whisky, including Scotch whisky, in the first quarter of this year was $51.497 million (approximately 69 billion KRW), a 13.9% increase compared to the same period last year. The import value of Scotch whisky accounts for 79.5% of the total whisky import value, an overwhelming scale, and it is the first time in 13 years since 2010 ($58.85 million) that the first-quarter import value of UK whisky has exceeded $50 million.

The import value of Scotch whisky, which was around $20.47 million in the first quarter of 2020, increased to $28.62 million the following year, $45.21 million last year, and surpassed $50 million this year, growing more than 150% in three years. During the same period, import volume steadily increased as well, doubling from 3,117 tons in the first quarter of 2020 to 6,968 tons this year.

As domestic demand for whisky rapidly increased, import values from major producing countries mostly rose. American whisky, which produces bourbon whisky, ranked second with a first-quarter import value of $7.077 million (approximately 950 million KRW), increasing more than fourfold from $1.67 million in the first quarter of 2021 over two years. Compared to Scotch whisky, relatively affordable bourbon whiskies such as ‘Jim Beam’ and ‘Maker’s Mark’ have recently gained popularity as cocktail bases for highballs, rapidly expanding their market.

Following the US, Japan ($2.234 million, 80.3%), Ireland ($1.374 million, 111.1%), Taiwanese whisky ($884,000, 201.7%), and India ($98,000, 133.3%) also showed significant growth compared to the same period last year. Especially Taiwanese whisky, led by ‘Kavalan,’ saw rapid growth with last year’s import value approaching $2 million, and in the first quarter of this year, it more than tripled compared to the previous year, maintaining a strong momentum. The total whisky import value in the first quarter was also $64.77 million (approximately 86.9 billion KRW), a 24.0% increase from the same period last year.

As demand increased, whisky importers quickly raised prices citing rising logistics costs and raw material prices. Diageo Korea raised prices of products like ‘Johnnie Walker’ by an average of 5-10% in April last year, and in December, increased the ex-factory prices of 53 products including whisky and beer by up to 40%. Pernod Ricard Korea also raised prices in the same month: ‘Ballantine’s’ by 5.5-14.3%, ‘Royal Salute’ by 5.8-17.8%, and ‘Chivas Regal’ by up to 9.6%. This year, D&P Spirits increased the ex-factory price of ‘Macallan’ by up to 13.5%.

With demand expansion combined with price hikes, the performance of foreign importers is rapidly improving. Pernod Ricard Korea posted sales of 158 billion KRW and operating profit of 39.5 billion KRW last year (fiscal year ending June 2022, July 2021?June 2022), up 32.6% and 46.6% respectively from the previous year. William Grant & Sons Korea, which imports ‘Glenfiddich’ and ‘Balvenie,’ also saw sales increase by 23.8% and operating profit by 94.7% last year. Korea Brown-Forman, importer of ‘Jack Daniel’s,’ recorded sales and operating profit growth of 84.6% and 137.8% respectively last year (fiscal year ending April 2022, May 2021?April 2022).

Most of the fruits of improved performance appear to be paid as dividends to the headquarters. Pernod Ricard Korea paid all of its net profits of 29.3 billion KRW and 19.1 billion KRW earned over the past two years as dividends to its headquarters, a 100% dividend payout ratio. Diageo Korea also paid 22 billion KRW as dividends to its headquarters in 2021 (fiscal year ending June 2021, July 2020?June 2021), a dividend payout ratio of 230%, and last year, Windsor Global, which became the surviving corporation of the Windsor business division through a spin-off, paid 32.1 billion KRW as dividends. This was a high dividend payout ratio of 100%, paying out all net profits earned the previous year as dividends.

This content was produced with the assistance of AI translation services.