Diageo, the world’s leading spirits company, marked a milestone in its China ambitions this month with the opening of its first whisky distillery in the country. The YunTuo Single Malt Whisky Distillery, nestled in Dali, China’s southwestern Yunnan Province, took nearly a decade and RMB 800 million (US$120 million) to complete.
“This stunning new distillery marks a significant milestone for Diageo in China and reflects our confidence in the future of Chinese whisky,” says Debra Crew, CEO of Diageo, “We are proud of the leading role we have played to grow whisky in China with our iconic brands. Our ambition is to combine our global heritage and whisky-making craftsmanship with deep local insights to create the highest-quality China-origin single malt whisky that will fire the imagination of whisky enthusiasts worldwide and place China firmly on the global whisky map.”
And it is not the only international spirits giant to invest in Chinese whisky distilleries. Pernod Ricard started operations at its Chuan Malt Single Whisky Distillery in China’s southwestern Sichaun three years ago. Companies from Singapore to Scotland are also joining the race, setting up facilities and tailoring products for what many see as a market of immense potential —despite current headwinds.
The Flourishing Whisky Market in China
China’s whisky industry has undergone remarkable growth in recent years. In addition to the aforementioned distilleries, several other foreign-invested whisky distilleries are either operational, under construction, or planned. These include:
Domestic firms are also joining the race. Leading Chinese drinks players like China Yanghe Group, Tsingtao Beer, and China Resources have announced plans to enter the whisky business, signaling confidence in its long-term growth potential.
Challenges Amid Growth
Why are so many companies investing in Chinese whisky distilleries? Industry insiders attribute this to the size and potential long-term growth of the market. “China’s large population base and increasingly globalized taste make it a high-growth market for whisky,” said a worker at a Scottish distillery who declined to be named.
Wu Yonglei, General Manager of Fond Wine, an importer of both wine and whisky, believes the growing popularity of whisky in China in recent years is the main reason attracting investment. “It’s similar to when LVMH, Château Lafite Rothschild, and Pernod Ricard set up wineries in China over a decade ago,” he said.
Chen Xun, founder of Shumen Single Whiskey Distillers, sees local distilleries as offering a unique advantage in local experiences. “Even if imported whisky dominates in the future, domestic whisky has its appeal. For example, I can’t travel to the UK easily to experience whisky-making, but visiting a distillery in Emeishan is convenient. Moreover, the rise of Chinese cultural trends of Guochao makes domestic investment an opportunity,” he said.
In 2023, China was the fifth-largest export market for Scotch whisky, with exports reaching £235 million, up 1% from 2022. This figure could nearly triple by 2027, as China’s whisky market is expected to grow at five times the global rate, according to Euromonitor International.
Despite the buzz, China’s whisky market is not without its challenges. Import data shows signs of cooling: whisky imports by volume and value fell 19.1% and 28.1%, respectively, in the first 10 months of 2024, according to China’s General Administration of Customs. The top three suppliers—Scotland, Japan, and the U.S.—all posted declines.
For fledgling Chinese whisky brands, the hurdles are even higher. “Currently, Chinese whisky enjoys good publicity but low sales. While big brands are raising awareness, the products on the market are still limited,” Wu Yonglei of Fond Wine explained, adding that domestic whisky is in its infancy, so its low presence is understandable.
Chen Xun remains optimistic about the future of Chinese whisky. “For my distillery, there’s considerable interest. We get visitors every week, but the long investment cycle and years without product output are a challenge. However, this isn’t an issue for well-funded large companies,” he said.
To address these challenges, some distilleries are experimenting with innovative business models, such as pre-selling entire whisky casks, blending imported whisky, or producing gin to generate cash flow. For instance, Ceilidh Distillery owned by Grace Vineyard released a gin product in 2023.
A few shorten its production cycle. THE CHUAN released its first pure malt whisky in December 2023, just two years after it began production, priced at RMB 675 for a 700ml bottle. Daiking’s single malts, sold on JD.com, also exceed RMB 500 per bottle despite lacking age statements.
What could give Chinese whisky a unique edge is its willingness to experiment with regional flavors and styles. For example, THE CHUAN are aging whisky in single cask oak barrels from China’s Changbai Mountain, and others are aging whisky in huangjiu (yellow wine) barrels to highlight an “Oriental” character. “Unlike vineyards, whisky is not constrained by terroir. You can produce it anywhere, from Inner Mongolia to Taiwan. The challenge is whether you can create a distinctive identity,” said Wu Yonglei.
Whether these efforts will resonate with consumers remains to be seen.
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