Edrington Korea, one of the leading whisky distributors in the country, has decided to leave amid continued sluggish sales.
Sources said Edrington recently told its Korean branch of the decision. The branch also ended its contract with employees.
Edrington Korea said it is meeting employees to discuss severance payments and compensation for the sudden notification.
“The closure of Edrington Korea is not something new as the whisky industry has been suffering from continued restructuring for nearly a decade. But the closure is viewed as quite symbolic as Edrington Korea owns a number of steady selling premium Scotch whiskies like The Macallan,” an industry official said.
Edrington Korea’s flagship products are premium single-malt whiskies like The Macallan, Highland Park and the Glenrothes. The Macallan is well regarded as a competitive brand in terms of recognition. Attention is now on which distributor will secure an “exclusive sales contract” for The Macallan.
Another issue is how the closure will affect the domestic whisky industry. Hit by slow demand, South Korea’s leading whisky distributors have seen a rapid deterioration of their balance sheets. The situation is the same for the country’s top two whisky importers ― Diageo Korea and Pernod Ricard Korea.
Pernod Ricard Korea reported an operating loss of 7.4 billion won (US$6.4 million) for the period July 2017 to June 2018. Its sales remained virtually unchanged on the previous period at 103.7 billion won.
“The competition in the Korean market is very fierce but it is an important market. We have been continuously investing here to keep the momentum of the business alive. We are moving forward with plans to make the overall business structure more efficient,” a Pernod Ricard Korea official said.
Sector leader Diageo Korea stopped production at its factory in Icheon, Gyeonggi Province, last June after 29 years of operation. It had been making Smirnoff vodka to export and Windsor whiskey to deliver to the Army.
Diageo Korea’s operating profit reached 109.5 billion won in 2011 but fell below 100 billion won in 2013. In 2018, profit was only 37.2 billion won.
Industry officials said the structural slowdown in the local whisky industry is mostly due to the introduction of the anti-bribery and graft act that passed the National Assembly in March 2015.
South Korean beverage makers are responding to the downturn with aggressive marketing campaigns for their flagship products. The top two ― Oriental Brewery Co. and HiteJinro ― said they would lower the price of some of their products.
“Due to the tax reform, we have raised the price for alcohol in bottles and draft beers while lowering those sold in cans,” a HiteJinro official said.
(Source: Korea Times)