Can 30-Something Celebrities Revitalize the Whisky Industry? -1

The year 2021 in the whisky industry was a year of both anticipation and uncertainty regarding market recovery, following a 32% increase compared to 2020, when imports in the Korean market hit their lowest point since 1999 due to the COVID-19 pandemic. Late last year, in conversations with business leaders of whisky brands, we observed their efforts to leverage the home drinking trend fueled by the pandemic, particularly among 20-30 year-old consumers, as an opportunity to foster ongoing relationships with these consumers and their whisky products. While contemplating value propositions centered around whisky as a new form of taste, these brands struggled to establish a clear direction. As a result, they kicked off 2022 with brand campaigns featuring 30-something celebrities, a generation younger than the previously employed brand ambassadors.

Of course, it's undeniable that the whisky industry has successfully leveraged 'age' as a core value proposition for generating revenue for a long time. After all, the length of maturation has been the key differentiator in terms of value. The issue, however, lies in how this new target demographic reacts to the hierarchy embedded within this concept. The distribution structure optimized by whisky producers for maximizing sales is primarily based on a set of products comprising entry-level whisky and a limited number of premium whiskies. This product sales structure, which hinges on value differentiation, is passed along unchanged from wholesalers and liquor shops to the final end-user – the consumer. The inherent inequality in securing premium whisky within this system is an unavoidable and inherent part of the experience. This links to the characteristics of late millennials and Gen Z who are quietly avoiding established hierarchies and actively forging new orders, potentially creating a barrier to the ongoing relationship development between consumers and whisky products – a crucial goal for the industry.

Even without considering these potential factors, the decline of the whisky market in Korea has been ongoing since before the pandemic. In Korea, drinking sessions have traditionally served as a primary stage for confirming the hierarchical relationships within social circles. The entertainment culture, a product of government-led economic development in the 1960s and 70s, became a prerequisite for business success in Korea. This naturally coincided with the growth of nightlife and the emergence of locations like hostess bars as key, albeit clandestine, consumption venues for whisky. According to a study published by the Korean Academy of Management in 2013, corporate entertainment spending was considered a more effective means of increasing revenue than advertising expenses. However, the government began to actively target corporate and official entertainment culture in the 2010s, leading to a decline in whisky sales. Corporate entertainment culture in Korea – which contributed to the dismissal of Uber's CEO in 2017 – is gradually evolving into activities centered around culture, leisure, and sports. As a result, hospitality-related spending on drinking and entertainment is consistently decreasing compared to the past.

The question is where the whisky industry is focusing its expectations for the core stage of whisky consumption that will drive the anticipated market growth. Whisky consumption in bars and pubs that relied on entertainment and hospitality is unlikely to generate explosive revenue as it once did, and the decision by Diageo to divest its Windsor brand is proof of this reality. The sale of the Windsor brand, announced in April 2022, represents an unprecedented M&A case in that it encompasses not only distribution but the brand itself for a total acquisition price of 200 billion won. Considering that the Windsor brand held a 70% market share in the domestic whisky market in the 2000s, generating annual profits of 400-500 billion won for Diageo, this decision by Diageo's London headquarters to sell the Windsor brand offers insight into the changing expectations surrounding the Korean whisky market.

As of April 18, 2022, with the government officially declaring the transition to an endemic phase in Korea following the complete lifting of social distancing measures, a glimmer of hope remains for the industry: the shift in the core venues for drinking from the previously dominant dine-out scene to a more dispersed and widespread home-based consumption. Of course, the longevity of this new drinking pattern experienced during the pandemic remains uncertain. People tend to prioritize rapid adaptation over coping with significant changes. Nonetheless, for whisky brands looking to leverage this current opportunity, we've compiled the following clues for fostering relationships with late millennials and Gen Z consumers.

**The first fully digital native generation capable of sharing the joy of drinking sessions even when apart.**The phenomenon of this generation's drinking logs being shared via Instagram Live, right from their 20th birthdays, is a trend frequently observed through YouTube searches. Among the individuals we met, there were instances of people creating Instagram accounts they don't typically use, inviting only close acquaintances to join virtual drinking sessions.

**A generation that values and invests in a single, optimal experience.**Their enthusiasm for premium dining experiences, such as queuing for hours at omakase restaurants, is easily verifiable through related hashtags. Since they don't travel as frequently as before, they opt for luxury accommodations that incur higher costs. This characteristic aligns with the high price of whisky and its corresponding value proposition.

**A generation that favors loose relationships and enjoys socializing in smaller groups.**Instead of investing in deep and personal new relationships, they are investing in subscription services for online classes or gatherings centered around shared interests. This has been a central aspect of their consumption shifts during the pandemic. This could provide an opportunity to expand the potential of whisky as a discovery of new tastes, which has been the expectation of 30-something women frequenting bars even before the pandemic.

However, to effectively capitalize on these opportunities, the industry should begin by reevaluating its ingrained drinking customs. Industries often rely on conventional wisdom and assumptions that are taken for granted. When we conducted a project to understand the long-standing decline in sales of traditional Korean medicine (Hanbang), individual practitioners identified a common cause for the decline: the external perception that it is unscientific. However, through our research, we discovered that the core issue often stemmed from the practitioners' own anxieties about prescribing Hanbang remedies.

While Hanbang practitioners spend six years studying the theories of traditional Korean medicine in university, there is no formal residency system upon graduation, like that available to medical doctors, where they can verify the knowledge they've acquired in clinical settings. Thus, most graduates start their own clinics with loans, suddenly confronted with the challenge of prescribing treatment for an 80-year-old patient's chronic joint pain. Incidentally, the main textbook for their six years of studying Hanbang is the Donguibogam, written 600 years ago. This hidden truth within the industry was a key driver of the decline in Hanbang sales, a problem that even 10 years of monthly 50 million won in Hanbang promotional spending by the Hanbang association failed to address. When practitioners realized the dramatic difference in monthly revenue – up to hundreds of millions of won – between those who had overcome their anxieties about prescribing remedies through individual effort and those who hadn't, internal change finally began.

If any business leader believes that the current whisky marketing campaign featuring 30-something celebrities will not be sufficient to replicate the past success of generating 400 billion won in revenue, then the case of the Hanbang industry is worth considering.

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