A leading wine and spirits supplier has tipped Singapore and Australia as the most attractive growth markets in the Asia Pacific region.
Joe Milner worked for Diageo and Constellation Brands before setting up his own business, Milestone Beverages, four years ago. He was born and raised in Hong Kong – his mother is Chinese and he is fluent in Cantonese – but he has also spent a number of years in Sydney. Milestone Beverages creates wine and spirits brands for the APAC market, and supplies more than 50 distributors across the region. It has enjoyed strong growth in a number of different markets over the past few years, but right now Milner is particularly excited about Singapore and Australia.
As a Hong Kong native, it may pain him to speak so enthusiastically about Singapore, but he believes it currently offers the perfect conditions for future growth. “Singapore has the perfect economy that’s run by a meritocracy,” says Milner. “It has a huge expat community. It’s becoming one of the cocktail capitals of the world and a shop window. It’s high income, plenty of sophisticated consumers, lots of cocktail drinkers, a lot of money floating around. You look at the numbers, it surpassed Hong Kong a couple of years ago in terms of consumption of premium spirits. I think it’s going to continue to grow.”
Milestone has just launched its Italian wine range, named Atilius, and its Taisteal Scotch whisky brand into the Australian market. Milner knows it well after studying in Australia and working for Pernod Ricard in Sydney. “Australia in my opinion is one of the most attractive retail markets in the world,” he says. “Australia only has a population of 25 million, but every year it’s just close to high single percentage growth in most categories. It’s amazing consumption. The minimum wage is $25 or something. Everybody can afford to buy a bottle of Johnnie Walker. Not everybody can afford to buy a bottle in Asia. I’m a huge advocate of the Aussie market.
“The government is pretty strict on Covid, so the on-trade is pretty dead, but the off-trade and ecommerce is just on fire. I think our Italian wine range and our Scotch whisky will do really well there.”
Milestone Beverages has been aggressive in driving growth over the past four years, focusing heavily on innovation and brand building. It currently has eight members of staff, which makes it difficult to properly crack the gargantuan markets in China and India, where you need a distribution team on the ground. The firm has initially focused on gaining traction in South Korea, Taiwan and Southeast Asia.
“Cambodia and Vietnam have great potential,” says Milner. “There are a lot of complications in getting route to market in terms of legal and compliance, but if you can get your head around that, Vietnam and Cambodia are huge opportunities.
“Indonesia is another if you are patient. People are scared by Indonesia because of the registration processes, the regulatory requirements, how long it takes – people have just failed in the market – but we have managed to find a lawyer in Hong Kong that works around it. Those markets are pretty solid.”
There are 5 billion people living in the APAC region, so it is very attractive for brand owners, but it is also extremely competitive. Milestone has focused on building up a core range of wine and spirits that will appeal to consumers in the region, while it also distributes gins from Quintessential Brands.
“We developed a portfolio of brands,” says Milner. “We developed a brand called Blowfish Wines in Australia, and within three years we were on track to do about 50,000 cases per year, but unfortunately Covid completely slammed that down. That was tough, but we’re building that back again.
“We developed a beautiful Italian wine range, Atilius, which we are quite precious about. That has proven to be a hugely successful brand for us, almost double the revenue of Blowfish. We have launched in Costco in Korea, and Dan Murphy’s in Australia and Dairy Farm in Southeast Asia.
“Taisteal has been great. We are not underestimating the challenges of Scotch, but we have built that into 12 markets. We do our own New Zealand wine brand and our own Californian wine brand. We also have the distribution rights for Langley’s gin in Asia Pacific. We are just in the process of launching our Japanese whisky, Onikishi, as well. We have been pretty busy, but we work with around 50 distributors and retailers, in pretty much every market in APAC.”
Milestone does not own any vineyards, wineries or distilleries. It contract manufactures with leading producers like Angus Dundee in Scotland and AVL in Australia, which allows it to remain agile and respond to data trends. “I’ve got this theory that in this region if it’s brown it will sell,” says Milner. “Ninety percent of the region is brown spirits, albeit that gin is still growing at a massive rate. People will still buy it and it will grow over the next five to 10 years, from a small base, but Scotch, Japanese whisky and bourbon will trend very heavily in this part of the world.”
The key challenge for many brand owners seeking to make inroads in the region is find reliable distributors. “A lot of Americans and Europeans look at this market and say, it’s 5 billion people, there’s so much opportunity for growth, but the reality is very different than what everybody expects,” says Milner. “There’s a limited number of distributors in every market. There might be eight to 10 decent distributors, but thousands and thousands of brands looking for distribution, so it’s an absolute buyers’ market.
“In my corporate career, I worked with over 200 distributors, so lucky enough I do have all the contacts. It hasn’t been that challenging for us to find distributors, but we still need a good reason to go and talk to them. We are very strong in South Korea. We work with Hite Jinro, Lotte Mart and Costco, and a number of key distributors in the market. We are quite strong in Taiwan. We have our own distribution in home market of Hong Kong. We go to bars and restaurants. We are strong in Thailand and in Indonesia. We are quite weak in China. I’ll admit it. It’s a tough market to crack.”
Milner says he could “write a book on the challenges of the Chinese market”. “It’s so big, fragmented, it’s a dog-eat-dog world, it’s very price-driven, margins are low, there’s not a lot of trust in distributors,” he says.
He appreciates the growth potential – the vodka category has trebled in size in China over the past few years – but points out that imported spirits are still not that big. For example, Taiwan, Australia and Japan are individually bigger than China by volume sales of Scotch whisky. Milestone has a distributor in Shanghai, where it is gaining traction, but Milner says “the only way to tackle China is to have your own proper team set up in market”. “You need to your own route to market, into wholesalers. I can add India into that. The only way to make any money in India is to set up your own entity, unless you are working with the power brands.
“It’s massively chaotic in India right now with COVID. Distributors are struggling to stay alive. It’s that intense. They’re in a right mess but confident they will pull through. We will enter China and India. We will have resources on the ground. We will have our own entities. But I’m not stupid. It will require a lot of capital raising and resource to do it properly. It’s a battle that we need to be very ready for to do properly. Put it this way, if I did well in Shenzhen and Guangzhou, the two main Tier 1 cities in the south, I’m done. I wouldn’t even care about Shanghai and Beijing. If I could get the south right, I’d be over the moon.”
In the meantime, Milestone will consider launching a hard seltzer, but a key development area could be local production. “We will consider local production projects. I think that will be the future for anyone wants to make any serious money in this region.”
