(Yicai) June 13 -- Investment in whisky projects is booming in China, with local acholic companies seeking ways to tap growing demand among younger consumers.

A whisky project jointly funded by Anhui Gujing Group and France’s Camus Group started at the end of last year, with plans to launch various products including whisky combined with trace amount of traditional Chinese medicine.

In April, baijiu producer Langjiu also announced the construction of a whisky distillery in Emeishan in Sichuan province, with a planned annual output of 10,000 tons of liquor. The plant will be completed in three phases by 2030.

And it is not just distillers that believe in the market’s potential. Tsingtao Brewery’s new production base, scheduled to come online at the end of this year, includes a production capacity of 2,500 tons of whisky along with its traditional beer products.

Shanghai Bairun Investment Holding Group, which makes fragrances and pre-mixed cocktails, also said earlier this month that the first batch of whisky products from its factory in Sichuan province is expected to be available by the end of 2024.

Since marque liquor makers have already established their own sale channels and loyal customer bases, new investment in whisky production facilities could bring them additional revenue, explained industry analyst Cai Xuefei.

Investment in the whisky business could also offer a good buy-in low opportunity for local liquor makers’ business diversification, given that the current alcohol market as a whole is still in its downturn cycle, said Yin Kai, founder of Chaoyinhui Shanghai Brand Management.

Still, some market insiders are concerned that there might not be enough demand to absorb the new production capacity. “The boom in whisky projects is just like the surfeit of wine projects years ago,” Yang Zhengjian, dean of WBO Wine Business School, told Yicai.

Although international liquor giants have developed the local whisky consumption market for many years, the market penetration rate of overseas spirits in China, including whisky, is only about 3 percent. This means domestic whisky producers will need to develop new consumption scenarios, Yang said.

Whisky consumption in China centers mainly around nightclubs, gift-giving and tasting events held by affluent consumers, Yang noted, but in these scenarios, imported whisky brands with a long history tend to be more popularly accepted,, so it will be difficult for domestic rivals to compete.

According to the latest report from alcohol market analysts IWSR, China’s whisky market was worth CNY5.5 billion (USD758 million) last year, having grown more than fourfold over the past 10 years. It is expected to reach CNY50 billion (USD6.9 billion) in the next five to 10 years.

Editors: Tang Shihua, Tom Litting