From Baijiu to Brandy: the Alcohol Industry in China
In times of economic and political uncertainty, some industries in China hold up against the odds, namely, alcohol.
Chinese consumers have embraced its drinking culture with open arms and demanding imports of premium quality beer, red wine, liquor and spirits. Defying stereotypes that Chinese people can’t handle their drink, the demand in China has seen immense growth and the total revenue generated in 2019 is estimated to be worth upwards of $246 billion, according to research from Statista.
Growing demand and changing tastes
Chinese drinking culture has traditionally been based on rice wine and báijiǔ consumption, a Chinese liquor famed for its potency. It has also long been backed by a tradition of gifting expensive alcohol, seen as a symbol of wealth. Drinking báijiǔ at business functions and banquets is still customary among older generations. But as international travel has expanded and China opened itself up Chinese consumers have become more adventurous in their tastes, and China’s budding alcohol enthusiasts and expanding middle class are more than willing to splash out. Canadian icewine brand Pillitteri, a favourite among Chinese consumers for its sweet flavour saw their Chinese exports rise by over 1000% from 2004 to 2012, owing to their reputation for premium quality (and pricey) products.
Alcohol consumption has increased by a staggering 70% since 1990 The aptly named Beer Connoisseur reports that beer is still the favourite beverage among most Chinese consumers. The Chinese domestic production market is dominated by mass produced pale lagers with around 4% alcohol content such as Tsingtao, which can cost as little as 2 or 3 RMB (20 or 30 pence). The imported beer market, however, is on the rise and in 2017 saw sales of $750 million, all pointing to an inclination for Western tastes.
Brandy is seen as the ultimate status symbol amongst wealthy Chinese and the figures speak for themselves, holding 76% of the total value of imported spirits and 44.4% year-on-year growth in 2016. It is predominantly millennial post-80s consumers who are the real drivers of market growth for brandy, wine, whisky and beer. According to an industry report from Euromonitor, by 2022, whisky sales in China are expected to be about 19.13 billion RMB, up 38.6% from 2018, and whisky volumes are predicted to reach 23.65 billion litres in 2022.
Standing out from the crowd
Mersol and Luo note that ‘foreign companies often struggle to communicate or alter their brand to accommodate Chinese culture, ways of thinking, and consumer values’. Chinese millennial consumers are more digitally active and savvier than Western millennials, and as such they account for a significant proportion of ecommerce customers. Knowing who is buying your product and creating content for them is paramount for hitting your sales targets in China. In a market as saturated as this, many brands are now experimenting with new forms of retail. Japanese brewer and distiller Suntory recently announced it would be joining the ranks of Diageo, Pernod Ricard, Remy Martin, and Moet Hennessy by selling on Tmall, the ecommerce platform for Alibaba.
Tmall, not one to shy away from shopping festival opportunities, created an annual 9.9 Global Wine and Spirits Festival held on the 9th of September. Based on the fact that the Mandarin characters for wine 酒 ‘jiǔ’ and the number nine 九 ‘jiǔ’ sound the same, it has been described as their ‘gift to China’s wine lovers’. Sales figures from its inaugural event surpassed $280 million, which for brands is a clear choice for drinks brands as a point of entry.
While getting noticed in this crowded ecommerce space can be hard, there are, however, a number of ways in which savvy brands can reach new customers. ‘Balancing novelty with familiarity’ such as creating targeted campaigns and collaborating with alcohol industry KOL influencers (Key Opinion Leaders) are just some of the ways to build a brand strong identity in China. Offline strategies can prove difficult but bespoke craft beer breweries and whisky bars for instance, are currently proving popular in Beijing and Shanghai. Other ways to get noticed offline may include pop-ups and exclusive members-only clubs, which tend to fare well at grabbing the attention of Chinese customers and enhancing the overall shopping experiences.
The next steps
There is a huge window of opportunities for brands to explore when targeting Chinese consumers, so knowing how to communicate with your audience is crucial. As well as building fun and eye-catching campaigns that are tailored to the Chinese mentality, a necessary part of streamlining any brands’ market entry, knowing how to navigate the cultural sensitivity minefield is where agencies such as us can step in. When done well, launching bespoke products are a sure way to capture the attention of your Chinese audience and will drive sales and brand recognition. And whilst it may seem like a leap of faith, planning and budgeting for festivals with lower barriers to entry such as 9.9 is advisable, as they present a unique opportunity for market entry and for your ecommerce sales to take shape.