The Dominance of Baijiu 白酒 in China
According to a Reuters report published on March 6, China is the world's largest market for alcoholic products. Currently, imported spirits account for only about 3% of national consumption. Western alcohol producers are targeting the market potential brought by young Chinese consumers and hope to increase sales of whisky and brandy. However, breaking the dominance of baijiu producers in China is very difficult.
Reuters reports that for Western alcohol producers, "challenging China's national liquor is an arduous task," but "even a small shift in market share in China can bring benefits to Western companies."
The report mentions that giants in the alcoholic beverage industry are currently looking to capitalize on the growing demand from young Chinese consumers for whisky and brandy in order to increase their market share. Previously, Western companies such as Diageo in the UK and Pernod Ricard in France focused on the luxury goods market in China. However, they believe that the rising consumption capacity of young consumers and evolving drinking trends could improve the sales of Western spirits.
According to Autl Chhaparwal, Managing Director of Diageo for Greater China, their whiskies target the expanding middle class, millennials, Generation Z, and high-end consumers.
"There is still a lot of growth potential," states Chhaparwal, adding that Chinese people are increasingly consuming alcohol at home and are beginning to frequent whisky specialty bars and high-end shops, whose numbers continue to grow.
Boston Consulting Group estimates that from 2022 to 2030, the number of middle-class and affluent consumers in China will increase by 80 million, reaching nearly 40% of the total population.
Currently, imported spirits account for about 3% of national consumption in China. According to Euromonitor data, the baijiu market was valued at approximately $167 billion in 2023, far above the $2.8 billion for whisky and $9 billion for brandy in the Chinese market.
Euromonitor International predicts that whisky will become the fastest-growing spirit in China over the next few years, with an expected increase of 88% between 2023 and 2026. However, analysts believe that the consumption of imported spirits remains niche, limited to five-star hotels and Western restaurants.
For Western alcoholic beverage companies, the Chinese market is very attractive. For example, China is the largest global market for Martell brandy from the French giant Pernod Ricard, contributing to half of its global growth.
Jerome Cottin-Bizonne, Managing Director of Pernod Ricard China, states that more and more people can afford their products and that young people want more choices.
However, Reuters points out that to compete with the dominant baijiu producers in China, Western companies face significant challenges.
In China, people are accustomed to drinking during meals and celebrations, and baijiu is omnipresent at banquets, business transactions, and as gifts. Baijiu is considered China’s national liquor.
As traditional drinkers age, Chinese baijiu producers like Moutai are trying to attract young people by launching baijiu-flavored lattes in collaboration with coffee brands or partnering with chocolate and ice cream companies. These initiatives are gaining popularity on social media.
To increase their sales in China, Western companies are making numerous efforts. Diageo has opened an online store on e-commerce platforms, collaborating with local logistics companies to offer one-hour delivery services, and plans to open a distillery in China this year.
Last September, Pernod Ricard launched a brandy in China aimed at young consumers in clubs and music festivals, and in December, they introduced their first Chinese single malt whisky, "The Chuan," made in Leshan.
However, Cai Xuefei, General Manager of Know-How Consulting and baijiu industry analyst, mentions that Chinese companies are also starting to enter the whisky market, launching more spirits to meet the demands of young consumers.
Daniel Taytslin, co-founder of Gotham East, an importer of spirits, believes that the dominance of Chinese companies means that the success of Western beverage producers will remain limited.
Reuters writes that "even a small shift in market share in China can bring benefits to Western companies."
According to a survey by iMedia Research, in 2023, the age group of alcoholic beverage consumers in China is primarily 31 to 40 years old, followed by 18 to 30 years old, showing a trend towards youthfulness. Chinese consumers' preferences for alcoholic beverages are as follows: beer (73.68%), wine (67.57%), baijiu (59.17%), and imported spirits (33.43%).
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