Reconnecting with Chinese GTR shoppers

20 December, 2018

After a downturn in sales following anti-corruption moves in China, shifting market demands are seeing cognac’s fortunes return. Shay Waterworth reports

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UNPREDICTABLE CURRENCY rates, Brexit and a drop in spending by Chinese travellers have all contributed to a downturn in global travel retail over the past few years. This is bad news for cognac producers because the travel retail market has gone from being a reliable goldmine for sales and advertising in the late 20th century to the opposite by 2018.

One of the key travel retail markets which has suffered the most in recent years is China. The country’s booming middle class prompted a major increase in the number of Chinese tourists. But, since North Korea’s missile tests upset the Chinese government in 2017, the number of international travellers from China to the rest of Asia dropped by 46.5% in the first half of 2017.

However, according to data offered by China Outbound Tourism Research Institute, 156m Chinese tourists are forecast to visit another country in 2018.

The reason China’s brief downturn was such a problem for GTR is that the country has become integral to many spirits categories around the world over the past 20 years, due to the sheer size of the population and the sudden wealth obtained by its burgeoning middle class. China’s travel blip has no doubt contributed to the fact that the volume of cognac sold in GTR is down 1.6%, according to data released by Bureau National Interprofessionnel du Cognac.

NOT ALL BAD

The most positive news surrounding China’s relationship with cognac is that export figures are up. Earlier this year the BNIC released statistics which showed shipments of cognac to the Far East had risen 13.5% from 2017-18, with China now the third biggest importer at 262m bottles over that year. So the demand for cognac is still there in China and the question which needs to be explored is: “How can cognac brands reconnect with China’s influential travel retail market?”

According to a report released in 2017 by Nielsen Holdings, 61% of Chinese tourists like to shop in duty free when leaving China and 63% use mobile payment methods. Drinks International’s travel retail expert Joe Bates has written in this magazine (p37) about how technology is being harnessed to increase sales in GTR and it is no coincidence that cognac brands have begun to adopt QR codes on bottles, opening the category up to Chinese travellers.

ANTI-CORRUPTION

Cognac now shares around 16% of the total GTR market for spirits but there has been a change in the type of cognac being offered in China by some brands due to a shift in market demand.

In the early stages of the 21st century a lot of the profits from big brands in China relied on corruption in the government and the country’s attitude towards bribery in business. Expensive bottles of cognac were ‘gifted’ as part of a business deal or favour, which is why a large portion of elite-level cognac was sold in China. However, when Xi Jinping was elected general secretary of the Communist Party of China in 2013, one of the first things on his to-do-list was clamp down on corruption in the country, which had a negative effect on the sales of cognac in GTR.





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