Will the year of the pig bring in the bacon?

04 April, 2019

At this time of year my inbox invariably gets flooded with press releases from wine and spirit producers trumpeting their latest Chinese new year special-edition gift boxes and travel retail exclusives.

2019 is the Year of the Pig, which to western ears might not seem quite so conducive to appealing marketing ideas as other signs of the Chinese zodiac. However, that hasn’t stopped the likes of Dewar’s whisky, Beluga vodka, Martell cognac, Tito’s vodka and Royal Salute whisky from eagerly releasing their Year of the Pig editions.

Such a marketing frenzy is understandable. After all, the Chinese New Year is the largest annual human migration on the planet. Hundreds of millions of Chinese travellers take long train and road trips to visit family and friends for the holiday, which this year falls on February 5. According to forecasts from Ctrip, the Chinese equivalent of Trip Advisor, around 7m mainland Chinese are planning to venture abroad for the annual holiday this year, up from around 6.5m in 2018.

Where will the Chinese be heading? Well, neighbouring countries such as Thailand, Japan, Indonesia and Singapore continue to be popular destinations, but more exotic, far-flung holiday spots such as Scandinavia, Spain and the UAE are all tipped to be hot this year.

Within the travel retail sector, excitement still surrounds the Chinese traveller, but it’s fair to say the outlook for this travel retail customer demographic is more uncertain than in previous years. Passenger traffic continues to rise, but the imposition of US trade tariffs, slowing global demand, growing domestic debt and the weakening Yuan suggest the mainland Chinese traveller will have less discretionary income to spend. On that front, 2019 has already got off to a bad start. Last month, luxury goods stocks took a beating after Apple warned that slowing Chinese demand was a key factor underlying its profits warning. According to global management consulting firm Bain & Co, Chinese nationals accounted for more than 30% of luxury goods sales last year, so when this key customer group feels the pinch, the fear is that a major crisis is not far away.

An over-reliance on the Chinese traveller is undoubtedly a key concern for the travel retail industry, but now is not the time to panic. Thankfully, the gifting tradition remains strong in China and other Asian nations despite the current global economic headwinds. New data from research consultancy M1nd-set shows that Asia Pacific recorded a reasonable level of duty free gifting in H1 2018 with 38% of shoppers purchasing as a gift.

How can that level be bettered? Many suppliers have told me that, as well as enticing gifting options, sales to mainland Chinese could be boosted through the wider use of Chinese-speaking sales staff, mobile Chinese payment options such as Wechat Pay, and competitive prices given that domestic Chinese alcohol prices are comparatively high.

As for sought-after high-end French wines, exclusivity is also a big plus. “Passengers who buy fine wine tend to have some basic knowledge of wine from their purchases in the domestic markets, and when you factor in comparative pricing web sites, the whole pricing [issue] is a big challenge for the operators to get right,”one distributor specialised in supplying Asian duty free retailers tells me.

Another point to remember is that 70% of outbound Chinese travellers are millennials. They might have less money to spend than previous generations, but they are more open to discovering wines from countries other than France and imported spirits other than cognac and whisky. This at least should provide some comfort at the start of a year which looks like it could prove challenging.

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