A fortune to be made

30 April, 2019

As the chinese new year begins, Shay Waterworth assesses the state of a spirits market that’s opening up to western companies

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NEW YEAR BRINGS a new animal when it comes to the Chinese zodiac, and 2019 is the Year of the Pig. According to ancient Chinese tradition, the lucky things to look out for are: the numbers two, five and eight; the colour gold; daisies and the month of February – good timing. But the real fortune right now is in the booming state of the Chinese booze industry. Its spirits market is predicted to reach a value of $450bn by 2021, according to Global Data, and although baijiu, China’s national spirit, is still dominant there is now an opportunity for international craft brands to get in on the action.

Traditionally western spirits brands have struggled to penetrate the Chinese market thanks to the sheer popularity of baijiu, communication difficulties and logistics issues for distributors. But these social and economic situations have changed, and will continue to do so.

In 2002 the Chinese middle class made up 4% of its population, but a decade later this had climbed to 31% – around 420m people. Fast-forward another seven years and we’re looking at half a billion people minimum who fit the status. As this immense middle class population continues to grow and demand more premium international products, the baijiu industry has begun to show signs of vulnerability.

According to Forbes magazine, baijiu sales by volume have dropped by around 20% since 2017, which resulted in a staggering 72% price increase. This means that, although the value of baijiu has increased, 20% of the volume of the biggest spirits category on the planet is either up for grabs for different spirits producers, or already taken.

CRAFTY SPIRITS

Major western companies have been pushing sales in China for a while, using Chinese New Year as an opportunity for exposure. For example, according to its financial report, Chinese New Year drove Pernod Ricard’s revenue up by 9.3% on an organic basis in the quarter leading to March 2018, mainly due to growth in sales of its Martell cognac brand. But it isn’t just the big dogs – or pigs – who are now benefiting from a wealthier, more curious Chinese population. Smaller craft brands from the US and Europe are proving popular in China – and it’s impossible to discuss the modern craft spirits movement in China without mentioning millenials, simply because the country has so many of them. They’re one of the biggest driving factors behind the rising interest in craft spirits as, not only do they travel internationally more than any other demographic, exposing themselves to western brands, they’re also more curious than the generations before them, experimenting with different spirits other than just baijiu.

China’s immense e-commerce is also a major opportunity for spirits brands around the world. Pernod Ricard reported at the tail end of 2018 that 10% of its entire business in China comes from e-commerce alone and if western brands can get their products on Wechat or Alibaba it could be a huge revenue stream.





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Joe Bates

Why craft brands are gaining traction

I’ve always maintained that the cards are stacked against craft spirits brands wanting to build a meaningful travel retail presence.

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