China Spirits Market

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International Markets Bureau
MARKET INDICATOR REPORT | JUNE 2010

Consumer Trends Wine, Beer and Spirits in China

Consumer Trends Wine, Beer and Spirits in China

EXECUTIVE SUMMARY

INSIDE THIS ISSUE
Consumer Trends 3 4 4-5 6 7 8 9

Total sales of alcoholic beverages in China were US $105.0 billion in 2009, a growth of 8.1% from 2008. On-trade* sales of alcohol in 2009 were reported at US $ 51.6 billion, with beer accounting for 40% of sales, wine 28%, and spirits 32%. Off-trade sales of alcoholic beverages in China were slightly larger than on-trade sales and reached US $53.4 billion. Sales through off-trade channels were broken down as follows: beer accounted for 45%, wine 11%, spirits 43%, and other alcoholic beverages (including cider/perry and ready-to-drink/high-strength pre-mixes) 1%. Alcoholic beverages were affected slightly by the economic downturn in late 2008 and early 2009, in terms of volume sales. Consumers and businesses reduced expenditures on entertainment, which affected on-trade sales. They also tightened their budgets at home, which affected off-trade sales. However, sales appear to have returned to normal and volume growth has been observed. Beer is the largest and most successful sector within alcoholic beverages. Economy lagers account for 89% of beer sales, based on volume, although domestic standard lager has seen the most significant growth. As a result, manufacturers are focusing on promoting domestic standard lagers in order to increase profits. Wine has started to become popular in China as consumers develop a sophisticated taste for alcohol. Non-sparkling (still) grape wines are increasing their presence, although the majority of sales are still, non-grape wines. Wine consumption is expected to grow as healthconscious consumers switch to wine from spirits and beer. Local and herbal Chinese spirits, also called baijiu, are the largest sector within spirits. Imported brands are growing, but market share is still small. Off-trade sales of spirits are significantly greater than on-trade sales, as spirits in on-trade establishments are expensive. Alcohol consumption per capita in China is currently low compared to Western standards, as it is still only popular in urban centres. However, with increasing urbanization and with time, consumption is expected to increase, as is expenditure on alcoholic beverages. This will open the door for increased sales of both domestic and imported products. There is incredible growth forecast in alcoholic beverages in China and multinational producers will have to be competitive in order to succeed within this domestically dominated market.

Retail Trends Regional Variances Beer Wine Spirits Chinese Brands

*On-trade = alcoholic beverages sold in restaurants, bars etc. Off-trade = alcoholic beverages sold in retail stores

PAGE 2

CONSUMER TRENDS
 In general, Chinese families have a conservative attitude towards alcohol consumption and, although there is no official minimum drinking age, alcohol is not served to those under 18.

Alcohol consumption varies regionally and is more popular in the colder climate of Northern China, which has previously seen greater alcohol consumption than the Southern region. However, as China changes to becomes more modern, the difference between regions is expected to narrow.

Health and wellness is becoming increasingly important to Chinese consumers. Consumption of grape-wine and low-alcohol beer has grown, while spirits consumption has decreased, as consumers look for healthier alcoholic beverages to enjoy. Manufacturers have even launched new products that are health focused, including Gold Jiu and Han Fang Nuan Pi.

Declining unemployment rates in 2009 helped to increase consumer confidence and demand for alcoholic beverages in both on-trade and off-trade channels. Furthermore, China’s economy is expected to continue to grow from 2009-2014.

Demand is growing for premium products as...
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