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Chinese Spirits - China - June 2015

“Almost all producers have paid more attention to the consumer market and the commoditisation of baijiu has become a consensus of the industry. Brands need to go beyond price incentives and renovate their product packaging and marketing communication to better appeal to the mass market. At the same time, opportunities exist for premium baijiu brands to market baijiu as a representation of good taste to compete against wine and Western spirits and drive sales.”
– Hao Qiu, Research Analyst

  • Will customisability become a standard feature of baijiu in the future?
  • How to market premium baijiu as a representation of good taste?
  • How to commoditise baijiu beyond price incentives?
After more than one year adjustment of the Chinese spirits market since 2013, signs of gradual recovery has revealed in 2015. According to Mintel’s estimates and forecast, retail value growth will be a positive 4.0% in 2015 after a negative -1.7% in 2014.
 
A more affordable and steadier price will help volume consumption bounce back.
 
Although the strong flavour has posed a major barrier for brands to encourage consumers to drink more baijiu, the relatively more fixed product impression among consumers is difficult to change. Instead baijiu brands could take cues from Western spirits companies and enhance the image/emotional perceptions of Chinese spirits via product innovation and marketing to drive future market growth.

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Table of contents

  1. Introduction

      • Definition
        • Figure 1: Definition of Low/Mid/High MHI groups, by city tier
      • Methodology
        • Abbreviations
        • Executive Summary

            • The market
              • Figure 2: Retail sales of Chinese spirits, by volume, China, 2010-20
              • Figure 3: Retail sales of Chinese spirits, by value, China, 2010-20
            • Companies and brands
              • Figure 4: Share of value in Chinese spirits retail market, by company, 2013 and 2014
            • The consumer
              • Usage of different types of alcoholic drinks
                • Figure 5: Usage of different types of alcoholic drinks, March 2015
              • Consumer perceptions of different types of alcoholic drinks
                • Figure 6: Consumer perceptions of different types of alcoholic drinks, March 2015
              • Purchase channel of Chinese spirits
                • Figure 7: Purchase channel of Chinese spirits, March 2015
              • Reasons for buying Chinese spirits
                • Figure 8: Reasons for buying Chinese Spirits, March 2015
              • Typical spending on Chinese spirits for different occasions
                • Figure 9: Typical spending on Chinese spirits for different occasions, March 2015
              • Purchase consideration factors for business occasions and special events
                • Figure 10: Purchase consideration factors for business occasions, March 2015
                • Figure 11: Purchase consideration factors for special events, March 2015
              • Consumption behaviours of and attitudes towards Chinese spirits
                • Figure 12: Consumption behaviours of and attitudes towards Chinese spirits, March 2015
              • Meet the Mintropolitans
                • Key issues
                  • Will customisability become a standard feature of baijiu in the future?
                    • How to market premium baijiu as a representation of good taste?
                      • How to commoditise baijiu beyond price incentives?
                        • What we think
                        • Issues and Insights

                            • Will customisability become a standard feature of baijiu in the future?
                              • The facts
                                • The implications
                                  • How to market premium baijiu as a representation of good taste?
                                    • The facts
                                      • The implications
                                        • How to commoditise baijiu beyond price incentives?
                                          • The facts
                                            • The implications
                                              • Figure 13: Baijiu advert example with a football theme, China, 2015
                                          • Trend Application

                                              • Mood to Order
                                                • Experience Is All
                                                  • Click and Connect
                                                  • Market Size and Forecast

                                                    • Key points
                                                      • Market growth hits the bottom in 2014
                                                        • Figure 14: Retail sales of Chinese spirits, by volume and value, China, 2010-15
                                                      • Signs of recovery in 2015
                                                        • Figure 15: Usage of baijiu in the past 12 months, by in-home and out-of-home, 2014 and 2015
                                                      • Future outlook
                                                        • Figure 16: Retail sales of Chinese spirits, by volume, China, 2010-20
                                                        • Figure 17: Retail sales of Chinese spirits, by value, China, 2010-20
                                                      • Forecast methodology
                                                        • Key Market Driver Analysis
                                                          • Retail price stabilises and the volume sales bounce back
                                                            • Figure 18: Average retail price change of Chinese spirits, 2013-15
                                                          • Greater variety of baijiu products with youthful images to engage with young consumers
                                                            • Key Market Barrier Analysis
                                                              • The strong taste of baijiu pushes consumers away
                                                                • The perception of baijiu being harmful to health
                                                                  • Strong competition from other alcoholic drinks
                                                                    • Figure 19: Usage of selected types of alcoholic drinks in the past 12 months, by in-home and out-of-home, 2014 and 2015
                                                                • Market Share

                                                                  • Key points
                                                                    • Wuliangye continued to lead value share but has had a big slump
                                                                      • Figure 20: Share of value and volume in Chinese spirits retail market, by company, 2013 and 2014
                                                                    • Jiannanchun Group showed the biggest value share increase amid intensive competition
                                                                      • Companies targeting mid-to-low end markets achieved better performance, reflecting the trend of commoditisation
                                                                      • Who’s Innovating?

                                                                        • Key points
                                                                          • Baijiu with health positioning concept is trending
                                                                            • Adding healthy ingredients to enhance the health perception
                                                                              • Playing around with distillation techniques to enhance the health perception
                                                                                • Mini-packed baijiu marketed with youthfulness, friendship and mood-positioning is fast emerging
                                                                                  • Jiannanchun has brought the “affordable luxury” concept with its new 779AD
                                                                                  • Companies & Brands

                                                                                    • Yibin Wuliangye Group
                                                                                      • Latest developments
                                                                                        • Luzhou Laojiao Company Limited
                                                                                          • Latest developments
                                                                                            • Yanghe Distillery
                                                                                              • Latest developments
                                                                                                • Sichuan Jiannanchun Group
                                                                                                  • Latest developments
                                                                                                    • Jiangsu King’s Luck Brewery
                                                                                                      • Latest development
                                                                                                      • The Consumer – Usage of Different Types of Alcoholic Drinks

                                                                                                        • Key points
                                                                                                          • Baijiu achieves the third highest usage rate both in and out of home, following beer and wine
                                                                                                            • Figure 21: Usage of different types of alcoholic drinks, March 2015
                                                                                                          • A significant increase in out-of-home consumption
                                                                                                            • Figure 22: Usage of baijiu in the past 12 months, by in-home and out-of-home, 2014 and 2015
                                                                                                          • Marketing career-life related themes to engage with 20-24-year-olds
                                                                                                            • Figure 23: Usage of baijiu in the past 12 months, by age, March 2015
                                                                                                          • Stronger pressure from western spirits and RTD alcoholic drinks in the South and East
                                                                                                            • Figure 24: Usage of different types of alcoholic drinks in the past 12 months, by region, March 2015
                                                                                                        • The Consumer – Consumer Perceptions of Different Types of Alcoholic Drinks

                                                                                                          • Key points
                                                                                                            • Methodology
                                                                                                              • Strong flavour and limited varieties could limit baijiu consumption
                                                                                                                • Figure 25: Consumer perceptions of different types of alcoholic drinks, March 2015
                                                                                                              • Baijiu is not perceived as being as suitable for gifting as wine and Western spirits
                                                                                                                  • Figure 26: Example of spirits packed in chocolate-made bottles, Canada, 2014
                                                                                                                • Regional Difference Analysis
                                                                                                                  • More consumers in the West and North consider baijiu “good value for money”
                                                                                                                    • Figure 27: Consumer perceptions of Chinese spirits, by region, March 2015
                                                                                                                  • Consumers in the East and Middle are more likely to associate baijiu with “premium” and reflecting “good taste”
                                                                                                                    • Significantly fewer consumers in the South think of baijiu as premium and suitable for gifting
                                                                                                                      • Consumer perceptions of baijiu between drinkers and non-drinkers mainly diverge on image rather than product
                                                                                                                        • Figure 28: Consumer perceptions of Chinese spirits, by baijiu drinkers and non-drinkers, March 2015
                                                                                                                    • The Consumer – Purchase Channel of Chinese Spirits

                                                                                                                      • Key points
                                                                                                                        • Offline retail channels play a dominant role
                                                                                                                          • Figure 29: Purchase channel of Chinese spirits, March 2015
                                                                                                                        • Online channels have emerged over the last two years
                                                                                                                          • Figure 30: Online purchase of Chinese spirits, by age, March 2015
                                                                                                                        • 20-29-year-olds are more likely to buy from convenience and grocery stores
                                                                                                                          • Figure 31: Selected purchase channels of Chinese spirits, by age, March 2015
                                                                                                                        • Purchase channel of baijiu is comparably more convergent
                                                                                                                          • Figure 32: Repertoire analysis of purchase channel of Chinese Spirits, March 2015
                                                                                                                      • The Consumer – Reasons for Purchasing Chinese Spirits

                                                                                                                        • Key points
                                                                                                                          • Baijiu drinking is deeply rooted in Chinese festival culture
                                                                                                                            • Figure 33: Reasons for purchasing Chinese Spirits, March 2015
                                                                                                                            • Figure 34: Reasons for purchasing Chinese baijiu, by age, March 2015
                                                                                                                          • Purchase purpose varies by city
                                                                                                                            • Figure 35: Reasons for purchasing Chinese spirits, by city, March 2015
                                                                                                                          • Channels have their own advantages to meet consumer needs for different reasons for purchase
                                                                                                                            • Figure 36: Selected reasons for purchasing Chinese spirits, by purchase purpose of Chinese spirits, March 2015
                                                                                                                        • The Consumer – Typical Spending on Chinese Spirits for Different Occasions

                                                                                                                          • Key points
                                                                                                                            • Consumers are willing to pay twice the price or more for gifting and business occasions than self/family consumption
                                                                                                                              • Figure 37: Typical spending on Chinese spirits for different occasions, March 2015
                                                                                                                            • Income is a key driver for baijiu spending, particularly for self/family consumption and festive occasions
                                                                                                                              • Figure 38: Average spending per person for different occasions, by monthly household income, March 2015
                                                                                                                          • The Consumer – Purchase Consideration Factors for Business Occasions and Special Events

                                                                                                                            • Key points
                                                                                                                              • Well-known brand and premium packaging are key purchase consideration factors for business occasions
                                                                                                                                • Figure 39: Purchase consideration factors for business occasions, March 2015
                                                                                                                              • Younger consumers are more packaging-focused and older consumers over 30 are more product-focused
                                                                                                                                • Figure 40: Selected purchase consideration factors for business occasions, by age, March 2015
                                                                                                                              • Relevance and price are key purchase consideration factors for special event occasions
                                                                                                                                • Figure 41: Purchase consideration factors for special events, March 2015
                                                                                                                              • Providing value-added services to stand out from the competition
                                                                                                                              • The Consumer – Consumption Behaviours of and Attitudes towards Chinese Spirits

                                                                                                                                • Key points
                                                                                                                                  • More than half of consumers are brand loyal
                                                                                                                                    • Figure 42: Consumption behaviours of and attitudes towards Chinese spirits, March 2015
                                                                                                                                    • Figure 43: Agreement with statement “I stick to one or a few brands that I am familiar with when buying Chinese baijiu”, by age, March 2015
                                                                                                                                  • Growth potential from customised baijiu
                                                                                                                                    • Connecting baijiu drinking with everyday mood to encourage usage in daily life
                                                                                                                                      • Figure 44: Consumption behaviours of and attitudes towards Chinese spirits, March 2015
                                                                                                                                    • Lower alcohol content does not translate to a healthier image
                                                                                                                                      • Figure 45: Agreement with statement “Baijiu with lower alcohol content is healthier than that with higher alcohol content”, by age, March 2015
                                                                                                                                  • The Consumer – Meet the Mintropolitans

                                                                                                                                    • Key points
                                                                                                                                      • Why Mintropolitans?
                                                                                                                                        • Who are they?
                                                                                                                                            • Figure 46: Demographic profile of Mintropolitans vs Non-Mintropolitans, by gender, age and personal income
                                                                                                                                            • Figure 47: Demographic profile of Mintropolitans vs Non-Mintropolitans, by marital status, city tier and education level
                                                                                                                                          • Baijiu has established a firm ground among Mintropolitans even under strong competition with Western alcoholic drinks
                                                                                                                                            • Figure 48: Consumer perceptions of Chinese spirits, by consumer classification, March 2015
                                                                                                                                          • Mintropolitans care more about premium packaging and customisability when buying baijiu for business and special events
                                                                                                                                            • Figure 49: Selected purchase consideration factors for business occasions and special events, by consumer classification, March 2015
                                                                                                                                          • Mintropolitans tend to enjoy baijiu as a common drink in daily life
                                                                                                                                            • Figure 50: Selected consumption behaviours of and attitudes towards Chinese spirits, by consumer classification, March 2015
                                                                                                                                        • Appendix – Market Size and Forecast

                                                                                                                                            • Figure 51: Retail sales of Chinese spirits, by volume, 2010-20
                                                                                                                                            • Figure 52: Retail sales of Chinese spirits, by value, 2010-20

                                                                                                                                        Companies Covered

                                                                                                                                        To learn more about the companies covered in this report please contact us.

                                                                                                                                        Chinese Spirits - China - June 2015

                                                                                                                                        £3,273.18 (Excl.Tax)