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Western Spirits - China - September 2015

“Given the complexity of the drinking culture in China and the wide range of products within the Western spirits market, one-for-all marketing communication and product design are no longer fit for purpose. Further segmentation based on regional differences at city level is needed to triumph in the market.”

- David Zhang, Senior Drink Analyst

This report covers the following areas:

  • How to utilise the evolving regional differences
  • How to target the fast-changing female segment
The post anti-extravagance campaign era requires Western spirits brands to be more vigilant when identifying emerging consumer trends and proactive when acting upon them. Relatively high penetration combined with low retention rate means the competition in the market is less about widening the user base and more about creating a Western spirits drinking culture.
 

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Table of contents

  1. Introduction

      • Definition
        • Methodology
        • Executive Summary

            • The market
              • Figure 1: Fan chart of Western spirits market in value terms in China, 2010-20
              • Figure 2: Fan chart of Western spirits market in volume terms in China, 2010-20
            • New era of O2O could give Western spirits market a boost
              • The new normality stabilises the market
                • Depreciation of Renminbi offsets the repositioning efforts
                  • Companies and brands
                    • The market is becoming increasingly fragmented
                      • Diageo gains market share from Pernod Ricard
                        • Decline in marketing investment poses challenges to refocus on consumer-driven demand
                          • Who’s innovating?
                            • Flavoured alcoholic drinks on the rise
                              • Figure 3: New launches in East Asia market of flavoured alcoholic drinks, 2010-14
                            • Ethical claims show potential
                              • Figure 4: Claims of newly launched flavoured alcoholic drinks in East Asia, 2010-14
                            • Glass bottles become increasingly popular
                              • Figure 5: Packaging materials used by newly launched RTD in East Asia market, 2010-14
                            • The consumer
                              • The penetration of Western spirits is still trailing behind
                                • Figure 6: Penetration of different types of alcoholic drinks, June 2015
                              • Casual social occasions stand out
                                • Figure 7: Drinking occasions for alcoholic drinks, June 2015
                                • Figure 8: Penetration of different occasions among Western spirits drinkers, June 2015
                              • Chinese full-service restaurants posing as the key drinking location
                                • Figure 9: Drinking location of alcoholic drinks, June 2015
                              • Overseas stands out as the top purchase channel
                                • Figure 10: Retail purchase channels of Western spirits drinks, June 2015
                              • Challenge remains for brands to retain their consumers
                                • Figure 11: Change in drinking behaviour, by types of Western spirits, June 2015
                              • Strong association with business occasions hampers the restructuring efforts of brandy brands
                                • Figure 12: Reasons for not drinking brandies, June 2015
                              • Western spirits are shaking the premium image off
                                • Figure 13: Correspondence analysis, June 2015
                              • Brand extension from leading Western spirits operators shows potential
                                • Figure 14: Attitudes towards RTD alcoholic drinks, June 2015
                              • What we think
                              • Issues and Insights

                                  • How to utilise the evolving regional differences
                                    • Issues
                                      • Implications
                                        • Figure 15: Penetration of drinking alcoholic drinks when socialising with families, by city, June 2015
                                        • Figure 16: Penetration of drinking alcoholic drinks at selected locations, by city, June 2015
                                        • Figure 17: Association with the attribute ‘can reflect my good taste’ when drinking whisky and brandy, by city, June 2015
                                      • How to target the fast-changing female segment
                                        • Issues
                                          • Implications
                                            • Figure 18: Penetration of drinking alcoholic beverages at full-service Chinese restaurants, by gender and age, June 2015
                                            • Figure 19: Dadong’s winter special food pairing event partnered with Martell, Q4 2013
                                            • Figure 20: Penetration of drinking alcoholic beverages at Western full-service restaurants, by gender and age, June 2015
                                        • Market Drivers and Barriers

                                          • Key points
                                            • Market drivers
                                              • New era of O2O could give Western spirits market a boost
                                                • The new normality stabilises the market
                                                  • Market barriers
                                                    • Depreciation of Renminbi offsets the repositioning efforts
                                                      • Figure 21: The daily average exchange rate (US Dollar to RMB), August 2013-August 2015
                                                  • Market Size and Forecast

                                                    • Key points
                                                      • The market is calming down
                                                        • Figure 22: The Western spirits retail market in China, 2010-20
                                                      • The recovery will be slow but steady
                                                        • Figure 23: Fan chart of Western spirits market in value terms in China, 2010-20
                                                        • Figure 24: Fan chart of Western spirits market in volume terms in China, 2010-20
                                                      • Forecast methodology
                                                      • Market Share

                                                        • Key points
                                                          • Market is becoming increasingly fragmented
                                                            • Figure 25: Value and volume share of China’s Western spirits retail market, 2013 and 2014
                                                          • Diageo gains market share from Pernod Ricard
                                                          • Key Players – What You Need To Know

                                                            • Decline in marketing investment poses challenges to refocus on consumer-driven demand
                                                              • Food pairing gains momentum
                                                                • E-commerce plays a crucial role in helping Western spirits brands to reach more people
                                                                  • Competition in the RTD segment is intensifying
                                                                  • Who’s Innovating?

                                                                    • Key points
                                                                      • Flavoured alcoholic drinks on the rise
                                                                        • Figure 26: New launches in East Asia market of flavoured alcoholic drinks, 2010-14
                                                                      • Ethical claims show potential
                                                                        • Figure 27: Claims of newly launched flavoured alcoholic drinks in East Asia, 2010-14
                                                                      • Glass bottles become increasingly popular
                                                                        • Figure 28: Packaging materials used by newly launched RTD drinks in East Asia market, 2010-14
                                                                    • The Consumer – Penetration of Different Types of Alcoholic Drinks

                                                                      • Key points
                                                                        • The penetration of Western spirits is still trailing behind
                                                                          • Figure 29: Penetration of different types of alcoholic drinks, June 2015
                                                                        • The mass market has not been fully exploited
                                                                          • Figure 30: Usage of Western spirits, by household monthly income, June 2015
                                                                        • RTD and cocktails are gaining popularity among female consumers
                                                                          • Figure 31: Penetration of selected types of alcoholic drinks, by gender, June 2015
                                                                      • The Consumer – Drinking Occasions

                                                                        • Key points
                                                                          • Casual social occasions stand out
                                                                            • Figure 32: Drinking occasions for alcoholic drinks, June 2015
                                                                            • Figure 33: Penetration of different occasions among Western spirits drinkers, June 2015
                                                                          • Income barrier does not exist on casual social occasions
                                                                            • Figure 34: Selected drinking occasions, by monthly household income, June 2015
                                                                          • Consumers from the North are more likely to drink alcoholic drinks when socialising with their families
                                                                            • Figure 35: Penetration of drinking alcoholic drinks when socialising with families, by city, June 2015
                                                                        • The Consumer – Drinking Locations

                                                                          • Key points
                                                                            • Chinese full-service restaurants posing as the key drinking location
                                                                              • Figure 36: Drinking location of alcoholic drinks, June 2015
                                                                            • The complexity of regional difference poses a challenges for Western spirits brands
                                                                              • Figure 37: Penetration of drinking alcoholic drinks at selected locations, by city, June 2015
                                                                              • Figure 38: Absolut Vodka, limited Chicago edition, Q2 2013
                                                                            • Chinese full-service restaurants are less appealing to young female drinkers
                                                                              • Figure 39: Penetration of drinking alcoholic beverages at full-service Chinese restaurants, by gender and age, June 2015
                                                                              • Figure 40: Dadong’s winter special food pairing event partnered with Martell, Q4 2013
                                                                            • The mid-range alcoholic drink is missing in KTV venues
                                                                              • Figure 41: Penetration of drinking alcoholic beverages at KTVs, by monthly household income, June 2015
                                                                            • Western full-service restaurants are more likely to attract female consumers in their thirties
                                                                              • Figure 42: Penetration of drinking alcoholic beverages at Western full-service restaurants, by gender and age, June 2015
                                                                            • Foshan consumers stand out as more sophisticated than average
                                                                              • Figure 43: Penetration of drinking alcoholic beverages at selected locations, by city, June 2015
                                                                          • The Consumer – Purchase Channels

                                                                            • Key points
                                                                              • Online channels are crucial to Western spirits
                                                                                • Figure 44: Percentage difference between the penetration of offline and online channels, by types of alcoholic drinks, June 2015
                                                                              • Overseas purchase stands out as the top purchase channel
                                                                                • Figure 45: Retail purchase channels of Western spirits drinks, June 2015
                                                                            • The Consumer – Changes in Drinking Behaviour

                                                                              • Key points
                                                                                • Challenge remains for brands to retain their consumers
                                                                                  • Figure 46: Change of drinking behaviour, by types of Western spirits, June 2015
                                                                                • Little price barrier in the vodka segment
                                                                                  • Figure 47: Penetration of different types of Western spirits, by personal monthly income, June 2015
                                                                                • Liqueur is missing opportunities in the middle ground
                                                                                  • Figure 48: The penetration of liqueur, by monthly household income, June 2015
                                                                                • Gin is female consumers’ favourite
                                                                                  • Figure 49: Penetration of gin, by gender, June 2015
                                                                              • The Consumer – Reasons for Not Drinking Brandies

                                                                                • Key points
                                                                                  • Strong association with business occasions hampers the restructuring efforts of brandy brands
                                                                                    • Figure 50: Reasons for not drinking brandies, June 2015
                                                                                  • The perception of being suitable for older consumers limits the develop of brandy market
                                                                                    • Affordability is no longer the key reason for not drinking
                                                                                    • The Consumer – Attributes Associated with Different Types of Western Spirits

                                                                                      • Key points
                                                                                        • Western spirits are shaking the premium image
                                                                                          • Figure 51: Correspondence analysis, June 2015
                                                                                        • Liqueur is free from cannibalism from within the Western spirits category
                                                                                          • Food pairing remains a challenge
                                                                                            • Gin bears a fashionable image
                                                                                                • Figure 52: Pink 47 London dry gin from Old St Andrews launched in Germany, Q3 2015
                                                                                              • Innovative flavours show potential as a premiumisation route
                                                                                                • Figure 53: Association with the attribute ‘offering innovative flavours’ when drinking liqueur, by monthly household income, June 2015
                                                                                                • Figure 54: Rum orange liqueur from Santa Teresa, launched in Canada, Q2 2015
                                                                                            • The Consumer – Attitudes towards RTD Alcoholic Drinks

                                                                                              • Key points
                                                                                                • Brand extension from leading Western spirits operators shows potential
                                                                                                  • Figure 55: Attitudes towards RTD alcoholic drinks, June 2015
                                                                                                • At-home occasions show potential
                                                                                                    • Figure 56: Agreement with the statement “RTD alcoholic beverages are not suitable for drinking at home”, by gender, June 2015
                                                                                                  • International brands still have the chance to fight back
                                                                                                  • The Consumer – Cluster Analysis

                                                                                                    • Five consumer segments identified
                                                                                                      • Figure 57: Segmentation based on consumers’ general attitudes towards alcoholic drinks, June 2015
                                                                                                    • Wealthy conventional
                                                                                                      • Who are they?
                                                                                                        • What do they think in general?
                                                                                                          • What do they think about RTD alcoholic drinks?
                                                                                                            • Which type of alcoholic drinks do they like?
                                                                                                              • How to target them?
                                                                                                                • Wealthy Liberal
                                                                                                                  • Who are they?
                                                                                                                    • What do they think in general?
                                                                                                                      • What do they think about RTD alcoholic drinks?
                                                                                                                        • Which type of alcoholic drinks do they like?
                                                                                                                          • How to target them?
                                                                                                                            • Close-minded
                                                                                                                              • Who are they?
                                                                                                                                • What do they think in general?
                                                                                                                                  • What do they think about RTD alcoholic drinks?
                                                                                                                                    • Which type of alcoholic drinks do they like?
                                                                                                                                      • How to target them?
                                                                                                                                        • Foreign worshipper
                                                                                                                                          • Who are they?
                                                                                                                                            • What do they think in general?
                                                                                                                                              • What do they think about RTD alcoholic drinks?
                                                                                                                                                • Which type of alcoholic drinks do they like?
                                                                                                                                                  • How to target them?
                                                                                                                                                  • The Consumer – Meet the Mintropolitans

                                                                                                                                                    • Key points
                                                                                                                                                      • Why Mintropolitans?
                                                                                                                                                        • Who are they?
                                                                                                                                                            • Figure 58: Demographic profile of Mintropolitans vs. Non-Mintropolitans, by gender, age, and personal income
                                                                                                                                                            • Figure 59: Demographic profile of Mintropolitans vs Non-Mintropolitans, by marital status, city tier, and education level
                                                                                                                                                          • Brand extension strategies are more appealing to MinT consumers
                                                                                                                                                            • Figure 60: Selected statements regarding RTD alcoholic drinks, by types of consumer, June 2015

                                                                                                                                                        Companies Covered

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

                                                                                                                                                        Western Spirits - China - September 2015

                                                                                                                                                        £3,273.18 (Excl.Tax)