China presents ‘significant opportunity’ for spirits brands

31st May, 2018 by Owen Bellwood

China’s spirits market may be dominated by baijiu, but there is a “significant opportunity” for international brands to steal share as the country’s middle class population grows.

Baijiu-China

China presents a “significant opportunity” for mid-range international brands

A new report published by analytics firm Global Data suggests that there may be “significant market penetration opportunity for mid-range western brands” in China.

The country has a growing luxury consumer base among the urban population, and in 2016 it was the world’s largest alcoholic drinks market by both volume and value.

International spirits producers are already seeing the potential the Chinese market offers. Chinese New Year drove Pernod Ricard’s revenue up by 9.3% on an organic basis in the quarter to March 2018, primarily due to growth in sales of its Martell Cognac brand.

Amy Walker, consumer research leader at Global Data, said: “All this luxury international spirit growth speaks of the tail end of the anti-corruption drive, which brought down such sales earlier this decade.

“A focus on fast growth can exaggerate the reality – which is that the majority of the Chinese spirits market is still dominated by baijiu.

“Retail sales of speciality spirits (including baijiu) in China are well into the hundreds of billions of US dollars. A significant market penetration opportunity would be for mid-range international brands to challenge the local spirit baijiu and this will not be an easy displacement.”

Across China, there is also a growing thirst for luxury whisky, with young high-net-worth individuals often spending US$80 and upwards on a bottle.

Last year, Global Data forecast that spirits sales in China would more than double in the next five years, with speciality spirits such as baijiu and soju continuing to dominate the market.

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