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Spirits - China - September 2014

Published By :

Mintel

Published Date : Sep 2014

Category :

Alcoholic Beverages

No. of Pages : 265 Pages

The forty percentage point increase in the spirits market in 2010 seems to be a distant memory now. The golden ten years of the spirits market ended in such an abrupt way that few could ever have rightly predicted it happening. The shrinking high-end segment and the subsequently over-crowded mid-range have made life difficult for spirits brands in 2012/13, with the growth rate of spirits market in value terms shrinking to only 13%. Mintel’s 2014 forecast puts the growth rate at merely 6.4%, just a couple of percentage points above the inflation rate, making it the worst performance since the start of the golden ten years at the beginning of 2000.

Baijiu is under pressure from both the regulatory perspective and the competition from its main rivalry, Western spirits. Although baijiu maintains 98% of the market share, its core user base, men in their thirties and forties and consumers from tier one cities, are showing signs of decline. In order to shield itself from the competition, baijiu brands will need to address consumers’ concerns over its health implications and strong taste by offering milder and lighter versions of baijiu. An original liquid concept could also be utilised to solidify baijiu’s presence in lower tier cities.

Western spirits are facing different types of challenges. Lack of knowledge makes adoption of Western spirits a slow and costly process. With the initial hype dying out, Western spirits brands are in the right place to nurture the market to achieve more sustainable growth in the future.
Table of Content

Introduction

Methodology
Limitation
Definitions
Abbreviation

Executive Summary

The painful reshuffle leads to a sustainable growth in the future
Figure 1: Best- and worst-case forecast of China retail value sales of spirits, 2009-19
Gender barriers most pronounced in baijiu category
Figure 2: Reasons for not drinking baijiu, June 2014
Lack of knowledge stops consumers from drinking Western spirits
Figure 3: Reasons for not drinking Western spirits, June 2014
Spirits users’ willingness to trade up is high
Figure 4: General attitudes towards drinking spirits, June 2014
The eagerness to see product innovation is high in the baijiu category
Figure 5: Attitudes towards production innovation concepts for baijiu, June 2014
What we think

Insights and Issues

Is the knowledge barrier of Western spirits breakable?
The facts
The implications
Is drinking at home showing potential in the spirits market?
The facts
The implications
Are milder, healthier baijiu products showing potential among the young?
The facts
The implications
How to make baijiu more suitable for women?
The facts
The implications

Trend Applications

Make it Mine
Guiding Choice
Prove it

Market Drivers

Key points
Rising disposable income encourages consumers to trade up…
Figure 6: Disposable income per capita household in urban China, 2005-13
… but the ongoing anti-extravagance campaign will drive spirits prices down
Rising food prices further squeeze baijiu brands’ profits…
Figure 7: Wholesale prices of key staples in China, 2009-14
… but the consumption tax reform is likely to ease the pressure

Market Size and Forecast

Key points
The end of the golden ten years and the new start of the spirits market
Figure 8: Value and volume sales for Chinese spirits, 2009-19
Figure 9: Value and volume sales for Western spirits
The painful reshuffle leads to a sustainable growth in the future
Figure 10: Best- and worst-case forecast of China retail value sales of spirits, 2009-19
Figure 11: Best- and worst-case forecast of China retail volume sales of spirits, 2009-19
Profit being squeezed in the baijiu category
Figure 12: Best- and worst-case forecast of China retail value sales of Chinese spirits, 2009-19
Figure 13: Best- and worst-case forecast of China retail volume sales of Western spirits, 2009-19
Fluctuation in the Western spirits market
Figure 14: Best- and worst-case forecast of China retail value sales of Western spirits, 2009-19
Figure 15: Best- and worst-case forecast of China retail volume sales of Western spirits, 2009-19
Forecast methodology

Market Segmentation

Key points
Western spirits are losing grounds
Figure 16: Segment performance of the spirits market in China, 2009-14
Different pictures within the Western spirits category
Figure 17: Market share changes from 2011-13 in the Western spirits category
Figure 18: Growth rate of selected types of drink in the Western spirits category, 2012-13

Market Share

Key points
The consolidation process in the baijiu category has ground to a halt
Figure 19: Market share of leading brands in the spirits category, by value, 2010-13
Figure 20: Market share of the top ten brands in the baijiu category

Brands and Companies

Leading baijiu brands
Yibin Wuliangye
Kweichow Moutai Co., Ltd
Leading Western spirits companies
Diageo Plc
Pernod Ricard S.A.

The Consumer – Drinking Habits for Spirits

Key points
Relatively low penetration of baijiu and Western spirits shows potential
Figure 21: Consumers’ drinking habits for spirits, June 2014
Baijiu is more popular among men, high earners, and those in lower tier cities
Figure 22: Consumers who drank baijiu in the past six months, by selected demographics, June 2014
High earners and people from tier one cities drink Western spirits more
Figure 23: Consumers who drank Western spirits in the past six months, by selected demographics, June 2014
Guangzhou stands out with highest Western spirits penetration
Figure 24: Consumers who drank Western spirits in the past six months, by regions, June 2014
Consumers in their thirties and low earners more likely to be non-drinkers of spirits
Figure 25: Non-drinkers of spirits, by selected demographic groups, June 2014

The Consumer – Reasons for Not Drinking Baijiu

Key points
Gender barriers most pronounced in baijiu category
Figure 26: Reasons for not drinking baijiu, June 2014
Figure 27: Flavoured sake products launched in Japan 2010-12
Older non-drinkers tend to consider baijiu as “old fashioned”
Health implications and baijiu’s strong taste deter consumers from drinking
Price barrier is very limited in the baijiu category
Milder baijiu products appeal to the young
Figure 28: Selected reasons for not drinking baijiu, by age group, June 2014
Taste barrier more pronounced among women
Young non-drinkers feel that baijiu is not for their age
Figure 29: Agreement with the statement “Baijiu is not suitable for people of my age”, by age, June 2014
Geographic location is no longer a good indicator
Figure 30: Selected reasons for not drinking baijiu, by region, June 2014

The Consumers – Willingness to Try Baijiu

Key points
More than one in three non-drinkers of baijiu are willing to try
Figure 31: Willingness to try baijiu in the next six months, June 2014
Young consumers, high earners are more likely to try baijiu
Figure 32: Willingness to try baijiu in the next six months, by selected demographics, June 2014
Non-drinkers from Chengdu are less likely to try
Figure 33: Non-drinkers who are not willing to try baijiu, by region, June 2014

The Consumer – Reasons for Not Drinking Western Spirits

Key points
Lack of knowledge stops consumers from drinking Western spirits
Figure 34: Reasons for not drinking Western spirits, June 2014
Figure 35: Agreement with the statement “I know little about Western spirits”, by selected demographics, June 2014
Peer pressure remains as a key barrier
Figure 36: Most popular reasons for not drinking Western spirits, by demographics, June 2014
Non-drinkers worry about counterfeit Western spirits
Specially designed drinks for women do not appeal to the majority of female non-drinkers
Figure 37: Willingness to try Western spirits, by next most popular reasons for not drinking Western spirits, June 2014
Health concerns deter tier one consumers and mid earners
Figure 38: The agreement with the statement “Western spirits are not good for health” by selected demographics, June 2014

The Consumer – Willingness to Try Western Spirits

Key points
More than half of non-drinkers willing to try
Figure 39: Willingness to try Western spirits, June 2014
Figure 40: Willingness to try Western spirits, by demographics, June 2014
Shanghai as a market shows limited potential to expand
Figure 41: Willingness to try Western spirits, by demographics, June 2014

The Consumer – Drinking Occasions For Western Spirits

Key points
Repertoire consumption is widely seen in the Western spirits market
Figure 42: Drinking occasions of Western spirits in the past six months, June 2014
Drinking-at-home occasion is on the rise for Western spirits
Socialising with friends is the most popular occasion

The Consumer – Users of Different Types of Western Spirits

Key points
Whisky attracts older consumers and mid-to-high earners
Figure 43: Whisky users in past six months, by selected demographics, June 2014
Brandy more appealing to high earners and consumers in their forties
Figure 44: Brandy users in past six months, by selected demographics, June 2014
At-home occasions popular among women in their forties
Figure 45: Spirits users who drank brandies at home in past six months, by selected demographics, June 2014
Women in their twenties show potential to become users of brandy
Figure 46: Spirits drinkers who did not drink brandy in the past six months, by gender and age, June 2014
Women in their forties are more likely to drink gin
Figure 47: Gin users in the past six months, by selected demographics, June 2014
Vodka holds a premium image
Figure 48: Users of vodka in the past six months, by personal income, June 2014

The Consumer – Users and Drinking Occasions of Baijiu

Key points
Baijiu is unnecessarily perceived as an old man’s drink
Figure 49: Users of baijiu in the past six months, by gender and age, June 2014
Figure 50: The usage of baijiu, by drinking occasions, June 2014
Socialising with friends a popular drinking occasion for consumers from the north
Figure 51: Users who drunk baijiu when socialising with friends in the past six months, by regions, June 2014

The Consumer – General Attitudes towards Drinking Spirits

Key points
Spirits users’ willingness to trade up is high…
Figure 52: General attitudes towards drinking spirits, June 2014
… but promotion deals are still welcomed
Word of mouth as an information channel is getting increasingly important
Health concerns hit baijiu consumption
Figure 53: Agreement with the statement “I am drinking less spirits compared to six months ago due to health concerns”, by type of spirits drunk, June 2014
Men show greater interests in spirits’ taste and flavour
Figure 54: Agreement of selected attitude statements, by gender, June 2014
Mobile phones and in-store information channels work better with Western spirits
Figure 55: Agreement of selected attitude statements, by types of spirits drinkers, June 2014
Regional differences play a key part
Figure 56: Attitudes towards drinking baijiu with specific flavours, by region, June 2014
Figure 57: Attitudes towards drinking Western spirits with authentic taste, by region, June 2014
Different types of Western spirits show disparity in attitudes
Figure 58: Selected general attitudes towards spirits, by different types of Western spirits, June 2014
At-home occasion for baijiu shows potential
Figure 59: Selected general attitudes towards spirits, by drinking occasions, June 2014

The Consumer –Innovation for Baijiu

Key points
The original liquid shows potential to appeal to the core user group of baijiu
Figure 60: Attitudes towards production innovation concepts for baijiu, June 2014
Highlighting mixability of baijiu makes it appealing to women

The Consumer – Product Innovation for Western Spirits

Key points
Unique and innovative packaging shows potential
Figure 61: Attitudes towards production innovation concepts for Western spirits, June 2014
Figure 62: Medea vodka launched in the US in Q2 2013
Single malt whisky shows potential
Figure 63: Attitudes towards single malt whisky for Western spirits, June 2014
Women shows greater interests in production innovation in Westerns spirits category
Women are more willing to join both online and offline activities
RTD drinks appeal to women
Limited edition appeals to female drinkers in their forties

Appendix – Drinking Habits in the Last Six Months

Figure 64: Consumers\' drinking habits for spirits, June 2014
Figure 65: Consumers\' drinking habits for spirits, by demographics, June 2014

Appendix – Reasons for Not Drinking Baijiu in the Last Six Months

Figure 66: Reasons for not drinking baijiu, June 2014
Figure 67: Most popular reasons for not drinking baijiu, by demographics, June 2014
Figure 68: Next most popular reasons for not drinking baijiu, by demographics, June 2014
Figure 69: Reasons for not drinking baijiu, by willingness to try baijiu, June 2014

Appendix – Willingness to Try Baijiu

Figure 70: Willingness to try baijiu, by demographics, June 2014
Figure 71: Willingness to try baijiu, by most popular reasons for not drinking baijiu, June 2014
Figure 72: Willingness to try baijiu, by next most popular reasons for not drinking baijiu, June 2014

Appendix – Reasons for Not Drinking Western Spirits in the Last Six Months

Figure 73: Reasons for not drinking Western spirits, June 2014
Figure 74: Most popular reasons for not drinking Western spirits, by demographics, June 2014
Figure 75: Next most popular reasons for not drinking Western spirits, by demographics, June 2014
Figure 76: Reasons for not drinking Western spirits, by Willingness to try Western spirits, June 2014

Appendix – Willingness to Try Western Spirits

Figure 77: Willingness to try Western spirits, by demographics, June 2014
Figure 78: Willingness to try Western spirits, by most popular reasons for not drinking Western spirits, June 2014
Figure 79: Willingness to try Western spirits, by next most popular reasons for not drinking Western spirits, June 2014

Appendix – Drinking Occasions in the last 6 Months

Figure 80: Drinking occasions of Western spirits, June 2014
Figure 81: Drinking occasions of Western spirits, June 2014
Figure 82: Drinking occasions of baijiu, June 2014
Figure 83: Drinking occasions of baijiu, June 2014
Figure 84: Most popular drinking occasions of Western spirits – Western spirits, by demographics, June 2014
Figure 85: Next most popular drinking occasions of Western spirits – Western spirits, by demographics, June 2014
Figure 86: Most popular drinking occasions of Western spirits – Whisky/bourbon, by demographics, June 2014
Figure 87: Next most popular drinking occasions of Western spirits – Whisky/bourbon, by demographics, June 2014
Figure 88: Most popular drinking occasions of Western spirits – Brandy/Armagnac/Cognac, by demographics, June 2014
Figure 89: Next most popular drinking occasions of Western spirits – Brandy/Armagnac/Cognac, by demographics, June 2014
Figure 90: Most popular drinking occasions of Western spirits – Gin, by demographics, June 2014
Figure 91: Next most popular drinking occasions of Western spirits – Gin, by demographics, June 2014
Figure 92: Most popular drinking occasions of Western spirits – Vodka, by demographics, June 2014
Figure 93: Next most popular drinking occasions of Western spirits – Vodka, by demographics, June 2014
Figure 94: Most popular drinking occasions of Western spirits – Tequila, by demographics, June 2014
Figure 95: Next most popular drinking occasions of Western spirits – Tequila, by demographics, June 2014
Figure 96: Most popular drinking occasions of Western spirits – Liqueurs, by demographics, June 2014
Figure 97: Next most popular drinking occasions of Western spirits – Liqueurs, by demographics, June 2014
Figure 98: Most popular drinking occasions of Western spirits – Cocktail, by demographics, June 2014
Figure 99: Next most popular drinking occasions of Western spirits – Cocktail, by demographics, June 2014
Figure 100: Most popular drinking occasions of Western spirits – Rum, by demographics, June 2014
Figure 101: Next most popular drinking occasions of Western spirits – Rum, by demographics, June 2014
Figure 102: Most popular drinking occasions of Western spirits – Wine, by demographics, June 2014
Figure 103: Next most popular drinking occasions of Western spirits – Wine, by demographics, June 2014
Figure 104: Most popular drinking occasions of Western spirits – Other Western spirits, by demographics, June 2014
Figure 105: Next most popular drinking occasions of Western spirits – Other Western spirits, by demographics, June 2014
Figure 106: Most popular drinking occasions of Western spirits – Don’t remember, by demographics, June 2014
Figure 107: Next most popular drinking occasions of Western spirits – Don’t remember, by demographics, June 2014
Figure 108: Most popular drinking occasions of baijiubaijiu, by demographics, June 2014
Figure 109: Next most popular drinking occasions of baijiubaijiu, by demographics, June 2014
Figure 110: Drinking occasions of Western spirits, by repertoire of drinking occasions of Western spirits, June 2014
Figure 111: Attitudes towards drinking spirits, by repertoire of drinking occasions of Western spirits, June 2014

Appendix – General Attitudes towards Drinking Spirits

Figure 112: Attitudes towards drinking spirits, June 2014
Figure 113: Attitudes towards drinking spirits – Consumption behaviour, by demographics, June 2014
Figure 114: Attitudes towards drinking spirits – Information channel, by demographics, June 2014
Figure 115: Attitudes towards drinking spirits – Price and promotion, by demographics, June 2014
Figure 116: Attitudes towards drinking spirits, by drinking occasions of spirits – Western spirits, June 2014
Figure 117: Attitudes towards drinking spirits, by most popular drinking occasions of spirits – Whisky/bourbon, June 2014
Figure 118: Attitudes towards drinking spirits, by next most popular drinking occasions of spirits – Whisky/bourbon, June 2014
Figure 119: Attitudes towards drinking spirits, by most popular drinking occasions of spirits – Brandy/Armagnac/Cognac, June 2014
Figure 120: Attitudes towards drinking spirits, by next most popular drinking occasions of spirits – Brandy/Armagnac/Cognac, June 2014
Figure 121: Attitudes towards drinking spirits, by most popular drinking occasions of spirits – Gin, June 2014
Figure 122: Attitudes towards drinking spirits, by next most popular drinking occasions of spirits – Gin, June 2014
Figure 123: Attitudes towards drinking spirits, by most popular drinking occasions of spirits – Vodka, June 2014
Figure 124: Attitudes towards drinking spirits, by next most popular drinking occasions of spirits – Vodka, June 2014
Figure 125: Attitudes towards drinking spirits, by most popular drinking occasions of spirits – Tequila, June 2014
Figure 126: Attitudes towards drinking spirits, by next most popular drinking occasions of spirits – Tequila, June 2014
Figure 127: Attitudes towards drinking spirits, by most popular drinking occasions of spirits – Liqueurs, June 2014
Figure 128: Attitudes towards drinking spirits, by next most popular drinking occasions of spirits – Liqueurs, June 2014
Figure 129: Attitudes towards drinking spirits, by most popular drinking occasions of spirits – Cocktail, June 2014
Figure 130: Attitudes towards drinking spirits, by next most popular drinking occasions of spirits – Cocktail, June 2014
Figure 131: Attitudes towards drinking spirits, by drinking occasions of spirits – Rum, June 2014
Figure 132: Attitudes towards drinking spirits, by drinking occasions of spirits – Wine, June 2014
Figure 133: Attitudes towards drinking spirits, by drinking occasions of spirits – Other Western spirits, June 2014
Figure 134: Attitudes towards drinking spirits, by drinking occasions of spirits – Don’t remember, June 2014

Appendix – Attitudes towards New Product Innovation Concepts in Baijiu

Figure 135: Attitudes towards new product innovation concepts in baijiu, June 2014
Figure 136: Interest in the statement ‘Products containing added traditional Chinese medicine ingredients’, by demographics, June 2014
Figure 137: Interest in the statement ‘The original liquid without being blended’, by demographics, June 2014
Figure 138: Interest in the statement ‘Products suitable for mixing with other alcoholic beverages/soft drinks’, by demographics, June 2014
Figure 139: Interest in the statement ‘Packages designed for special occasions’, by demographics, June 2014
Figure 140: Interest in the statement ‘Fashionable packaging’, by demographics, June 2014
Figure 141: Interest in the statement ‘Products designed for the young^’, by demographics, June 2014
Figure 142: Interest in the statement ‘Products designed for women^^’, by demographics, June 2014
Figure 143: Interest in the statement ‘baijiu with milder taste’, by demographics, June 2014
Figure 144: Interest in the statement ‘Products with low alcohol content’, by demographics, June 2014
Figure 145: Interest in the statement ‘Products from well-known brands but lower priced’, by demographics, June 2014
Figure 146: Interest in the statement ‘Products in small pack’, by demographics, June 2014

Appendix – Attitudes towards New Product Innovation Concepts in Western Spirits

Figure 147: Attitudes towards new product innovation concepts in Western spirits, June 2014
Figure 148: Interest in the statement ‘Packaging with Chinese elements’, by demographics, June 2014
Figure 149: Interest in the statement ‘Limited edition especially for Chinese market’, by demographics, June 2014
Figure 150: Interest in the statement ‘Western spirits designed for women^’, by demographics, June 2014
Figure 151: Interest in the statement ‘Ready-to-drink spirits drinks’, by demographics, June 2014
Figure 152: Interest in the statement ‘Products with customized taste for Chinese consumers’, by demographics, June 2014
Figure 153: Interest in the statement ‘Products with a brochure about drinking knowledge’, by demographics, June 2014
Figure 154: Interest in the statement ‘Products offering offline brand/membership activities’, by demographics, June 2014
Figure 155: Interest in the statement ‘Products offering online brand/membership activities’, by demographics, June 2014
Figure 156: Interest in the statement ‘Western spirits with more accessible price’, by demographics, June 2014
Figure 157: Interest in the statement ‘Fashionable/unique packaging design^^’, by demographics, June 2014
Figure 158: Interest in the statement ‘Innovative gift packaging^^’, by demographics, June 2014
Figure 159: Interest in the statement ‘Western spirits with additional flavours^^’, by demographics, June 2014
Figure 160: Interest in the statement ‘Single malt whisky^^^’, by demographics, June 2014

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