Consumption of foreign liquors such as whisky and brandy is gradually moving beyond nightlife venues, and leading international foreign liquor enterprises are more optimistic about the Chinese market. Recently, a reporter from China Business News learned that the preparation for exhibition booths at the China International Import Expo (hereinafter referred to as "CIIE") by several major well-known foreign liquor enterprises is well underway. This year’s booth area will continue to maintain high standards, and more new products will be brought to the expo.
These multinational liquor enterprises see more opportunities in Chinese young people. In the industry’s view, the trend of diversified alcohol consumption in China has become increasingly prominent, making incremental opportunities in the Chinese market more important.
Although the recovery of alcohol consumption in the Chinese market has been weak so far this year, the data on imported spirits remains impressive.
Not long ago, the China Chamber of Commerce for Import and Export of Foodstuffs, Native Produce and Animal By-Products (CCCFNA) released data on imported alcohol in the first half of 2023. The import volume of spirits in the six months reached 58.68 million liters, a year-on-year increase of 10.5%, and the import value hit 1.15 billion US dollars, a sharp year-on-year increase of 34.1%. After a slight decline in both volume and price of imported spirits in 2022, the import data in the first half of this year has returned to growth. Customs data shows that in July and August this year, the import value of imported spirits in the domestic market increased by 28.9% and 34.7% respectively.
From the perspective of the first-half import data, in terms of categories, the two popular spirits categories in recent years—brandy and whisky—have seen both volume and price rise. Among them, the import volume of brandy increased by 15.6%, and the value rose by 31.4% year-on-year. While the once red-hot whisky category in the previous two years has slowed down in growth, its volume and price still increased by 7.9% and 18.2% respectively.
In the industry’s opinion, the obvious recovery of imported spirits data in the first half of the year is related to the actions of several major well-known foreign liquor enterprises in the Chinese market.
Yang Zhengjian, Dean of WBO Wine Business School, told China Business News that imported spirits, especially brandy, have a high market concentration. The growth of the data also indirectly reflects that several major well-known foreign liquor enterprises have increased their investment in the Chinese market. The slowdown in whisky’s growth, however, is related to the industry’s self-adjustment; for example, some categories such as Japanese whisky grew too fast in the early stage, leading to a relatively large bubble.
It can also be seen from the financial reports released one after another recently that several major well-known foreign liquor enterprises achieved substantial revenues in the Chinese market in the first half of the year.
Diageo previously released its 2023 fiscal year performance report (ending June 30, 2023), showing that its net sales reached 17.113 billion pounds, with an organic year-on-year growth of 6%. Among them, the net sales in the Asia-Pacific region were 3.53 billion pounds, a year-on-year increase of 13%, and the sales of Scotch whisky in the Chinese market rose by 13% year-on-year.
Pernod Ricard Group achieved a revenue of 12.137 billion euros in the 2023 fiscal year (ending June 30, 2023), a year-on-year growth of 10%. Among them, the Asian market achieved net sales of 5.19 billion euros, a year-on-year increase of 17%, and the Chinese market’s net sales increased by 6% year-on-year. Its Cognac brand Martell and Scotch whisky performed better than market expectations, mainly driven by the recovery of consumer demand in the Asian region (represented by China) and global travel retail channels.
Earlier, the UK-based Edrington Group released its 2023 fiscal year annual report (ending March 31, 2023), showing that it achieved an annual revenue of approximately 1.28 billion pounds, a year-on-year growth of 30%. Although the financial report did not disclose the specific market growth, its whisky brands such as Macallan and Glenrothes are among the best-selling brands in the Chinese market.
Although major well-known foreign liquor enterprises (including those focusing on whisky) have long laid out their plans in the Chinese market, the proportion of foreign liquors in China’s spirits consumption was previously not high, believed to be around 2%. It took about a decade for this market share to rise from 1% to 2%, which is also related to Chinese consumers’ greater preference for Baijiu (traditional Chinese distilled liquor).
In recent years, the consumption of foreign liquors (including whisky) in China has shown a rapid upward trend. In the past two years, although the epidemic had a certain impact on the original consumption scenarios of foreign liquors (including whisky) such as nightlife venues, KTVs, and bars, the recovery of foreign liquor consumption (including whisky) this year is better than that of other alcohol types.
During the interview, the reporter found that on the one hand, with the iteration of consumer groups, young people’s alcohol consumption shows a diversified trend, and mainstream categories such as brandy and whisky have become one of their main choices; on the other hand, the epidemic has accelerated the expansion of foreign liquors (including whisky) beyond nightlife venues, and new scenarios such as family gatherings and parties have brought new growth drivers.
According to the report Alcohol for Young People previously released by Ries Strategy Positioning Consulting, among the options of "what kind of alcohol have you drunk most frequently in the past year", beer accounted for 40%, wine and fruit wine accounted for 20% and 16% respectively, while Baijiu and whisky each accounted for 9%.
Jeremy Speirs, Global Travel Retail Regional General Manager of Edrington Group, responded to China Business News that whisky is currently one of the fastest-growing categories in China’s imported alcohol market, and the demand for single malt whisky has grown more significantly, which also shows that Chinese consumers’ demand for high-end whisky products continues to increase. Consumers of different age groups are gradually taking whisky as part of their lifestyle; especially the younger generation, who are more interested and curious about foreign liquor consumption, which has also accelerated the cultivation of drinking habits of foreign liquors in scenarios such as wine pairing with meals and other occasions.
In Jeremy Speirs’ view, although many external factors have affected China’s alcohol consumption market in the past three to four years, Macallan’s sales in travel retail channels and the Chinese market have still maintained considerable growth, and the management is full of confidence in the growth of China’s whisky market.
It is worth noting that currently, well-known foreign liquor enterprises are all accelerating their layout in the Chinese market, but in a different way from the past—especially in the red-hot whisky category.
A reporter from China Business News noticed that as an imported product, whisky brands have long faced the challenge of consumer cultivation in the Chinese market. In the early days, most whisky brands adopted the method of introducing Western evaluation knowledge systems and consumption habits to cultivate the market. However, with the growth of whisky consumption in China, various well-known whisky brands have begun to change their approaches and explore localized ways to appeal to Chinese consumers.
On August 22, 2023, the Shanghai R&D Center invested in and built by Diageo in Shanghai was officially unveiled. This innovation center will be based on insights into local Chinese consumers and develop products that better meet the tastes and needs of Chinese and Asian consumers. In November 2021, Diageo announced an investment of 500 million yuan to build a whisky distillery in Eryuan, Yunnan, which is also its first malt whisky distillery in China and is expected to start production this year.
Pernod Ricard also announced the completion of its first whisky distillery in China in November 2011. In the past two years, Pernod Ricard has accelerated its localization, including launching products with Chinese elements, cooperating with Chinese catering businesses, and strengthening communication with Chinese consumers to speed up its layout in the Chinese market.
Macallan has also made a series of investments in the Chinese market. For example, at the end of 2022, Macallan opened the largest duty-free boutique in the global travel retail channel in Haikou, hoping to achieve mutual engagement with Chinese consumers through this move. At the same time, it has also launched more high-end whisky products such as the Zhencai Series in China.
In response to this, Jeremy Speirs told China Business News that China has now become one of the main markets for Macallan’s sales, and the retail performance of the Chinese market has exceeded expectations in growth. Therefore, continuous interaction with Chinese consumers has become more important, and providing richer consumption experiences for whisky enthusiasts is an important strategy for Macallan to open up China’s travel retail market.
In an interview at the previous China International Consumer Products Expo (CICPE), Jerome Cottin-Bizonne, Managing Director of Pernod Ricard China, also believed that Chinese consumers have a strong curiosity about new things. Recently, emerging foreign liquor categories such as single malt whisky and gin have become very popular in the Chinese market, and Pernod Ricard also needs to communicate more with consumers to seize market opportunities.
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