This is the first article in our four-part series on the advantages and disadvantages of selling alcohol in each of the Greater China markets—Mainland China, Hong Kong, Macau, and Taiwan. The focus is on the importation, sales and promotion of foreign alcoholic products. In this article, we will discuss the largest of the four markets – Mainland China.
Advantages of Selling Alcohol in the Mainland
Extremely large market
China is the fastest-growing consumer market in the world. In terms of growth in the drinks, mixology, and spirits sectors, it is considered one of the most exciting markets for foreign companies. There are more than enough opportunities waiting for firms, so long as they find the right niche for their products.
At US$190.2 billion, the largest segment in China’s alcohol market is spirits, with baijiu taking the biggest share. Over all, the market accounted for 32.8% of the global share and 52.3% of the Asia-Pacific regional share in 2016. The wine market is also booming, with sales expected to reach US$21 billion in 2020. China’s beer market is projected to reach US$99.3 billion by 2019.
High growth potential
Alcohol consumption in China has changed over the years, set to reach approximately 65 billion liters by 2020. Spirits consumption reached 8.4 billion liters in 2016 and it is expected to grow at a compound annual growth rate (CAGR) of 15% over the next three years. Annual beer consumption is at 45.7 billion liters, the largest in the world.
In terms of sales potential, companies can depend on the Chinese’s growing desire for premium and foreign alcohols. Increased exposure to foreign lifestyles has paved the way for the rise of global consumer culture in the country. Many are optimistic that this interest will continue to increase far into the future.
Surging per capita disposable income
In 2017, China’s per capita disposable income increased by 9% at almost ¥26,000 (US$4,000). This was mainly due to the country’s stable economic growth. Higher incomes mean higher consumption Chinese consumers, driven in large part by the growing middle class.
Increased disposable income allows the purchase of premium and more expensive goods. In the past years, there is an unprecedented rise in consumption of foreign alcohols. Demand is high for better-quality premium booze, especially among young drinkers. Because of this, more opportunities are opening for importers in the country.
Disadvantages of Selling Alcohol in the Mainland
Understanding a complex market like China’s can be taxing for alcohol companies. For instance, consumer behavior in China is decidedly different compared to Western markets and cannot be easily compared to other Asian markets, such as Japan. Culture plays an important part in the Chinese’s preference for alcohol. Their drinking habits differ across regions and age groups. Finding the right niche for a product can be difficult, especially without a local.
China’s alcohol consumer market is not homogeneous. There are substantial variations in the Chinese’s shopping habits and spending ability based on tier. Large producers tend to focus on urban areas and coastal provinces where markets are large and profitable or work with distributors in China with regional or national reach. Small businesses usually find partners in local or provincial distributors to bring in products to their target market. For companies, success may rely on their choice of local partners and sales/distribution channels.
Consumers are less familiar with foreign alcohols
A majority of the Chinese consumers remain unfamiliar with imported alcohols. This makes educating them important to sellers. Many organize events to create brand awareness and increase demand and familiarity. By teaching consumers about the product’s quality, varieties, history, and culture, companies can acquire loyal clients. These take a lot of time, planning, and organizational skills.
Closing Thoughts on the Mainland China Market
While sales potential is high in China’s alcohol market, its complex and fragmented nature poses a huge challenge for foreign businesses. Depending on the company’s resources, long-term and short-term goals, this market may be a good choice. Otherwise, one of the other Greater China markets is worth considering when deciding where and how to develop their business.