How is the Coronavirus affecting Chinese Consumption?
The big picture
China’s consumer market is worth $5 trillion and will grow to $15 trillion by 2030 as an increasing share of economic growth comes from consumption. Despite disruption caused by the coronavirus, China’s economy will still grow by 2.6% in 2020 which makes it the one of few economies expected to grow in this year. This is 2x and 4x the projected growth rates of the US and EU, respectively, which are still reeling from the ongoing impact of the Coronavirus. This means China remains the largest driver of global economic growth.
Chinese consumers are spending, adapting
Chinese consumers are still buying their favorite foods and beverages, particularly imports. They’ve simply turned to making purchases online. Over 85% of Chinese already shop online. Chinese spent $1.5 trillion online in 2019. Online spending has increased by 25% CAGR over the last few years. The current situation will accelerate this trend.
Among the biggest winners are imported beer, wine, spirits, and ready-to-drink (RTD) beverages. Three major trends have made this possible: culture, changing tastes, ease of buying. Chinese prefer to drink in intimate settings with friends and family. Spending more time at home has reinforced this, resulting in people merely shifting from drinking to bars to drinking with friends and family at home.
Chinese, particularly younger generations, are turning away from China’s traditional spirit—baijiu. They instead seek novel beer flavors, wine, and imported spirits. Buying online is easy in China and same day delivery common. Chinese consumers are also more open to taking a chance on a new brand. Consumers can order a new bourbon whiskey in the morning to share with friends in the evening.
The bottom line
Although the coronavirus is disrupting China’s export sector, Chinese consumers’ dream of an American lifestyle is alive and well. For drinkers, more of that is simply moving from the bar to the living room to be enjoyed with friends over spicy hotpot.
New brands can tap into this growing demand for imported consumer goods. China is entering a new phase of consumption-driven growth. What’s more, Chinese economic life has already begun to return to normal. With the right strategy and early entry, brands can enjoy excellent long-term profits.