Economic Boom In China Sends Booze Market Skyrocketing

on 24/07/11 at 7:06 pm

Industry

China’s unprecedented economic growth has led to increased disposable income, which has caused a rise in consumption and changes in eating and drinking habits.

In terms of the country’s alcoholic beverage market, many consumers could afford only locally made alcoholic drinks prior to the economic boom.

But the rise of China’s middle class and increases in discretionary income have allowed many consumers to afford foreign-made and foreign-branded alcoholic beverages.

Changing social and cultural factors have also strengthened the potential of China’s alcoholic beverage market. China’s expanding pub culture has offered more avenues for people to consume alcohol. In addition, a rise in the number of women who consume alcohol—especially wine—has expanded the China market. Overall, Chinese consumers are increasingly willing to try new varieties of alcoholic beverages.

To successfully tap China’s alcoholic beverage market, companies must overcome certain obstacles. For example, companies must determine how to alter or market their products to appeal to Chinese consumer tastes and increasing health concerns. They must also maneuver through a changing regulatory environment. Companies that closely track market developments are on the path to success.

Drinks Of Choice

Grain-based alcohol used in spirits is the earliest known alcohol found in China. To this day, grain-based alcohol, such as baijiu—a high-strength alcohol typically made from sorghum, rice, wheat, or barley—is most commonly served during traditional occasions, such as holidays and formal events.

Being the traditional (and indeed, the national) drink of China, baijiu accounts for almost the entire spirits market. For most Chinese men, it is strength that qualifies an alcoholic beverage as a “man’s drink.” This explains why baijiu, which typically has alcohol by volume (ABV) of 50-60 percent, remains the preferred drink among Chinese men during private and business drinking occasions.

In recent years, beer, hard cider, and flavored alcoholic beverages (FABs, which are sweet, relatively low-alcohol content beverages such as wine coolers) have dominated the Chinese alcoholic beverage sector, however, accounting for roughly 90 percent of the market’s sales by volume in 2009 and 2010. Standard lager is the preferred beer in China, but sales of low-and no-alcohol beers are rising faster than those of lager.

Spirits and wine share the remaining 10 percent of China’s sales volume, with spirits contributing the larger proportion, according to Datamonitor Group’s Market Data Analytics (MDA). In terms of spirits, baijiu, brandy, whiskey, and vodka have the highest sales volumes. Recently, an expanding elite consumer segment in China has boosted sales of premium spirits such as whiskey. Datamonitor estimates that whiskey sales will increase by 24 percent in the next five years.

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