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Daxue Sopexa W&S Report
Daxue Sopexa W&S Report
Industry Barometer
Report
October 2022
CONTENT OUTLINE
1.08 3.07
Source: Statista (2022) 2.96 159.4
152
144.4
• By revenue, spirits lead the alcoholic drinks market in China, which is
dominated by liquors, specifically Baijiu. 2021 E2022 E2023
• Still wine is also taking the most revenue share when compared to
fortified wine and sparkling wine. Liquors & other spirits Brandy Whisky
4 Fujian Province
US$136.3 million
1 Guangdong Province
US$909.8 million
Source: International Wine and Spirit Competition
China’s alcoholic import value in 2021 Top 10 alcohol beverage exporters to China by value
(in billion US$) in the first half of 2022
France 37.18%
2.5 1.69 0.12
U.K. 9.04%
Chile 8.31%
Spirits Wine Beer
Japan 4.96%
Spirit has the highest import value for China in 2021 followed by wine. Germany 4.84%
Brandy is the largest imported spirit, accounting for 68% of the spirit’s
import value. Italy 4.02%
Spain 3.97%
China’s spirits import value in 2021
1.70 (in billion US$) South
3.86%
Korea
0.46 U.S.
0.15 3.43%
0.03 0.01 0.01 0.01
Brandy Whisky Liquor Vodka Gin Tequila Rum Source: China Chamber of Commerce For
Belgium 2.74%
Import and Export of Foodstuffs, Native
Source: China Association for Imports and Exports of Wine and Spirits Produce And Animal
The pandemic correlated with an increase of 10% and 5.8% New media platforms targeting young consumers such as Douyin
y-o-y in online wine purchases in 2020 and 2021 and LRB are frequently utilized by various brands to establish
respectively. communications with the said customer segment.
For those wine lovers at entry level, it can take advantage of celebrity
promotion and live stream shopping. Now some new media are developing
very well. Retailer
79.9% 74.1%
91.6% 88.7% 86.9%
Currently, Douyin short videos, for the promotion and
advertising of wine, have a certain effect.
Importer / Distributor
20.1% 25.9%
8.4% 11.3% 13.1%
2017 2018 2019 2020 2021 People who are born after the year 2000 prefer to buy wines
recommended on Douyin. Advertisement, celebrity promotion,
Online Offline Livestream on Douyin, and other new media are also beneficial.
Source: Statista (2022)
As health is a significant factor in consuming alcohol in China, Due to the growing health conscious of
low-alcohol wine has gained in popularity. As well as wine Chinese people, low-alcohol, no-alcohol, low-
bars, a place where consumers can purchase wine in glasses sugar, etc. are becoming an emerging trend.
instead of bottles.
The idea of wine being healthy was particularly common
Rosé wine is growing in Chinese
among respondents in the 36-45 (59%) and 46-55 (55%) age
consumers, as it has a low alcohol
groups, mentioning that “drinking wine is good for health”
content, a refreshing all-around taste,
and a nice color.
Rosé is also often featured in photos
Reasons Chinese consumers say they drink wine (2020)
taken and posted by bloggers on Weibo
and RED and is associated with a high
click-rate.
Health 54%
Source: China Association Imports and Exports of Wine and `Spirits (2022)
There is no depth in the mind of consumer for wines that
have not been heard of in uncertain regions/varieties, etc.,
and there is a conservative mentality to try them. French wines are dominating the market. However, the cost
Importer / Distributor of production and importation have increased drastically due
to pandemic prevention measures and the war in Ukraine.
Source: Interview by Sopexa
Chilean wine exports to China Chilean wines offer great “price-for-value” (性价
比), a trait highly valued by Chinese consumers,
Wine Category 2020 2021 % Change due to its established procedures and techniques
in making wine and relatively low labor costs.
Sparkling Wine $70,439 $82,809 +17.6%
Source: Asia Wine News
Still wines in containers of <2 L $77,777,082 $110,218,773 +41.7%
6.29
4.51 4.13 Turpan and Hoxud in the
Xinjiang region, which
produces Cabernet
Sauvignon, Cabernet Franc,
and Chardonnay.
Shandong, specifically
2016 2017 2018 2019 2020 Yantai, Penglai, and Qingdao,
Source: International Wine & Spirits Competition Ltd.
is China’s largest wine region.
It produces over 40% of the
Yunnan province is
country’s wine.
growing a variety of
Cabernet.
• No set criteria for selecting vineyard locations • Imposes specific and strict requirements on
Wine grape • Lack of expertise in soil management and the grapes
assessment and cultivation techniques • Official varietals and growing instructions
Wine-making • Still introducing equipment and ideas • Wine-making techniques and experiences
philosophy & technique • More time is needed to cultivate the sector have been handed down for decades, even
centuries
Wine offerings • Limited number of wine offerings • Diverse options with unique feature
Source: GLG
More and more consumers begin to drink Chinese fine wines. Because
on the one hand, the national self-confidence has been enhanced, on
the other hand, Chinese fine wineries have a history of 20-30 years to
make good wines.
HORECA Professional
Source: Changyu
Source: Interview by Sopexa
The company had signed an agreement with the China Alcoholic Drinks Association
(CADA), the country’s main alcohol industry body, to build the Chinese wine industry
through technical knowledge and expertise exchange in China. TWE says the
agreement is testimony to the company’s commitment to partnerships with the
Chinese wine industry and the strong equity that the Penfolds brand has established
with its consumers in China.
“China is an emerging fine winemaking region and we’re confident we can produce a
premium Chinese Penfolds that maintains the distinctive Penfolds’ house style and
uncompromising quality,” said Mr. Ford, the Chief Executive.
Wechat official account & mini program
Weibo official account
Penfolds奔富| 不凡空间
Penfolds奔富| 66K followers
SOCIAL MEDIA
Content strategy: frequent engagements with
followers on Weibo by product news, event
news, seasonal greetings; Comprehensive
CRM mechanism by Wechat mini program
KEY FINDINGS
TWE, the biggest exporter of Australian wine to China bore the brunt of loss due to China imposed steep 218% tariffs on Australian
wine in 2020, Wine exports as a result plunged from AU$1.2 billion to just AU$200 million within a year. The ‘Made in China’ approach
will play a significant role to circumvent the Chinese tariffs
OUR INSIGHTS
Chinese wine drinkers are generally less aware of brands. “Made in China Penfolds” is catching up well on the trend that domestic
wine is reaping the benefits of Chinese wine consumers growing confidence in home-grown product.
BRAND BUILDING IS CRUCIAL
▪ Brand building strategies target on end consumers is important to gain awareness and visibility with pull effect to penetrate the
market
▪ Brand communication campaign to tell story about the “reborn” of this iconic south Australian brand with authentic Chinese DNA
could be a tactic approach to draw consumers attention and create interests to drive the buying motivation.
TARGET ON “NEW” CONSUMERS TO “GROW TOGETHER”
▪ Through the China strategy, Penfolds might want to target on the “newbies” of the wine category because the group of consumers
are young, relatively new to the category, have little knowledge and experience but looking for excitement and open to new.
▪ With China exclusive series to begin with, Penfolds could grow these consumers into more sophisticated and frequent drinkers in the
future with the full range product portfolio and its brand power.
▪ Promotions, discounts, loyalty schemes, and fun and experiential social events might be the driven for their interest to trying out the
new product
• Cognac is often consumed during dinner and other social events, usually
mixed with ice or as a cocktail.
• Chinese also prefer high-end cognac as its consumption is motivated by
business and social drinking. Its packaging is also important in China, such
as French cognac, including the 3 major brands, often offers elaborate and
premium packaging.
There appear many popular whisky bars crowded with young people Brandy is also a must-have product in bars and nightclubs
recently in China cities, which cater to their social attributes. Whisky and has an especially high demand in the Guangdong and
bars also play a role in educating consumers and promoting the Fujian province.
development of whisky in China.
HORECA Professional
Source: Interview by Sopxa
© 2022 daxue consulting 21
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Brandy and whisky are considered status symbols in China
Usually consumed by wealthier consumers, both brandy and whisky have their unique values to Chinese people.
VS
• An important symbol of France, which is often paired with French A high-end image is correlated in China, with buzzwords
food (法餐) like lobster (龙虾) and foie gras truffle (鹅肝松露). related to locations such as: “whisky bar (威士忌吧)," "Hong
• An emotional value linked to romance, where gifts for Tanabata Kong (香港)," "Shanghai (上海)," "Beijing (北京)" and other
(七夕送礼) are used by brandy labels and marketing campaigns. first-tier cities and professional tasting venues.
Topics most associated with brandy on Chinese social media (2021) An emotional value is linked to relieving bitterness and
easing the mood, with expressions like "rainy season (雨季)"
and "twilight (黄昏)" being considered whisky season.
27.9% 18.8% 15.3%
Whisky drinkers typically have a high standard of living and
Parties Vacations Dates focus on enjoyable consumption.
` Chinese also often pair
(聚会) (度假) (约会) Whisky with "nuts (坚果)”- a high-end snack in China.
The partnership started in July 2021, Macallan and Bentley announced again the strategic
partnership in August 2022, presenting the Macallan Horizon, a “highly innovative limited edition
single malt whisky being created by the brands”.
These 2 brands united by a long-term vision of a more sustainable future and a shared dedication
to innovation and excellence. While this partnership recognises the provenance and deep heritage
rooted in both brands, the focus is set on looking forward together to collaborate on innovative
products, immersive experiences, and captivating storytelling.
KEY FINDINGS
CHALLENGES
- The favoritism for domestic products, emerging local brands and the rising RTD alcohol category is posing a threat to the
traditional Western spirit's market
OPPORTUNITIES
- Sustainability has gained importance in the Chinese alcoholic beverage market in recent years
- Strategic partnership or cross-border collaboration has become an important approach for brands that share values
OUR INSIGHTS
EXPANSION TO NORTHERN CHINA – tap into undeveloped areas
The rising number of whisky bars and whisky tasting classes have already penetrated lower tier cities in China, especially the south
China, due to the facts that the early business development of port cities (majorly tier 1 cities) in that area, and the socializing style of
southern Chinese tend to consume spirits including imported ones in high volume during business occasions.
To expand penetration to northern part of China by spreading trade activities collaborating with CHR nation-wide to tap all the tier 1
and new tier 1 cities in northern China.
CREATE TOPICS FOR ENTRANTS – make premium products approachable & affordable
Shown by a survey conducted with key retail market players, Macallan was mentioned the most as the premium whiskey brand in
China and has its unshakable position in the mind of whisky drinkers. Promoting Macallan as a quality yet approachable and
affordable whiskey in everyday drinking by interesting topics (ie. ride on the craze of cocktails by young generations and the trend of
food-paring) could be a door knocker to enter the circle of whisky entrants.
Local spirits dominate the market as they are deeply rooted in Chinese culture, where Baijiu is omnipresent in the various distribution
channels as the leading category in China, accounting for over 90% of all spirits consumption. However, Cognac, the ultimate quality
reference on the market, remains the leader of imported spirits.
With the development of urbanization and the rise in Chinese living standards, on-trade consumption is densifying. Imported Western
spirits have become a common and popular product for business and personal banquets and gift-giving occasions in China. Furthermore,
the arrival of the bar culture has given rise to a new trend in spirits consumption among the younger generations.
Educational activities
▪ Trainings - for professionals of the industry, such as importers, distributors, e-commerce,
retailers, sommeliers, restaurants managers…etc.
▪ Bartender training & competition - To raise awareness and train bartenders about Cognac and
maximize the word of mouth and highlight the Cognac as the top-of-mind product around the
bartender profession
▪ Participation in trade fairs - such as CFDF, Toewine, Interwine, Prowine…etc.
Digital Campaigns
▪ Social media – Through WeChat, Weibo, and Douyin activation, and KOL partnership to create
regular, relevant, visual and high-quality content to educate readers and transmit their passion
for Cognac
▪ E-learning platform - Continue to connect with Cognac lovers through recurrent broadcasts of
hard-hitting content and entertaining visual aids to build loyalty among existing followers and to
acquire new followers of both professionals and amateurs.
▪ E-commerce platform – Partnership with the e-commerce giant in China to multiply visibility and
reach the target of end consumers
© 2022 daxue consulting 26
ALL RIGHTS RESERVED
Case study – Cognac
Over a decade, Cognac has built its by educating different target groups of professionals, trade partners, media, KOLs, and
professional schools' students about the origins of Cognac to raise brand awareness.
PR Campaigns
▪ Continuous media exposure by press releases to increase awareness and boost knowledge of
Cognac among professionals and consumers
▪ Press events – Workshops, press trip, anniversary ceremony of Cognac GI…etc. for journalists and
KOLs, which are essential to create quality and educational content while providing an experience
allowing the media to communicate about Cognac and publish quality articles and media coverage.
KEY FINDINGS
CHALLENGES
- Current consumption patterns perceived as unattractive by the new generations
- General lack of knowledge about the origins and authenticity of Cognac (GI, PGI and PDO)
OPPORTUNITIES
- Despite the long history in Chinese market, China is a still developing market for Cognac
- The development of urbanization and bar culture particularly appreciated by the younger generations
- A booming HORECA sector with increasing demand
OUR INSIGHTS
MAKE HORECA A KEY DISTRIBUTION CHANNEL
The HORECA sector is the preferred channel where consumers are looking for recommendations and advice from. The
development of the "bar culture" also pushes bartenders to be new prescribers. Bars in China are becoming more and more
sophisticated, where expertise, taste and a sense of detail of the bartenders are required. Thus, the professionals of HORECA
sector, especially bartenders, would be the best advocates at the front line for Cognac to arouse consumers’ curiosity and interest.
Maintain and Reinforce the community of professionals by constant trainings and workshops is the operational tactic to
continuously develop the Chinese market in the long run.
CONTINUOUS VISIBILITY AND ACTIVITY ONLINE TO PROACTIVELY REACH OUT TO END CONSUMERS
Employ consistent and integrated content strategy on all the social media platforms (WWRD) and online marketing means (KOL
collaborations, E-learning, E-commerce…etc), continuously make contact and engage with users to increase Cognac perception
among professionals and consumers. After a decade of cultivation from trade perspective, it’s time to shift the focus and strategy
to be more consumer oriented, communicate directly with the end consumers to educate them of the fundamental and essence of
Cognac to create desire and generate the pull effect from the consumer’s perspective.
Share of consumption volume of vodka by Top 7 vodka exporters to China by value from
brand in China January to November 2021
(2020) (in million USD)
U.K. 1.12
Shanghai consumed the most imported vodka in China, 61.7% of
the total import volume (4.6M liters) or 65.8% of the total import
value (US$15.56M). Source: China Customs (2021)
ADAPTATION & LOCAL SOURCING – include flavors that appeal to the Chinese palate
A common trend shared by many Gin importers is the adaptation of local sourcing. While adapting their products to the Chinese
market by tweaking their ingredients with botanicals from the region for more modern flavors, they find the way to plant the
temptation for young drinkers, especially when Chinese gin (中国式金酒 ) became an emergent trend on social media.
KEY FINDINGS
THE CRAZE OF CUSTOMIZATION
As China has such an abundance of local botanicals and exotic flavours, that gives gin makers a great selection of ingredients for
creating customized flavour of gin.
For cocktail drinkers, short videos and posts demonstrating how to make your own drinks and cocktails at home is becoming a popular
topic and can be easily found on social media.
OUR INSIGHTS
As China welcomes a steady recovery from the pandemic and cocktail enthusiasts fill bars all over China, craft gin brands are looking
forward to a warm reception for their new offerings from both bar owners and drinkers. However, how to stand out among so many
players is a matter of importance for brands.
MARKETING IS THE KEY
▪ Take advantages of the uprising new media (Douyin and Red, and also the mainstream media WeChat and Weibo) with a consistent
content strategy of online marketing to keep the close connection and engagement with the Chinese Gen Zs.
▪ Leverage Word-of-mouth marketing strategy by KOLs and KOCs
▪ Create unique brand identity by making a personalized statement that interprets the brand’s features and characteristics to
differentiate themselves to cater young consumers in China who are looking for uniqueness are attracted to novel topics
3.7
2.9
1.6 39.1 Young white- Sophisticated Senior middle Gen Z
0.8 0.9
30.1 collar workers mothers class
23.1
16.5 18.4 Source: Bairun Flavor & Fragrance Co.
14.4
• Ready-to-drink (RTD) is particularly well-known amongst the light
2018 2019 2020 2021 E2022 E2023 drinkers in China as it is easy to consume, have lower alcohol
content, and is cheaper than cocktails at bars.
• RIO is the most popular RTD alcopop brand in China which was
first launched in 2003.
China’s low ABV sales are increasing. The sales of low ABV are
predicted to increase by 188.8% in 2023 when compared to 2018. • RIO’s products are accessible throughout China’s 1,300 count-
level cities and more than 260 large prefecture-level cities.
Source: leadleo (2022) Source: Mersol & Luo (2020)
• A government crackdown in 2012 on officials' luxury spending hit Baijiu distillers hard: Almost 70% of distillers were forced to halt or cut
production. Given baijiu's production cycle -- which runs to about five years for sauce-fragrance varieties -- the effects of this sudden cut to
demand on production only appeared in 2017
• Nevertheless, baijiu sales revenues have been on an upward trend starting from 2018.
• In 2020, 50% of domestic baijiu production comes from Sichuan province.
Source: International Wine and Spirit Competition (2021)
Despite an increase in overall alcohol consumption during the After the 2012 crackdown on production, the industry has decreased by
pandemic, imports have been negatively impacted by lockdown 34.71% from 2017–2020.
measures.
China’s baijiu import volume
(in million liters) Number of baijiu manufacturers in China
3.9 1,593
1,445
3.0 2.8 1,176
2.4 1,040
17%
10%
4% 3% 3%
Source: CNN
© 2022 daxue consulting 40
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FRESH “UPDATES” OF 2022
The consumption trends 2022 – Among The Gen-Z and More…
Play the “Niche”; Leverage the “Guochao”; Have More “Granular Segmentations”
• Self-enjoyment
e.g., kouliang 口 粮 (good affordable drinks);
Socialization/table culture; Weixun 微醺 culture (light
& delicious drinks, mainly for girls)
• Interests study
e.g., training for self-achievement, socialization
Method: daxue consulting’s research on KOLs in 2019 Method: daxue consulting’s research in 2022
New and emerging category like “Natural Wine” starts being popular New trends of Chinese fusion is considered niche and special
2018 The National Tide Baby Show in The notion of Guochao will maintain its importance and popularity in the next years
Chinese brands Hangzhou, with more than 30
"Guochao Kids Stars“.
Domestic products H&M's “anti-Xinjiang cotton“ in 2021, statement
sparked strong discontent among Chinese
The State Council has designated May netizens. Nike, Adidas, GAP, etc. proposed a
Guochao 10th as "China Brand Day“ since 2017. "boycott" of Xinjiang cotton. Chinese shoppers
In response to this call, Tmall launched turned to domestic brands Li-Ning and Anta, and
the "National Tide Action“ in 2018 searches for Chinese brands spiked.
BAIDU INDEX
2016 2021
1 2
The New Baijiu in 2022
For the YOUNG generation
夏桐 Chandon Xi Tabb 堂白 (by Luzhou Laojiao 泸州老窖)
– Nining Xia,
A dedicated packaging A Baiju that is more suitable
since 2013 for making cocktails
design, tone of voices
Wuliangye Crossover with coffee
(western culture) & reputed
regional ingredients (Yunnan
High-level collaboration
coffee beans)
• Strategic cooperation in Yibin, Sichuan
since 2019, on infrastructure, sales
Chandon in
channels and potentially help the
Hainan, Le
Meridien
Chinese brands go oversea (Asia)
傲云 Aoyun
Yunnan Since 2017
A RESEARCH AND CONSULTING FIRM HEADQUARTERED IN CHINA, WITH AN ASIA-FOCUS AND A PRESENCE ON THREE CONTINENTS
FRANCE
Beijing (Rep. offices,
CHINA
Paris, Bordeaux) • Shanghai
Shanghai (HQ) • Beijing
UNITED VIETNAM • Hong Kong
STATES
(Rep. office, Ho
(Rep. office,
Chi Minh City)
Minneapolis)
Hong Kong MALAYSIA
(Rep. office,
Kuala Lumpur)
2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022
Founding in Beijing Opening of Shanghai office Opening of Hong Kong office Malaysia, Korea, and USA
(new HQ) representative offices
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