China is the largest market for alcoholic spirits in the world, with retail volume sales at an estimated 7,486 million litres in 2019 (Mintel, 2020). In recent years, purchasing power has been shifting to younger generations (Euromonitor, 2019), making innovation a key growth driver for the category (Mintel, 2019). With China’s increasingly ageing population, brand owners need to think about how they can capture the attention of this consumer group (Mintel, 2019), who are more diverse in their brand loyalty than the generations who came before them (Euromonitor, 2019).
This Food Alert sets out to identify how brands are tapping into the Consumer Lifestyle Trends (Bord Bia, 2018) in order to shape their offerings towards a younger consumer, and how Irish spirit suppliers active in China might also navigate these trends to connect with these young generations of spirit drinkers.
Local Brands Regain Popularity
Young consumers are more confident in their own culture than ever before (Euromonitor, 2020). As their purchasing sophistication increases, they pay more attention to comparative quality, instead of assuming imported brands are better than domestic (Fitch Solutions, 2019). At the same time, traditional baijiu and other luxury brands are trying to diversify their consumer base in response to the contracting size of the baijiu market and the 2015/2016 slowdown caused by restrictions on government banqueting and gifting (Euromonitor, 2019).
Baijiu brands have started upgrading their product mixes in an attempt to do well among young consumers (Euromonitor, 2020). The baijiu brand LuZhou LaoJiao have collaborated with national ice lolly brand Zhong Xue Gao to launch ‘pass-out ice cream’ (see image above), which was announced on the social media platform Weibo. Alcopop brand Rio also did an unexpected campaign with nostalgia ink and pen brand Hero (Mintel, 2019).
This resurgence of national pride doesn’t mean that international brands have to miss out. Connecting with the Chinese culture in an ‘East meets West’ style can be successful if done correctly, as proven by some of the large spirits players. Pernod Ricard are to open China’s first whiskey distillery next year in Sichuan province, a renowned baijiu region (Euromonitor, 2020), while Diageo have entered a joint venture with baijiu producer Jiangsu Yanghe Distillery to launch Zhong Shi Ji whiskey (Fitch Solutions, 2020).
Consumer Lifestyle Trends: Community & Identity
Implication for Irish Suppliers: Communicate any authentic connections your brand has with Chinese culture. Otherwise, a creative Chinese name with relevant meaning to the brand, or a surprising collaboration with post-80s and 90s nostalgia brands can immediately resonate with millennial consumers.
Minis for Millennials
Small Formats, Big Wins
Traditionally, large bottles were the most popular pack size for spirits, as the main usage occasions were business meals, banquets or gifting. However, consumption of luxury brands is becoming increasingly casual among young consumers (Euromonitor, 2020), with 66% of consumers in their early twenties viewing alcohol as a source of relaxation (Mintel, 2019). Unwilling to compromise on quality, smaller formats are a portable and affordable way for young consumers to access luxury that fits into their busy lifestyles (Euromonitor, 2020).
Jiangxiaobai from the Jiangji Distillery were one of the first baijiu brands to target young consumers with innovative packaging including a blue sleeve, cartoon design and small format that broke away from the traditional baijiu image (Mintel, 2019). Other leading baijiu brands soon followed into smaller formats, such as Wuliangye (Euromonitor, 2020) and Langjiu (Euromonitor, 2019).
The channels most important for reaching young drinkers with casual consumption are online and convenience stores (Mintel, 2019). Recognising this, LVMH launched a 200ml mini champagne for the online channel (Euromonitor, 2019) and Absolut have released a newly designed pack for its vodka which is limited edition and exclusive to Family Mart (Mintel GNPD, 2020), one of the leading convenience store chains.
Smaller formats are likely to benefit the imported spirits market by removing a barrier to entry for unfamiliar consumers and encouraging product trials. Young drinkers are curious and willing to experiment with new products and tastes (Euromonitor, 2020). A third of Mintel surveyed consumers buy alcohol to try new releases (Mintel, 2019).
Consumer Lifestyle Trends: Fuller Lives, Engaging Experiences, Health & Wellbeing
Implication for Irish Suppliers: Smaller formats are a huge opportunity for Irish suppliers to get young consumers to trial their products. Brands could make up small format sets including glassware or mixers for a more engaging and relevant retail experience for the convenience store and online channels e.g. Last year Jiangxiaobai released a six pack of 100ml servings including a free gift and QR code (see image above).
Craft & Experiential Important for Premium
The global trend for drinking less but better has led to the success of craft brands and experiential consumption in recent years, and China is no different. Gin has been at the forefront for craft spirits around the world, and the local Chinese craft gin scene is becoming more and more competitive, with many brands trying to differentiate themselves through their botanicals.
Peddler’s Gin (see images above), recognised as the pioneer of local Chinese craft brands, is inspired by the Shanghai underground and features a spicy Asian twist from Sichuan pepper and Buddha’s Hand (Drink Magazine, 2018).
Experiential brands also attract younger consumers, who want to express their personality through the beverages they buy and are willing to pay extra for exotic (Canvas8, 2018). The demographic of Chinese travellers has shifted recently to more 18-34 year olds looking for authentic experiences. The link between Scotland and whisky is seeing an increase in the amount of Chinese visitors to distilleries. Exclusive bottlings and bespoke tours, along with an opportunity to learn about the provenance of the brand are all appealing to the young Chinese drinker (China Daily, 2018).
Consumer Lifestyle Trends: Engaging Experiences, Community & Identity, Health & Wellbeing
Implication for Irish Suppliers: The popularity of craft and experiential brands are beneficial to Irish suppliers who naturally fall into these categories. Irish brands should leverage Ireland’s image of natural and clean when communicating their use of local ingredients and take part in experiential initiatives like The Irish Whiskey Trail (2020) and the Irish Whiskey Tourism Strategy (Irish Whiskey Association, 2016) to attract young Chinese tourists.
Spike Your Tea
Low & No Trend, Chinese Style
The low and no trend has been present in China for a lot longer than in Western markets, with consumption per capita typically at lower levels. Nonetheless, an emerging focus on health and wellness among China’s younger generations is giving the trend a new lease of life. Females in their 20s’ top consideration for spirits purchases is alcohol content (Mintel, 2019), with high alcohol content negatively associated with being unhealthy.
Baijiu brands which traditionally have an ABV of between 40 to 60%, are responding by reducing the alcohol content of new products targeting young drinkers (Euromonitor, 2020). The growing success of imported wine among Gen Yers is also down to its healthy image slotting into their fitness regimes (Canvas8, 2019). Soft drinks are taking share from alcoholic beverages in the overall beverage category, as females’ top replacement for drinking less alcohol (Mintel, 2019). However, Western spirits lovers are more likely to choose non-alcoholic liquor, reduce their consumption amount or trade up when they decide to drink less (Mintel 2019).
Like in other markets, category blurring is an effective way to tap into the trend. Tea shop chain ‘We Drink’ has become popular (see image above), with its light alcoholic offerings where you can ‘spike’ your iced tea or juice with spirits like rum, making spirits more accessible for curious but health-conscious consumers (Mintel, 2019). Mixing with other sweet food and drink pairings can make the high alcohol content of spirits more approachable and fun for young generations e.g. 67% of surveyed consumers had either tried and liked, or were interested in trying alcohol with ice-cream (Mintel, 2019).
Consumer Lifestyle Trends: Health & Wellbeing
Implication for Irish Suppliers: There are lots of ways for Irish suppliers to engage with the low and no trend in a way that relates to young Chinese drinkers. Ready-to-drink mixed offerings can be good for retail, while collaborating with media influencers on dessert recipes or food pairings can be effective online, as seen with the popularity of cream liqueurs in China.
You’re the Bomb
TikTok, Tmall & Douyin: Doing Digital Right
Social media and e-commerce platforms are increasingly important for brands to reach and engage young Chinese consumers. Online supermarkets are particularly popular among young Shanghai consumers (Mintel, 2019). Besides visibility, online channels give brands the opportunity to tell their story and educate young drinkers on how to consume their products.
- Tmall is an e-commerce platform owned by Alibaba, where brands and distributors can own a store and sell direct to consumers. Distributors now make up more of the top 10 leading alcohol stores on Tmall, with many of the top distributors growing from content creators on social media platforms. Their well-made, interesting videos catch the young consumers’ attention and introduces them to niche products. (Mintel, 2019)
- TikTok is a social networking service for short-form mobile videos.
- Douyin is TikTok, but it allows certain influencer accounts to link their videos directly to Tmall stores to purchase the products they are showcasing.
Brands that understand and use digital marketing effectively stand to make a major impact among GenY and GenZ consumers. For example, online searches for Jagermeister exploded in 2018 in China, after videos of the product became popular on TikTok (click on image above). The brand now has a high reputation among post-90s consumers, making it the go to shot in nightclubs after years in the market without much penetration (Mintel, 2019). Jiangsu Yanghe baijiu have also used TikTok to access this consumer group, offering prizes for posting video clips with the product (Euromonitor, 2020). Bacardi made one of the largest e-commerce platforms, JD.com, their online retail partner in China, which allows them to raise the profile of their lesser known brands and leverage JD.com’s extensive distribution network to access young consumers nationwide, not just in high tier cities (Fitch Solutions, 2020).
Consumer Lifestyle Trends: Engaging Experiences
Implication for Irish Suppliers: Even without a large budget to spend on digital marketing, Irish suppliers can connect with young consumers online once they use the right platforms. Short videos are a key format to engage with post-90s consumers, so be imaginative about how to capture their attention online with a video campaign. If your distributor already has a Wechat or Tmall store, make sure that your brand is optimally featured, with creative and interesting promotions and use of storytelling.
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Canvas8 (2019). HOW WHISKY IS ATTRACTING NEW FANS IN INDIA AND CHINA.
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Irish Whiskey Association (2016). Irish Whiskey Tourism Strategy. [online] Drinks Ireland. Available at: https://www.drinksireland.ie/Sectors/DI/DI.nsf/vPagesWhiskey/Media~Newsroom~irish-whiskey-tourism-strategy/$File/Irish%20Whiskey%20Tourism%20Strategy.pdf [Accessed 28 Feb. 2020].
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