China is the world’s biggest consumer of alcoholic beverages. For many years, the Chinese people preferred the products of their national industry. Recently the structure of demand changed rapidly. While the shelves of Chinese supermarkets are still filled with expensive ceramic jars with baijiu, the nation’s most revered high-alcohol rice vodka, more and more Chinese are learning how to enjoy red wine or imported beer.
Chinese alcoholic beverages – market possibilities
Evidence of drinking alcohol in China dates back 7000 years. It was always an indispensable part of religious ceremonies and important events, such as weddings and funerals. The traditional beverage was usually distilled from sorghum or rice, ranging from 20% of alcohol (huangjiu) to above 40% of alcohol (baijiu). Beer was introduced in China at the beginning of the last century by two big breweries: Harbin, owned by Russians, and Qingdao, owned by Germans. Wine was almost not known before the Deng Xiaoping reform period. During the last 40 years, wine consumption has skyrocketed, and in 2013 China surpassed France and Italy as the biggest consumer of red wine (2 billion bottles).
What is the most popular alcoholic beverage in China?
According to recent data, China’s consumption of alcoholic drinks is expected to reach 84.37 billion liters by 2016. It has already risen from 46.52 billion liters in 2007 to 62.72 billion liters in 2012. In terms of consumption, surprisingly, traditional Chinese liquor was surpassed by red wine. Wine is very popular among the emerging middle class, and expanding pub culture is offering more opportunities to consume it. Chinese women, who traditionally were not supposed to drink baijiu, are turning to red wine instead. What kind of business opportunities does it create?
Wine in China
Almost 80% of the wine consumed in China is produced domestically. But the remaining 20% is imported from foreign countries, including France, Australia, Italy, the USA, Chile, and South Africa. French wines are considered to be the most prestigious and occupy the high-end price range (above 400 CNY per bottle). Most Chinese customers are not very familiar with less common wines and are attracted by easily recognizable brands, which bear names such as Bordeaux, Chardonnay, or Burgundy. The color of the wine is important – the sales of red wine are bigger than the sales of white wine, mostly due to the traditional meaning of the red color (happiness, prosperity, wealth). Similar to many other products, it may be easier to introduce the wine labeled as “upscale” or “premium” into the Chinese market than to compete with the local brands at a lower price level.
Establishing a wine-distributing company in China is not very complicated. Like in the other sectors, wholly-owned foreign enterprises and joint ventures are the most common form of business presence in China. The company should follow the regulations of the local Administration of Industry and Commerce. It also should prepare labels according to the rules of the China Entry-Exit Inspection and Quarantine Bureau.
Obviously, the most important risk is related to counterfeited alcohol. This problem is particularly serious in the case of high-end imported spirits. One example is Johnny Walker, but wine and beer are also counterfeited on a smaller scale. In China, proper intellectual property protection is a must, and irrespective of popular opinion, we can still enforce our rights. Big opportunities in the Chinese alcoholic beverage market are attracting many foreign investors. With enough determination, we can also join them.