Promising Chinese Whiskey Market as Suntory Seizes Opportunity, Sets Up Shop in Tmall (Alibaba)
Experience of Staying Abroad the Connection?
In the Chinese alcohol market – in contrast to popular alcoholic beverages like baijiu, beer and wine -whiskey has existed in the shadows for a while now. But at this point, that appearance is changing. Its popularity is rising, particularly among the young and wealthy in urban areas. Suntory is planning to seize this opportunity and “attack” the Chinese market.
China’s whiskey market
The Financial Times recently conducted a survey with the whiskey consumption of 1000 Chinese people as their target group. According to the survey, people who had experienced living or travelling abroad were “partial” to whiskey. In this particular group, 59% were enjoying whiskey more than 3 times a month. However, only 21% had no experience of staying abroad.
In terms of income and age, 40.7% with an annual income of more than 6.07 million yen (350,000 yuan) consumed whiskey. Also, the whiskey consumption of 25-29-year-olds was double that of people aged 35 and above.
There is another source material called the “2017 Official Report on the Whiskey Consumption of the High Net Worth Population in China” by private investigation agency The Hurun Research Institute. According to it, whiskey enthusiasts are concentrated among people in the high-compensation/high-pressure industries of real estate, finance, investments, trading, manufacturing and construction. Also, the most common age group is people between 28-45 years old. The average is 38.2 years old. Many highly-educated young people – if this trend continues – can be expected to become whiskey enthusiasts.
Cultivating the Chinese market
According to data of the General Administration of Customs (customs house), the import volume of whiskey in 2017 increased by 19.5% to 17.4 million liters. This was the highest since the anti-corruption campaign began. There is also the effect of the import duty on whiskey being lowered from 10% to 5%.
But on the whole, whiskey consumption is still insignificant. The production volume of Chinese baijiu was 1.2 billion liters in the period between January and November 2017, and India’s annual whiskey consumption is 1.5 billion liters.
Nonetheless, due to the growth in demand and the reduction in taxes, there is no doubt that the whiskey market of 2018 will expand. The largest company in the world of whiskey, Diageo, decided on a plan of action with regard to the Chinese market in 2017. Focusing on luxury items will expand sales routes through sales promotion activities such as exhibitions. It will also enhance its online sales. Suntory of Japan has decided to set up shop in Tmall (Alibaba).
“Tmall” is the B2C site of the largest online shopping company, Alibaba. Japanese companies such as Fast Retailing <9983>, Sharp <6753> and Shiseido <4911> have established “flagship stores” that are making high sales.
Suntory will enter the market under the name of its US subsidiary, Beam Suntory. Perhaps they decided that putting on an American appearance would be an advantage? Beam Suntory is also including the expansion into news stores with the Alibaba Group’s O2O format – “Tmall Supermarket” and “Hema Fresh” from Tmall’s online store – into its outlook.
In the meantime, its policy is to make its luxury products such as the “Yamazaki” 12 Year Old for 31,000 yen and “Hibiki” 17 Year Old for 57,000 yen its main force. The following is a story heard at the Shangri-La Hotel, a top-class hotel in Qingdao, Shandong Province. Mainly targeting German clients, it opened a luxury bar in the annexe. But almost all the clients coming to the bar were Chinese, and it was mostly unable to attract European clients – was how the story went.
Eating habits in China are in the process of a drastic about-face after the 90s generation (people born in the 1990s). Luxury bars are also thriving. One possibility is that the number of people with a taste for whiskey will increase. Perhaps this can then be regarded as the perfect timing for Suntory to advance and work towards committing to the mass-market segment.