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Western Spirits - China - September 2015

INTRODUCTION
Definition
Methodology
EXECUTIVE SUMMARY
The market
Figure 1: Fan chart of Western spirits market in value terms in China, 2010-20
Figure 2: Fan chart of Western spirits market in volume terms in China, 2010-20
New era of O2O could give Western spirits market a boost
The new normality stabilises the market
Depreciation of Renminbi offsets the repositioning efforts
Companies and brands
The market is becoming increasingly fragmented
Diageo gains market share from Pernod Ricard
Decline in marketing investment poses challenges to refocus on consumer-driven demand
Who’s innovating?
Flavoured alcoholic drinks on the rise
Figure 3: New launches in East Asia market of flavoured alcoholic drinks, 2010-14
Ethical claims show potential
Figure 4: Claims of newly launched flavoured alcoholic drinks in East Asia, 2010-14
Glass bottles become increasingly popular
Figure 5: Packaging materials used by newly launched RTD in East Asia market, 2010-14
The consumer
The penetration of Western spirits is still trailing behind
Figure 6: Penetration of different types of alcoholic drinks, June 2015
Casual social occasions stand out
Figure 7: Drinking occasions for alcoholic drinks, June 2015
Figure 8: Penetration of different occasions among Western spirits drinkers, June 2015
Chinese full-service restaurants posing as the key drinking location
Figure 9: Drinking location of alcoholic drinks, June 2015
Overseas stands out as the top purchase channel
Figure 10: Retail purchase channels of Western spirits drinks, June 2015
Challenge remains for brands to retain their consumers
Figure 11: Change in drinking behaviour, by types of Western spirits, June 2015
Strong association with business occasions hampers the restructuring efforts of brandy brands
Figure 12: Reasons for not drinking brandies, June 2015
Western spirits are shaking the premium image off
Figure 13: Correspondence analysis, June 2015
Brand extension from leading Western spirits operators shows potential
Figure 14: Attitudes towards RTD alcoholic drinks, June 2015
What we think
ISSUES AND INSIGHTS
How to utilise the evolving regional differences
Issues
Implications
Figure 15: Penetration of drinking alcoholic drinks when socialising with families, by city, June 2015
Figure 16: Penetration of drinking alcoholic drinks at selected locations, by city, June 2015
Figure 17: Association with the attribute ‘can reflect my good taste’ when drinking whisky and brandy, by city, June 2015
How to target the fast-changing female segment
Issues
Implications
Figure 18: Penetration of drinking alcoholic beverages at full-service Chinese restaurants, by gender and age, June 2015
Figure 19: Dadong’s winter special food pairing event partnered with Martell, Q4 2013
Figure 20: Penetration of drinking alcoholic beverages at Western full-service restaurants, by gender and age, June 2015
MARKET DRIVERS AND BARRIERS
Key points
Market drivers
New era of O2O could give Western spirits market a boost
The new normality stabilises the market
Market barriers
Depreciation of Renminbi offsets the repositioning efforts
Figure 21: The daily average exchange rate (US Dollar to RMB), August 2013-August 2015
MARKET SIZE AND FORECAST
Key points
The market is calming down
Figure 22: The Western spirits retail market in China, 2010-20
The recovery will be slow but steady
Figure 23: Fan chart of Western spirits market in value terms in China, 2010-20
Figure 24: Fan chart of Western spirits market in volume terms in China, 2010-20
Forecast methodology
MARKET SHARE
Key points
Market is becoming increasingly fragmented
Figure 25: Value and volume share of China’s Western spirits retail market, 2013 and 2014
Diageo gains market share from Pernod Ricard
KEY PLAYERS – WHAT YOU NEED TO KNOW
Decline in marketing investment poses challenges to refocus on consumer-driven demand
Food pairing gains momentum
E-commerce plays a crucial role in helping Western spirits brands to reach more people
Competition in the RTD segment is intensifying
WHO’S INNOVATING?
Key points
Flavoured alcoholic drinks on the rise
Figure 26: New launches in East Asia market of flavoured alcoholic drinks, 2010-14
Ethical claims show potential
Figure 27: Claims of newly launched flavoured alcoholic drinks in East Asia, 2010-14
Glass bottles become increasingly popular
Figure 28: Packaging materials used by newly launched RTD drinks in East Asia market, 2010-14
THE CONSUMER – PENETRATION OF DIFFERENT TYPES OF ALCOHOLIC DRINKS
Key points
The penetration of Western spirits is still trailing behind
Figure 29: Penetration of different types of alcoholic drinks, June 2015
The mass market has not been fully exploited
Figure 30: Usage of Western spirits, by household monthly income, June 2015
RTD and cocktails are gaining popularity among female consumers
Figure 31: Penetration of selected types of alcoholic drinks, by gender, June 2015
THE CONSUMER – DRINKING OCCASIONS
Key points
Casual social occasions stand out
Figure 32: Drinking occasions for alcoholic drinks, June 2015
Figure 33: Penetration of different occasions among Western spirits drinkers, June 2015
Income barrier does not exist on casual social occasions
Figure 34: Selected drinking occasions, by monthly household income, June 2015
Consumers from the North are more likely to drink alcoholic drinks when socialising with their families
Figure 35: Penetration of drinking alcoholic drinks when socialising with families, by city, June 2015
THE CONSUMER – DRINKING LOCATIONS
Key points
Chinese full-service restaurants posing as the key drinking location
Figure 36: Drinking location of alcoholic drinks, June 2015
The complexity of regional difference poses a challenges for Western spirits brands
Figure 37: Penetration of drinking alcoholic drinks at selected locations, by city, June 2015
Figure 38: Absolut Vodka, limited Chicago edition, Q2 2013
Chinese full-service restaurants are less appealing to young female drinkers
Figure 39: Penetration of drinking alcoholic beverages at full-service Chinese restaurants, by gender and age, June 2015
Figure 40: Dadong’s winter special food pairing event partnered with Martell, Q4 2013
The mid-range alcoholic drink is missing in KTV venues
Figure 41: Penetration of drinking alcoholic beverages at KTVs, by monthly household income, June 2015
Western full-service restaurants are more likely to attract female consumers in their thirties
Figure 42: Penetration of drinking alcoholic beverages at Western full-service restaurants, by gender and age, June 2015
Foshan consumers stand out as more sophisticated than average
Figure 43: Penetration of drinking alcoholic beverages at selected locations, by city, June 2015
THE CONSUMER – PURCHASE CHANNELS
Key points
Online channels are crucial to Western spirits
Figure 44: Percentage difference between the penetration of offline and online channels, by types of alcoholic drinks, June 2015
Overseas purchase stands out as the top purchase channel
Figure 45: Retail purchase channels of Western spirits drinks, June 2015
THE CONSUMER – CHANGES IN DRINKING BEHAVIOUR
Key points
Challenge remains for brands to retain their consumers
Figure 46: Change of drinking behaviour, by types of Western spirits, June 2015
Little price barrier in the vodka segment
Figure 47: Penetration of different types of Western spirits, by personal monthly income, June 2015
Liqueur is missing opportunities in the middle ground
Figure 48: The penetration of liqueur, by monthly household income, June 2015
Gin is female consumers’ favourite
Figure 49: Penetration of gin, by gender, June 2015
THE CONSUMER – REASONS FOR NOT DRINKING BRANDIES
Key points
Strong association with business occasions hampers the restructuring efforts of brandy brands
Figure 50: Reasons for not drinking brandies, June 2015
The perception of being suitable for older consumers limits the develop of brandy market
Affordability is no longer the key reason for not drinking
THE CONSUMER – ATTRIBUTES ASSOCIATED WITH DIFFERENT TYPES OF WESTERN SPIRITS
Key points
Western spirits are shaking the premium image
Figure 51: Correspondence analysis, June 2015
Liqueur is free from cannibalism from within the Western spirits category
Food pairing remains a challenge
Gin bears a fashionable image
Figure 52: Pink 47 London dry gin from Old St Andrews launched in Germany, Q3 2015
Innovative flavours show potential as a premiumisation route
Figure 53: Association with the attribute ‘offering innovative flavours’ when drinking liqueur, by monthly household income, June 2015
Figure 54: Rum orange liqueur from Santa Teresa, launched in Canada, Q2 2015
THE CONSUMER – ATTITUDES TOWARDS RTD ALCOHOLIC DRINKS
Key points
Brand extension from leading Western spirits operators shows potential
Figure 55: Attitudes towards RTD alcoholic drinks, June 2015
At-home occasions show potential
Figure 56: Agreement with the statement “RTD alcoholic beverages are not suitable for drinking at home”, by gender, June 2015
International brands still have the chance to fight back
THE CONSUMER – CLUSTER ANALYSIS
Five consumer segments identified
Figure 57: Segmentation based on consumers’ general attitudes towards alcoholic drinks, June 2015
Wealthy conventional
Who are they?
What do they think in general?
What do they think about RTD alcoholic drinks?
Which type of alcoholic drinks do they like?
How to target them?
Wealthy Liberal
Who are they?
What do they think in general?
What do they think about RTD alcoholic drinks?
Which type of alcoholic drinks do they like?
How to target them?
Close-minded
Who are they?
What do they think in general?
What do they think about RTD alcoholic drinks?
Which type of alcoholic drinks do they like?
How to target them?
Foreign worshipper
Who are they?
What do they think in general?
What do they think about RTD alcoholic drinks?
Which type of alcoholic drinks do they like?
How to target them?
THE CONSUMER – MEET THE MINTROPOLITANS
Key points
Why Mintropolitans?
Who are they?
Figure 58: Demographic profile of Mintropolitans vs. Non-Mintropolitans, by gender, age, and personal income
Figure 59: Demographic profile of Mintropolitans vs Non-Mintropolitans, by marital status, city tier, and education level
Brand extension strategies are more appealing to MinT consumers
Figure 60: Selected statements regarding RTD alcoholic drinks, by types of consumer, June 2015

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