Whisky is a rapidly growing segment of the spirits market in China. It is a huge market with high potential, and at the same time very specific economic and cultural conditions, which have a significant impact on the development of the Scottish whisky market in this country.
The spirits market in China
China is the world's largest consumer of spirits. Revenues in the spirits segment are expected to reach $133,834 million in 2020. The market is expected to grow 4.5% annually in value (CAGR 2020-2025). The spirits market in China is performing better than initially predicted at the onset of the pandemic, according to IWSR figures, as Chinese consumers - including the country's 400 million millennials - have now resumed almost all their daily activities. The IWSR predicts that the spirits market in China will fully recover by 2021.
Scotch whisky market in China
Baijiu, the local liquor, continues to dominate the spirits market with 98% of total sales. However, a strong upward trend in imported alcoholic beverages is clearly visible, both in terms of quantity and quality. Cognac and Scotch whisky are the leaders among imported spirits. Young Chinese are not as enthusiastic about baijiu as the elderly. This is due to changing drinking habits; Chinese consumers drink less and buy better quality alcohol. Young Chinese perceive imported alcohol as better substitutes, associating them with a foreign, modern lifestyle. Scotch whisky market in China
According to the Euromonitor report, by 2022, the value of whisky sales in China is expected to reach around GBP 2.2 billion, which is 38.6% more than in 2018, and the volume of whisky sales is to reach 23.65 billion liters in 2022.
Direct exports increased from around £1.4 million in 2000 to around £89 million in 2019, reaching an annual growth rate of over 24% (CAGR 2000-2019). About 25 bottles of Scotch whisky are exported to China every minute.
Scotch whisky consumers in China
Whisky is a rapidly growing segment of the spirits market in China. Along with the economic development of China, interest in products from other parts of the world is growing, and the history of Scotch whisky stimulates the imagination of the Chinese. Experts point to the link between heritage, longevity and the "family" nature of Scottish production, and values that are important to the Chinese.
Demand is growing especially among high-income, urbanised consumers, especially young adults. The largest markets for Scotch whisky are large, cosmopolitan first-tier centers such as Shanghai, Beijing and Guangzhou.
The Chinese view whisky as an international social status of sophistication. The high prices of Scotch whisky speak of the prestige, the quality that brand-conscious consumers in China like. Whisky in China costs RMB 520 (£ 60) per bottle. Many people are willing to spend over RMB 1,000 (£ 115) on a bottle of high quality Scotch whisky.
The Chinese whisky market has an exceptionally large share of single malt whisky (in 2017, 33% of imported Scotch whisky was single malt). Over 90 percent of buyers believe that single malts are of higher quality, and 98 percent. of consumers identify single malts as their favorite whisky.
Favorable legal conditions
The import duty on Scotch whisky to China is low, amounting to 5%. SWA is working with the UK and Chinese governments to ensure the seamless import of Scotch whisky to China. In 2018, China renewed trademark protection for Scotch whisky, valid until 2028. This is to protect this drink from local fakes. Since 2008, the Scotch Whisky Association (SWA) has fought over 100 trademark cases and removed some 200 counterfeit products in China. SWA believes that Scotch whisky will gain special recognition on the Chinese market as a Scottish product, especially when consumers are guaranteed the authenticity of the product.
Culture in China is very focused on status and position in society, and Scotch whisky has become a strong determinant of prestige and, above all, an essential addition to social gatherings. The Chinese prioritise their status and the way they communicate it to friends and family. In China, we are dealing with a toast culture. They must be proposed and cannot be refused. The host must be generous and the guest willing to drink. This is how friendships and celebrations are made in China, which means that you drink a lot of alcohol during one meeting.
Scotch whisky appeals to the Chinese as a sophisticated, exotic drink, a symbol of social status and wealth. The image and history of whisky strongly affect the imagination of the Chinese. Whisky label branding successfully fits this Chinese approach. Instead of buying a drink by the glass, the label on the bottle is a real indicator of wealth and prestige, in China, bottles are a central place on tables, they are often illuminated.
Rather than competing on price, distilleries and retailers prefer to focus on educating Chinese consumers about whisky. Marketing is based less on hard selling and more on education and building a luxurious image. Many distributors train bar staff to be able to offer specialised, expert-led customer service.
Expert comment on Chinese market
- China is a huge, rapidly growing market and in my opinion, along with several other Asian countries such as Taiwan or Vietnam, one of the main directions of Scotch whisky expansion in the coming years - says Krzysztof Maruszewski, CEO of Stilnovisti. - The drinking culture and its relationship with demonstrating social status in China make it an excellent market for luxury single malt editions. However, one should remember about very important aspects that can be easily overlooked by people from outside the Chinese culture, such as the Chinese people's attachment to numbers. Choosing the right bottling date or displaying specific numbers on the label can be crucial for the success of whisky in this market - adds the CEO of Stilnovisti.
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