Nielsen’s data from more than 1,100 hypermarkets across 22 key cities in China showed that the Baijiu market improved in 2014, with a sales growth of 5.5 per cent. In 2013, sales had dropped 2.7 per cent compared to 2012.
The key insight is that future growth of the Baijiu market is relying on mass market consumption, and brand positioning will have to go from being a “national liquor that appears at formal Chinese-style banquets” to one that is more accessible.
In terms of the sales value, the growth rate of mass-consumption alcoholic beverages, such as Vodka (3.1 per cent) and beer (2.7 per cent), all had a higher growth than Baijiu (-1.2 per cent), meanwhile, Whisky (-9.1 per cent), Brandy (-23.2 per cent) plunged in sales in 2014.
Kiki Fan, managing director of Nielsen China, noted in the report that optimistic Chinese consumer confidence, an increasing purchase intention among consumers from Central-West China and Tier 2-3 cities played a role in the recovery of Baijiu growth.
However, the gain was largely attributed to the enhanced promotions from Baijiu manufacturers, which also led to growth during off-peak seasons.
The future of Baijiu’s mass market positioning may lie with younger generations. Qualitative research from Nielsen shows that consumers start to discover high-end Baijiu from the age of 25 to 35. During this period, they begin to increase their drinking volume and to explore different brands. From the age of 35 to 45, they gradually form their brand loyalty.
With the evolving diverse needs of Chinese consumers, younger generations such as the post-'80s and '90s, are the key to drive future consumption.
“Our study shows that, most of the younger consumers started to discover alcoholic beverages in their 20s, and they always start with beer,” Fan said. “The key to Baijiu market growth is dependent on younger generations having a better understanding of Baijiu as well as the unique culture associated with it.”
According to the Nielsen study, price-point has been crucial for Baijiu and will continue to be important in the future. The sales of Baijiu priced between 300 and 700 yuan accounted for 21.9 per cent of the total sales in 2014, which grew by 8.6 percentage-points compared with 2013.
The sales of low-end Baijiu (which Nielsen terms as being for "self-drinking") priced below 100 yuan per pack accounted for 30.4 per cent increase in total sales, 2.3 percentage points higher than the previous year.
Nielsen’s recommendations for Baijiu:
From business to leisure and self-indulgence: creating more reasons to drink
- If consumers’ needs for alcoholic beverages can be divided into four social categories: business, social networking, self-indulgence and entertainment, Nielsen’s research shows that so far, Baiju is predominantly consumed in a business context.
Ride the ecommerce trend
- According to Nielsen’s survey, around 77 per cent of surveyed Baijiu consumers are willing to increase purchases via online channels in the next two or three years, compared with 53 per cent of respondents who are willing to increase purchases via offline channels.