Increase in spirit consumption spurs two-way investment
Driven by a growing high-income population and their increasingly discerning tastes, China's rising consumption of spirits like whiskey and cognac will push more French wine and spirits providers to invest in China to meet local demand.
After putting its first China-based malt whisky distillery into operation in Sichuan province in 2021, Pernod Ricard, a French wine and spirits group, will further enrich its product portfolio, and boost both online and offline sales in China to seize more market share in the coming years.
Aside from importing wine and spirits into China, the company has already transformed from a trading company into a hybrid group in the country. It currently runs two manufacturing sites — a winery in the east foothills of Helan Mountain in Northwest China's Ningxia Hui autonomous region, and a whisky distillery in Southwest China's Sichuan province.
Jerome Cottin-Bizonne, managing director for China at Pernod Ricard, said innovation plays a critical role in seeding future category growth, allowing the company to engage with consumers seeking differentiated and premium experiences across diverse occasions.
"One of the most important measures is digitalization," he said. The Paris-based group is partnering with over 200 wholesalers and more than 4,000 retailers digitally across China.
Supported by 19,480 employees, Pernod Ricard is the world's second-largest producer of wine and spirits, including Chivas Regal, Royal Salute and Martell Cognac. Its consolidated sales stood at 10.7 billion euros ($11.67 billion) in its 2022 fiscal year.
Thanks to China's growing trend toward premium products, its sales revenue in the country grew by 9 percent on a yearly basis in the first quarter of its 2023 fiscal year.
Besides traditional sales channels, such as restaurants, bars and clubs, increasingly sophisticated Chinese consumers have explored new ways of drinking at home or during outdoor picnics and "glamping" — a combination of the words glamour and camping — said Sophie Phe, CEO for China at Remy Cointreau, another French cognac, liqueurs and spirits provider.
In its 2022 fiscal year, global sales of the cognac division of Remy Cointreau increased by 26.3 percent year-on-year, thanks to a growing contribution from high-end and exceptional products, including sales growth from Remy Martin Club cognac in China, one of its largest markets.
"Remy Cointreau is confident about the growth in China, and Chinese consumers are becoming more sophisticated at a personal level. Young consumers have access to Western spirits earlier than their previous generations, and some may be influenced by their experiences abroad," she said.
The company found that single malt whiskey has attracted the attention of more female consumers than before, who have also shown a higher-quality demand for cocktails.
According to market research company Euromonitor International, by 2025, whiskey sales in China are expected to reach $2.25 billion.
Still, total imported spirits account for about 3 percent of China's alcohol market in value and the China market is still dominated by baijiu, according to the London-based International Wine & Spirit Research organization.
Guo Xin, a marketing professor at Beijing Technology and Business University, said the imported spirits market in China is expected to embrace new consumption scenarios and consumers while also providing more diversified opportunities.
"Young consumers prefer fresh and diversified alcoholic drinks," she said, adding the change in consumption structure will certainly bring changes to the market.
In another development, major industry players such as Pernod Ricard and China Great Wall Wine, have set up production operations and vineyards in the Ningxia Hui autonomous region, a major wine-producing region in China.
By 2035, the region is predicted to generate annual sales of 200 billion yuan and the scale is expected to rival that of Bordeaux, a famed wine-producing region in France, according to local government plans.
