CHINA – Alcohol consumers remain cautious in terms of discretionary spending, with many prioritising expenditure on travel and experiences over the drink, IWSR explained in its latest market research publication.
IWSR had projected that 2024 was set to be a year of normalisation for China’s beverage alcohol market, after softer than expected performance in 2023.
“The recovery in China during 2023 wasn’t as smooth or strong as many had expected, with inconsistencies between categories and price tiers,” says Shirley Zhu, IWSR Research Director for Greater China. “A slowdown was felt across drinks categories, with consumers wary of spending.”
However, the trade is now focusing on de-stocking of high-end products – especially Baijiu, Cognac and Scotch whisky.
Data from IWSR reveals that total beverage alcohol (TBA) volumes in China experienced only marginal growth from 2022 to 2023.
While spirits and wine volumes declined by 9% and 14%, respectively, increases were seen in beer (+3%) and ready-to-drinks (RTDs) (+1%). Notably, malt Scotch whisky experienced declines across all price tiers for the first time since 2000.
While IWSR market data forecasts expect TBA volumes to be essentially flat between 2023 and 2028, prospects are brighter when it comes to TBA value in China.
IWSR’s latest Bevtrac consumer tracking data indicates that while consumer sentiment in the first half of 2024 remains positive, it is notably weaker compared to the previous year.
Zhu attributes this to a property sector crisis that dampened both business and consumer confidence. Although there was a brief uptick early in 2023 as pandemic restrictions eased, sentiment subsequently declined.
Zhu commented that a crisis in the property sector significantly impacted the Chinese economy, affecting both business and consumer confidence.
Despite an improvement in early 2023 as pandemic restrictions were lifted, consumer sentiment subsequently tailed off and remained low.
The data also highlights a slowdown in spending per unit across many categories, with evidence of down-trading among middle-class consumers.
This trend is attributed to perceptions of rising prices in premium spirits, as average prices and spending ceilings for personal use have increased.
Looking ahead, IWSR forecasts suggest that TBA volumes will remain flat from 2023 to 2028. However, the market value is expected to recover, with a projected increase of over USD 14 billion by 2028, driven largely by Baijiu.
High inventory levels have led to continued de-stocking of XO Cognac and high-age whiskies, following a tough 2023.
Cognac and malt Scotch volumes both declined, with an anticipated further decrease in 2024. Conversely, VSOP Cognac and blended Scotch have maintained stability, and VS Cognac has seen growth due to its more accessible price range.
In contrast, the on-trade revival has fuelled significant growth in white spirits, including gin, vodka, rum, and tequila, with double-digit increases across these segments in 2023. However, this growth may be tempered in 2024.
Beer is projected to grow at a CAGR of +1% from 2023 to 2028, following a 3% volume increase in 2023, driven by premium products.
Wine, however, continues to face challenges, with still wine experiencing persistent declines. The removal of tariffs on Australian wine in March 2024 may shift market dynamics, but a substantial increase in total wine consumption is unlikely.
Overall, while the beverage alcohol market in China faces a period of adjustment, there are positive signs of recovery and growth in specific segments.
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