Page 282 - 2018 White Paper on the Business Environment in China
P. 282
8 White Paper on the Business Environment in China
Kong tea and fruit juices have become the trend but more demand for high-alcohol Chinese distilled liquor has
than 14 years have gone and the Chinese are searching for remained strong. Few can argue that baiju (white spirit)
new beverages (Daxue, Beverage). is China’s most infamous drink. Sales of China’s premium
liquor segment were hit hard after 2012, when Xi’s
The average growth rate of the production of signature anti-corruption campaign focused on officials’
beverages in China is about 13 percent, but the growth of lavish spending on entertaining. In 2017, however, the
each category varies a lot according to the product: water, Communist Party asked local cadres to identify all the
carbonated drinks, fruit juice, milk, tea and many others. illegal spending on luxury liquor from January to August,
Water is the largest segment of the beverage industry including how much officials spent and the names of
in China. The packaging design and size is playing an those who attended banquets that included luxury
important role in the consumer’s choice however after alcohol, according to notices published on government
recent food scandals, the health and security criteria have websites. The impact this time is more muted as makers
become the priority for the Chinese. Nongfu Spring and of the most popular luxury brands are seeing a surge in
Master Kong share 65 percent of the mineral water market. consumption in the mass market and the economy is
The high-quality fruit juices are benefiting from a trend showing signs of strength. “The demand for premium
for green products and will be raising the market up to 26 liquor is very strong now in China, mainly from family and
billion dollars in 2017, suggesting an increase of over 16 friend gatherings, and normal business needs,”said Qi He,
percent compared to the previous year, equivalent to the a Shanghai-based fund manager at Huatai Pinebridge
mineral water market. The growth rate of milk and protein Fund Management Co. “The sales contribution from
beverages has increased a lot more than all other types of government consumption has reduced much from more
products, with consumption increasing by 23.46 percent, than 50 percent years ago, to less than 20 percent now in
producing a revenue estimated at $14.5 billion. This higher China” (Zhai and Wei).
growth is explained by the established trend of parents
selecting milk beverages for their children to encourage Since 2005, market deregulation, product
healthy development. More than 10,000 brands of tea are improvements, and resurgence in popularity of Chinese
on the market in China, but Master Kong and Uni-President alcohol have boosted revenue for the domestic alcohol
both hold 40 percent. Even further segmentation is production industry. In the five years through 2017,
expected in the coming years as brands are struggling to industry revenue grew 10.8 percent per year on average
acquire new loyal consumers (Daxue, Beverage). to reach $126.5 billion. Imports and exports of Chinese
alcohol products are low, and domestic demand
Market analysts also believe the surge of sports and is roughly equal to industry revenue. The alcohol
energy drinks will continue in China. Chinese consumers production industry is at the end of the growth stage of
drank more than 545 million liters of sports drinks over its life cycle. The industry has developed for over 5,000
2014 and 2015, four times more than Americans. This years and production technologies are mature. Industry
number also represents a 25 percent volume growth value added has been growing at an annualized rate of
during the period. These products have a huge growth 9.7 percent in the 10 years through 2022. With gradual
potential considering the Chinese government has slower growth of value added, this industry is expected
announced the plans of building an $850 billion sports to develop from growth to a mature phase (IBISWorld,
economy by 2025. Currently, Red Bull, manufactured Chinese Alcohol).
by local Red Bull Wei Sheng Su Gong Neng Yin Liao, still
remains the leading brand in the category, but it’s getting Although toasting with 80-to-120-proof firewater
a bit scared by Monster Energy that emerged in the isn’t everyone’s idea of a refreshing beverage, alcohol
market in 2017 (Yu, What). consumption in China is growing so rapidly that the
country now out-boozes the Brits, Americans and even
Alcoholic Beverages the Irish. Alcohol consumption per capita in China has
risen from an average of 4.9 liters between 2003 and
Chinese consumers enjoy a wide range of alcoholic 2005 to 6.7 liters five years later. When the 56 percent of
beverages, such as beer, rice wine and Chinese distilled the nation’s non-drinkers are excluded, consumption per
alcohol. Despite consumers becoming more health- capita was an annual 15.1 liters (Davidson). It’s not just
conscious in recent years and more people showing baijiu. Consumers from various regions are turning more
a preference for drinks with lower alcohol content, towards Western liquors such as beer, wine, and whiskey.
282
Kong tea and fruit juices have become the trend but more demand for high-alcohol Chinese distilled liquor has
than 14 years have gone and the Chinese are searching for remained strong. Few can argue that baiju (white spirit)
new beverages (Daxue, Beverage). is China’s most infamous drink. Sales of China’s premium
liquor segment were hit hard after 2012, when Xi’s
The average growth rate of the production of signature anti-corruption campaign focused on officials’
beverages in China is about 13 percent, but the growth of lavish spending on entertaining. In 2017, however, the
each category varies a lot according to the product: water, Communist Party asked local cadres to identify all the
carbonated drinks, fruit juice, milk, tea and many others. illegal spending on luxury liquor from January to August,
Water is the largest segment of the beverage industry including how much officials spent and the names of
in China. The packaging design and size is playing an those who attended banquets that included luxury
important role in the consumer’s choice however after alcohol, according to notices published on government
recent food scandals, the health and security criteria have websites. The impact this time is more muted as makers
become the priority for the Chinese. Nongfu Spring and of the most popular luxury brands are seeing a surge in
Master Kong share 65 percent of the mineral water market. consumption in the mass market and the economy is
The high-quality fruit juices are benefiting from a trend showing signs of strength. “The demand for premium
for green products and will be raising the market up to 26 liquor is very strong now in China, mainly from family and
billion dollars in 2017, suggesting an increase of over 16 friend gatherings, and normal business needs,”said Qi He,
percent compared to the previous year, equivalent to the a Shanghai-based fund manager at Huatai Pinebridge
mineral water market. The growth rate of milk and protein Fund Management Co. “The sales contribution from
beverages has increased a lot more than all other types of government consumption has reduced much from more
products, with consumption increasing by 23.46 percent, than 50 percent years ago, to less than 20 percent now in
producing a revenue estimated at $14.5 billion. This higher China” (Zhai and Wei).
growth is explained by the established trend of parents
selecting milk beverages for their children to encourage Since 2005, market deregulation, product
healthy development. More than 10,000 brands of tea are improvements, and resurgence in popularity of Chinese
on the market in China, but Master Kong and Uni-President alcohol have boosted revenue for the domestic alcohol
both hold 40 percent. Even further segmentation is production industry. In the five years through 2017,
expected in the coming years as brands are struggling to industry revenue grew 10.8 percent per year on average
acquire new loyal consumers (Daxue, Beverage). to reach $126.5 billion. Imports and exports of Chinese
alcohol products are low, and domestic demand
Market analysts also believe the surge of sports and is roughly equal to industry revenue. The alcohol
energy drinks will continue in China. Chinese consumers production industry is at the end of the growth stage of
drank more than 545 million liters of sports drinks over its life cycle. The industry has developed for over 5,000
2014 and 2015, four times more than Americans. This years and production technologies are mature. Industry
number also represents a 25 percent volume growth value added has been growing at an annualized rate of
during the period. These products have a huge growth 9.7 percent in the 10 years through 2022. With gradual
potential considering the Chinese government has slower growth of value added, this industry is expected
announced the plans of building an $850 billion sports to develop from growth to a mature phase (IBISWorld,
economy by 2025. Currently, Red Bull, manufactured Chinese Alcohol).
by local Red Bull Wei Sheng Su Gong Neng Yin Liao, still
remains the leading brand in the category, but it’s getting Although toasting with 80-to-120-proof firewater
a bit scared by Monster Energy that emerged in the isn’t everyone’s idea of a refreshing beverage, alcohol
market in 2017 (Yu, What). consumption in China is growing so rapidly that the
country now out-boozes the Brits, Americans and even
Alcoholic Beverages the Irish. Alcohol consumption per capita in China has
risen from an average of 4.9 liters between 2003 and
Chinese consumers enjoy a wide range of alcoholic 2005 to 6.7 liters five years later. When the 56 percent of
beverages, such as beer, rice wine and Chinese distilled the nation’s non-drinkers are excluded, consumption per
alcohol. Despite consumers becoming more health- capita was an annual 15.1 liters (Davidson). It’s not just
conscious in recent years and more people showing baijiu. Consumers from various regions are turning more
a preference for drinks with lower alcohol content, towards Western liquors such as beer, wine, and whiskey.
282
