China has become the largest import market of Australian wines, overtaken the traditional markets such as the United States and the United Kingdom. From 2014 onwards, the import value has increased rapidly and surged by 533% during 2014-2018. In 2019, the import value of Australian wines reached 1.2 billion AUD. These figures have revealed the evolving size of the Australian wine market in China.

In 2012, China was Australia’s third-largest international market. From June 2011 to June 2012, the value of China’s import of Australian wines increased by 20%, but the quantity dropped by 24%. The reason was that Chinese consumers focused more on high-end luxury wines, according to Tony Spotonm, professor at the University of South Australia. The return of Australian wines in China will show in the long run. Chinese consumers still maintain curiosity about Australian wines.

[Data source: Wine Australia, ‘Import Value of Australian Wine in China’]

Australian wines account for a large market share in the import wine market in China

Regarding the import wine market in China, from 2014 to 2017, the total volume and value of import wine had increased gradually. In 2017, China imported 0.746 billion liters of wines with a value of 2.789 billion USD. In 2018, the figure slightly decreased to 0.688 billion liters with a value of 2.85 billion USD.     

Specifically, Australian wines have accounted for a large proportion of the import wine market in China. In 2018, Australia, France and Chile were the top-3 import partners in the wine market in China, and Australia ranked at the second.

Australian wine sells for a medium price in China

In 2015, China became the fourth largest wine consumption market in the world. Nevertheless, the average price of the import wine was 3.3 EUR (25.56 RMB) per liter, which was higher than that in some traditional markets such as France and Russia. This indicates that Chinese consumers are more likely to purchase costlier wines.

In 2018, the Australian wine was positioned in the second class in the import wine market in China with an average price of 40.6 RMB per liter. Additionally, it had approximately 30-RMB gap compared with the average price of Zelanian wines, which indicates that Australian wines in China are not considered high end.

How Australian wine companies in China leverage E-commerce

According to Euromonitor, store-based retailing and online selling are the main distribution channels of the wine market in China. Moreover, China’s E-commerce sector has accounted for more than ¼ of the total sales volume owing to its growing trend. To keep pace with E-commerce trends, Australian wine companies in China have utilized the online sector to promote their products. Meanwhile, they can increase brand exposure via traditional distribution channels. By 2017, there have been 32 Australian wines sellers on Tmall, 26 of them are flagship stores.

[Data source: Euromonitor, ‘Distribution Channels in China’s Wine Market (2013-2018)’]

For example, Treasury Wine Estates has established 3 official online distribution channels. 2 of them are online flagship stores on Tmall and JD respectively. The last one is an authorized self-operated store on JD. Also, Treasury Wine Estates has operated brick and mortar stores in different cities and collaborated with hypermarkets and supermarkets in China such as Metro AG, Walmart, Sam’s Club, Yonghui Superstores and Ole.

[Photo source: Tmall, ‘Online Store of Treasury Wine Estates’]

[Photo source: JD, ‘Online Store of Treasury Wine Estates’]

Casella, another famous wine producer in Australia, has also set up its online store on Tmall. By collaborating with Telford China, a well-known import agent, Casella can promote its products effectively in the wine market in China.

[Photo source: vinehoo, ‘Casella’s Collaboration with Telford China’]

[Photo source: Tmall, ‘Online Store of Casella’]

The reason behind the popularity of Australian wines in China: driven by cost-effectiveness and acceptable tastes

China imposes zero tariffs on Australian wines

 It is easy to see that Australian wines are gaining recognition from wine consumers in China. Wine producers there are fully aware of this, as they say, ’If we are not in China, we are on the way to China.’

As a representative of the new world’s wines, Australian wines receive much welcome in the wine market in China. They are Hardy’s, Yellow Tail, Jacob’s Creek, Lindemans, Rosemount, Penfolds, Wolfblass, and Banrock Station.

Penfolds

[Photo source: Treasury Wine Estates, ‘Logo of Treasury Wine Estates’]

According to IBISWorld, Penfolds is a part of Treasury Wine Estates Limited (TWE), an Australian-owned wine manufacturer and distributor. In 2010, Foster’s Group split its wine and beer sectors and created TWE. After its demerger, TWE became one of the world’s largest wine producers. The brand has vineyards across Australia, New Zealand, the United States and Italy. The company’s brands include Penfolds, Lindeman’s, Wolf Blass, Rosemount Estate, Beringer Vineyards and Matura.

Penfolds is one of the oldest and most representative wines in Australia. The company has developed a variety of products under the Penfolds brand to tailor to different social occasions and consumers’ needs. Penfolds vineyards also cover a range of climates, soil and regions to grow various types of wines.

[Photo source: Penfolds, ‘Products of Penfolds’]

Yellow Tail

[Photo source: Casella, ‘Logo of Casella’]

According to IBIS World, Yellow Tail is affiliated with Casella Wines Pty Limited, a family-owned winery established in 1965 in the Riverina region of New South Wales. Over the past five years, Casella Wines has extensively utilized its acquisition strategy by purchasing several vineyards and wineries across Australia.

Yellow Tail is the result of the persistent business vision, making wines to bring families and friends on any occasion. Bearing this in mind, the founders of the brand have created an approachable wine that everyone could enjoy. Yellow Tail wines are cost-effective while maintaining the average quality.  

[Photo source: Yellow Tail, ‘Products of Yellow Tail’]

Jacob’s Creek

In 1989 and 1990, Pernod Ricard acquired Orlando Wines and Wyndham Estate and merged the two entities into Orlando Wyndham Group (OWG). In 2013, Premium Wine Brands changed its trading name to Pernod Ricard Australia.

Jacob’s Creek has a long history of making wines. In 1976, the brand was born. Since then, the brand has dedicated to innovating novel products. From the blend of Shiraz and Cabernet Sauvignon to French-style rose, they have embodied founders’ effort and passions.

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E-commerce and westernized lifestyles: The wine market in China is changing at a quick pace

Profile of wine consumers in China

Wine drinking habits in China are changing. In the old days, wine has played the role of a social indicator; it was considered expensive prestigious. Hence, the perception of wine has aroused the curiosity of its consumers through its hedonistic, self-expressive motivations. Traditionally a masculine drink and consumed in the north of the country, wine has succeeded in establishing itself and seducing a new clientele: women and young adults. On the other hand, the increase of the middle class has favored this growth with the increase in purchasing power. The consumer is willing to pay for a quality mid-range bottle without spending a fortune.

China will drive world wine consumption

The wine and spirits market in China is flourishing. High-end spirits, such as Moutai, Chivas, and Martell, are common guests on Chinese tables. However, Baijiu, the local spirit of China still dominates the Chinese spirits market. Despite significant progress over the past decade, regular wine consumption in China remains relatively low compared to countries such as France, Italy, Spain and even the United States. According to some studies, the market for daily alcohol consumption will increase in the coming years and it will become a much more common consumer product than it is currently in China.

According to the latest figures, there is no doubt about its consumption. The Chinese drink 1.46 billion liters of wine every year or almost one liter per capita, according to a study by Vinexpo, an organizer of international trade fairs. China ranks 5th in the world, behind the Americans, French, Italians and Germans. The Middle Kingdom imported nearly 690 million liters of foreign wines in 2018 against 750 in 2017. Their market share would reach 50% in volume today, i.e. one bottle out of two. According to forecasts, China will become the world’s second largest consumer by 2021 and will be the world’s most dynamic market with an estimated 18.5% increase in consumption. By 2030, wine drinking habits in China are projected to 10 liters on average per person against 7 in 2017.

[Source: Euromonitor, evolution of the wine and spirits market]

What are the consumer preferences of Chinese consumers?

Among the most popular wines are: fruity, flavored white and sparkling. Red wine is at the top of the best-selling due to cultural traditions and the health benefits associated with it. But according to experts, the Chinese thirst for white wines could increase in the coming years as the western lifestyle becomes more widespread. Drinking alcohol in China has moved into the mainstream culture, beyond just an activity at family gatherings and dinners .

In addition, drinking during the day and, especially drinking during official working hours, is uncommon in China.). It is to be mentioned that the after-work drinks with colleagues are becoming popular and familiar amongst Chinese urbanites, especially among young professional people. Among the selection criteria, Chinese distributors give priority to the origin over the label and the color of the beverage, which favors Bordeaux and Champagne in particular. Price comes second, followed by taste and designation of origin . The organic segment is becoming more and more prominent as a result of the growing environmental concerns.

E-commerce: a non-negligible distribution channel

The Middle Kingdom expresses a keen interest in viticulture, which obliges companies to adapt. As brands continue to appeal to Chinese consumers, specialist stores have become increasingly popular as famous international brands make their way through these retail venues into the Chinese marketplace. Indeed, new consumption habits have emerged thanks to digital technology. Simultaneously, many specialized shops have recently opened outside the main cities; the development of purchases on the Internet takes on a new dimension.

[Source: Vinexpo’s official website, breakdown of wine sales by volume, imported vs Chinese wines]

Online sales and the creation of platforms available on smartphones have accelerated this phenomenon. According to studies, the online wine market on platforms dominated by Tall (Alibaba) represent the second most used distribution channel behind hypermarkets. In China, 40% of the alcohol is sold online (d.ii). 50% of imported wines are resold in restaurants against 25% in specialist stores and 25% in retailers. Converserly, Chinese wines are sold mainly to retailers (50%), 45% to restaurants and 5% to specialized shops

The wine market in China shows promise

Chinese wine production

After having invested in French vineyards for a long time, European companies have a chance to invest in Chinese wine-growing. Due to the favorable farming climate in certain regions in northeastern China and the size of the agricultural areas, wine production in China is attractive because of its potential for growth. Investors such as LVHM (Moet and Chandon) and Domaines Barons Rothschild Lafite have invested heavily in China. Both firms are developing their own Chinese vineyards and tweaking flavours to best serve the Chinese market.

[Source: Bloomberg ‘Domaine de Barons de Rothschild in Shandong, China]

International events exported in China

China has become a strategic location for industry professional in their strategy to penetrate the Chinese market. After a great success at the Vinexpo exhibition in Shanghai in October 2019 dedicated to wine and spirits market, the economic capital is preparing to host Vinexpo again in October 2020, which attracted more than 5,000 visitors last year. Vinexpo and the e-commerce giant Alibaba joined forces to bring together market and online sales players to consolidate the market.  

Will the wine market in China put trading partners in the shade?

Nonetheless, China’s entry into viticultural production worries the largest producing-countries which depend on its market. The Middle Kingdom has the second largest vineyard in the world, capable of meeting both domestic and foreign demand. With the acquisition of the foreign know-how, China has succeeded in producing very-good-quality wines that the consumer could favor China’s cheaper quality wines to the detriment of European producers.

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High-end and Imported Wines in China Appearing More Frequently

Being regarded as the symbol of polite society or business elites, imported luxury wine such as Chivas Royal Salute(皇家礼炮), John Pope Hennessy(轩尼诗), Remy Martin(人头马) are gradually acquiring public acknowledgement, and we can frequently see them in business receptions or balls. Although the inflation in alcoholic drink in China was surprising 4.2% and the costs for imported alcoholic drinks in China rose greatly, it still sold well. Also these wine companies are trying to produce more varieties of products, which can well-satisfy the taste of Chinese people. French, in particular is doing well in alcohol market in China.

Enter the alcohol market in China through Strategic marketing

In the complex wine industry in China, wine producers are finding ways to win Chinese customers. Many companies use innovative strategies to focus on specific target markets.  Companies are using innovative marketing strategies to focus on specific target markets. For example, the Bonny Doon Company, which uses an unusual selection of wine varieties along with unconventional label, designs to attract new market segments including China. Innovation varies from packaging, branding and advertising.

Surging Sales of alcoholic drinks in China on the Internet

Online B2C purchasing has become more and more popular in China in recent years, and this trend remains the same specifically for the wine in China. There are more online shops and online professional websites doing business related to mid-end wines or high-end brands. Due to the relatively short development history of online wine retailing, the market of online wine purchasing still has great potential.

There are more ways to source wines in China. A British wine research corporation, Wine Intelligence, conducted a market research in March 2016 based on more than 1000 Chinese wine consumers whom were from upper middle class. According to the ‘China Wine Market Landscape Report’ Wine Intelligence published based on the market research, more than 48 million consumers from the middle class consumed wine at least twice a year. Back in 2014, it was only 38 million. Meanwhile, the research also shown 49% consumers have purchased wine online in the past 6 months upon the research conducted. JD.com and T-mall were the most popular platform to source wines compared to other e-commerce platforms, according to the book ‘the competitive strategy of China wine industry’

Domestic Companies Cooperate to Make Themselves More Important in China’s Alcohol Market

We can say without any exaggeration that fierce competition exists in every industry of China. Since the market is widely spread, competition in the alcohol drink industry is intensive and is still heating up. To increase their own market powers, some companies threw themselves in merging or acquisitions. On typical example is the merge of Beijing Dragon Seal Wine and Beijing Red Star into Capital Wine Group. By enlarging the scale of themselves in this way, they enjoy more information, more high-technology, and more capitals for production. This trend again strengthens the competition and speeds up survival of the fittest and quitting of the ones that are not good enough.

High-end domestic alcohol brand such as Mao Tai (茅台) was still leading the domestic alcohol market. The stock has been rising and reached historical high in June 2019. It reached 1163 yuan by 13 December 2019. As the lead in Chinese domestic alcohol market, the growth also promotes sales and growth of other alcohol brands in China. As of 16 December 2019, Mao Tai sales revenue reached 100.3 billion yuan.

Meanwhile in June 2019, Koya Brandy Winery has officially opened in Yantai City. The company Zhang Yu (张裕) has made the first Brandy in China back in 1896 and in the market for sale since 1914 as KOYA Brandy. Koya Brandy is the pioneer in Chinese Brandy alcohol market and expect to enter international alcohol market in the future.

Digital transformation of China’s alcohol industry

In July 2019, Huawei, ZTE and other mobile internet high-tech companies led teams to visit Luzhou Laojiao, Wuliangye, and Maotai, respectively, in digital transformation, smart wineries, cloud computing, etc. On the other hand, it has launched comprehensive cooperation with liquor companies. The development of 5G technology will further change the development of the future liquor industry. In this regard, the industry believes that the use of the new network platform and 5G technology in the communications industry will reduce the difficulty and cost of equipment access to the brewery, transform data resources into data assets, bring out the core advantages of the industry, and continue to optimize and upgrade smart brewing. Technology may be one of the effective ways to enhance the competitiveness of Chinese liquor.

A Grow in Sales of Alcoholic drink in China in 2020

Market for imported wine has been expanding and reached 65.3% by 2018, thanks to the zero tax policy for New Zealand wine in 2012 and Chile wine in 2015.

In 2018, 4.9% of wine produced in China and 10% consumed in China. According to International Wine Association, the average consumption of wine in China is only 1.6L per person while the world average is 3.3L per person, which is twice as much. In 2019, China mainland has consumed 1.79 billion liter and was ranked the fifth in the world. Therefore, there is still a significant potential for the wine market to grow in China.

Author: Fengyu Du

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AI in the Chinese catering industry: restaurants are the next target of AI

According to the China Industry Information Network and China Daily, China’s catering industry reached a revenue of 4.27 trillion yuan ($628 billion) in 2018, a new record.  In this dynamic sector, the use of artificial intelligence is becoming more and more widespread. The Chinese e-commerce giants have embarked on the race.

Robots in restaurants in China

The most visible application of AI in food and beverage is the use of robots in restaurants in China. Earlier this year, Chinese e-commerce giant JD.com announced plans to open 1,000 restaurants by 2020 where food will be prepared and served by robots.

Chinese robot chefs

The use of robots in restaurants in China raises several questions. Does food prepared by robots taste as good as food prepared by human chefs? What about the job of cook, will this lead to mass layoffs in the restaurant industry? These are questions that several restaurants and cafes have tried to address after installing robots in their kitchens.

A leader in the industry is Xcafé, a restaurant opened by JD.com in Tianjin at the end of 2018. This 400 square meter restaurant can welcome up to 100 people ready to enjoy the dishes prepared by the robot chefs. The process is simple: one person supervises approximately 5 robots who are in charge of all the preparation steps. Receiving orders, choosing products, assembling, cooking and plating up, everything is done by artificial intelligence.

However, the example of Xcafé shows us that robots are not yet independent enough to manage restaurants alone. On the other hand, they can also still represent a big advantage; smart restaurants in China are becoming a real tourist attraction.

Having cooks or robot bartenders is still something new around the world and a lot of chains are promoting it to attract customers who are keen on high tech.

In Shanghai, the Ratio recently opened its doors with an attractive concept: the bartender is a state-of-the-art robot that modeled after the arm and hand of a real bartender. Customers order on a Wechat mini-program and can see the robot prepare their orders in front of them. Of course, as far as human interaction is concerned, human managers are still there to answer customers’ questions. 

Chinese robot waiters

The kitchen is not the only place you can find robots in restaurants in China. They are also in the dining room, interacting directly with customers to take orders and serve meals.

Haidilao, one of the largest hotpot chains in China (the only Chinese food company with a revenue of over 10 billion) opened the world’s first artificial intelligence technology restaurant in Beijing in 2018. A fully mechanized service with intelligent robots as waiters and a panoramic screen to order everything to enjoy your private custom-made hotpot experience.

 “Our next goal is to be the most intelligent restaurant in Beijing, we are already conducting technical discussions. I believe that in 10 or 20 years, there will be no more people in hotpot restaurants, only two engineers who can take charge of everything”

—Zhang Yong (CEO of Haidilao)

In the dining room, humanoid robots navigate the tables to serve customers their orders, which were taken on ipads. However, the restaurant is so big that there are still human waiters to take care of the 93 tables. In this case, it appears robots are present in restaurants as a novel attraction and not to replace servers.

Alibaba has also hopped on board with AI in the Food and Beverage industry in China with Robot.He. Following its New Retail project, the restaurant, located in the Shanghai suburb of Nanxiang is part of a Hema’s store. In alignment with Hema’s Retailtainment strategy, waiters are small robots that bring you dishes prepared by cooks.

Leverage big data to understand customer expectations

AI in the Chinese catering industry also makes it possible to predict customers’ expectations and tastes in order to offer them an ultra-personalized experience. This is what the Chinese pizzeria chain La Cesar has set up.

By analyzing the data collected on Baidu, marketers can see what the current food trends are. The analysis of social networks or other applications such as Dazhong Dianping via web robots can also be very relevant. The idea is to analyze trends to create appropriate recipes and menus. So the restaurant is constantly changing its menu. This reminds us of the business model of major international clothing chains such as Zara, which relies on the continuous renewal of its collections.

Thus, the intelligent software combines searches, comments, and photos to create a list of the most frequently used keywords to produce a monthly report that serves as a basis for managers to create new recipes. This is how the cranberry smoothie became a success after a 2017 analysis showing the trend of sour flavors and cranberries during the summer. Another example is the durian pizza, which is the brand’s best-seller.

In China, KFC also uses data to predict customer choices. Thanks to intelligent software that assembles the customers’ faces and their previous choices, KFC is able to offer a choice adapted to each customer. The facial recognition technology was developed in partnership with Baidu.

Smart restaurants in China: a way to ensure safety and hygiene

Beyond purely marketing applications, AI in China’s F&B has also been used to ensure kitchen hygiene. It has become a very sensitive subject in China since the 2008’s melamine-tainted infant formula scandal. The relatively high frequency of such incidents takes a great toll on consumer trust. Artificial intelligence can be a solution. A camera-based system is currently being piloted in the Zhejiang city of Shaoxing to recognize the bad sanitation habits of cooks. A camera system installed in kitchens is able to recognize 18 different types of health risks such as smoking, using your phone, not washing your hands or touching your hair.

An alert is then sent to managers via a mobile app. The system also recognizes good sanitary habits such as disinfecting surfaces, using gloves, checking the temperature of refrigerators. This system based on motion and facial recognition can encourage employees to maintain good habits that would be financially rewarded.

According to a report, since January 2019, approximately 1,700 cameras have been installed in more than 800 restaurants in Minhang district, Shanghai. The food safety project is led by the Market Supervision and Management Bureau of Minhang, which will also receive alerts.

We can see several advantages to the use of AI in the Chinese catering industry:

• Rapid service, the average robots in restaurants are capable of processing up to 8,000 dishes each day
• More endurance than human cooks and no need to take breaks or change the team.
• Fun, attractive to tourists
• No room for human error, protocols are respected bringing transparency for everyone
• An increasingly important database for marketers and the beginning of the era of extreme personalization

However, it should be noted that the price of a robot remains very high today for the trend of AI in the Chinese catering industry to really grow. For a restaurant to employ a robot worker it must pay about 50,000RMB for each robot and then several hundred RMB each month for its upkeep. To compare, a waiter in Shanghai would cost between 3,000 to 10,000 yuan per month.

While facial and speech recognition systems can be profitable, robot restaurant managers are not yet ready.

AI in food delivery in China

Delivery drones in China

A famous application of AI in the food and beverage industry in China are delivery drones. These are supposed to facilitate the process of meal transport to the country where food delivery apps have an estimated 355 million users.

However, the introduction of drones requires the creation of air routes over cities. A trend that is still being tested today and which causes a real problem of competition between the different brands. Who will have the roads above Beijing, who will have the longest roads to the countryside? The war of automatized food delivery in China has only just begun.

Ele.me, China’s largest delivery application with 260 million users and 53.4% market share, was the first to receive government approval to work on the first air routes for delivery drones.

Thus 17 roads have been approved over Shanghai, in the Shanghai Jinshan Industrial Park. This should benefit more than 100 restaurants in the area. The Ele.me drones used during this test phase are capable of carrying up to 6 kilos and flying at a maximum speed of 65km/hour.

The trend is gaining momentum with China’s e-commerce platform JD.com also entering China’s drone delivery market with a license to experiment with delivery drones in Shaanxi Province last year.

How automated food delivery in China is breaking records

The battle is growing between all the players in food delivery and the stakes remain the same: who will be the fastest?

While drones can become the solution, for the time being, other AI-based software and systems are being used. That’s how Meituan Waimai, commonly known as Meituan, which controls 40% of China’s food delivery market, developed its AI-powered Super Brain, a system to automatize food delivery in China.

The system aims to ensure the best delivery times at any time of the day or night and under any weather conditions. Everything is based on data: artificial intelligence analyzes data before, during and after delivery to always improve. The aim is also to offer customers a very accurate estimate of delivery time in real-time.

This is how Meituan Waimai promised to break all delivery records in China.

AI in China’s F&B: controlling the food supply chain

It all starts in the fields

Artificial intelligence has also made its entry into the world of agriculture in China. Thanks to cloud-based agricultural intelligence, farmers are now able to improve their yield and the quality of their product.

Alibaba recently launched its “ET Agricultural Brain” in Shanghai, a powerful intelligent software based on big data that will change the lives of Chinese farmers.

The AI is able to record all the production details to regulate the full life-cycle of production. Vegetable and pig farmers have already started using the program. This is the case of Tequ Group, a pig breeding company based in Sichuan that has been using Alibaba’s technology for several months to raise its pigs. So each pig has an identifier that allows them to set metrics, to see which pig is sick, which pig is fertile, reducing mortality rates.

 AI in factories in China: How robots perform quality assurance

2nd step of the process: the establishment of AI in factories in China. This is primarily used to improve machine performance and ensure quality. For example, the AI modules from EZ Robot Inc. have improved production efficiency, inventory turnover, and equipment utilization across China.

But more recently, a new type of robot has appeared in factories using AI in China: Taste-testing robots.

Powered by artificial intelligence, they aim at guaranteeing the quality of some mass-produced Chinese food such as pork belly, black rice vinegar, fine dried noodles, etc.

The idea sounds crazy but before this job was done by human tasters and the process was slow. Thanks to robotic tasters, the assessment will not vary from one person to another.

According to the report of the China National Light Industry Council, the Chinese food manufacturers that have taken part in the government-funded AI-tasting program have received positive feedback.

The robots can also check that all the food has the same color, smell, and taste.

Finally, AI in factories in China can also sort ingredients. Food sorting is indeed a very time-consuming step in factories because it is carried out by human hands. But with artificial intelligence and especially image and motion recognition systems, factories using AI in China can accelerate this production phase. Products can be sorted by size, color, and freshness.

AI in China’s F&B: ensuring transparency for the customer

If AI in the food and beverage industry in China can directly serve the interests of customers, it is in the tracking of the supply chain.

Mengniu Dairy, China’s second-largest dairy company, is embarking on an effort to bring the centuries-old industry up to date using AI in China’s F&B. In the dairy industry, in particular, the whole process is very delicate and the temperature at each stage of production must remain the same.

Mengniu is now collaborating with Alibaba to use AI to analyze the supply chain, to gain information such as where to manufacture products and where to collect milk, as well as how products can be transferred to customers with maximum efficiency.

Alibaba has indeed big plans to integrate food-tracking blockchain technology into the supply chain in its stores. The company undertook a traceability test conducted last year to track the origins of a package of mangoes thanks to AI. It took only 2.2 seconds compared to 6 days and 18 hours using traditional methods.

How to find the right partner to work with AI in the Food and beverage industry in China

Daxue Consulting offers you a short list of actors developing AI solutions that could be very good AI partners in China. You can find a full list here.

ZhongAn Technology

ZhongAn Technology, the tech subsidiary of Chinese Insurtech giant ZhongAn Online, is a FinTech company focusing on the research and development of technologies in blockchain, AI, big data and cloud computing. They have developed a research center and lab, the Fudan-ZhongAn Blockchain & Information Security Joint Laboratory, to remain at the forefront of research within a large network of AI partners in China. 

They have already worked on a technology relying on blockchain farming to provide more trustworthy food. They applied blockchain in raising free-range chicken in rural areas. Their project called “Go go Chicken” is already working in more than 200 farms in Anhui, Henan, Guizhou, Shaanxi, Gansu, Hainan, and other provinces. By 2020, it will land in around 2,500 farms in China.

EZ Robot Inc

EZ Robot is not only specialized in AI in China’s F&B but in high-performance robots more generally. They are known for their robots in education and how they are able to interact with children but their robots can also be used in the catering industry. Indeed their robots can be controlled remotely and adjusted by wifi and can have all the useful features: vision tracking, speech recognition, artificial intelligence, 3D printing, etc.

Hongbo Zhicheng Technology

Hongbo Zhicheng Technology is a Chinese start-up based in Shenzen that has been known to have created “stir-frying robots”, i.e. a kind of equipment (non-humanoid) that automatically cooks, such as automatic woks. They are the AI partners in China of some of the biggest names in the F&B industry such as Haidilao or the Japanese fast-food franchise Ajisen Ramen. If you need their robotic solutions for canteens, schools or other facilities, they can also be a good solution. In addition to their machines, Hongbi Zhicheng Technology is developing a research lab in Chinese cuisine to see how robots can improve in Chinese techniques. They have also developed a digital database of recipes for several hundred Chinese dishes.

Infinite Food

Created in 2015, Infinite Food is the right AI partner in China if you want to combine food and robotics.

The company’s core product is a vending machine that prepares and distributes meals on-demand. The strong point is that robots are able to work correctly with fresh products. Today, the company is still looking for ways to improve its product and considers it to be a “restaurant in a box”. It is possible to rent or buy this product.

Despite all these innovations, many people remain doubtful about the use of AI in the food and beverage industry in China. It raises the question of the standardization of Chinese food and the end of creativity in cooking. This calls into question the culinary arts and the profession of chef and waiter. Do robots in restaurants in China mark the end of conviviality? In any case, they undoubtedly help to bring a little transparency into the production process, from the farm and factory to the consumer’s plate.

Author: Steffi Noël

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This article AI in the Food and Beverage industry in China: the future of dining starts today | Daxue Consulting is the first one to appear on Daxue Consulting - Market Research China.

• 1:51 The size of the business
• 3:50 Charles Carrard’s personal career experience
• 8:23 The motivation of Charles Carrard to evolve so many businesses
• 9:53 What’s the main challenge of running restaurants
• 11:32 The challenges in the cost structure of running a restaurant
• 13:36 Is it difficult to follow the regulations as running a restaurant
• 16:19 How much did it cost to open a restaurant
• 18:00 How to attract people to the restaurant using the Internet and media
• 21:44 How to catch people’s eye when promoting a restaurant
• 23:42 Charles Carrard’s perspective of the current online and offline wine retail industry
• 30:48 What business format works the best for Charles Carrard in China
• 34:35 Charles Carrard explains why nobody can make money on selling wine online
• 39:38 Which part of the wine value chain in China can make the most money
• 43:11 Which platform would Charles Carrard suggest for wine sellers to use to contact the customer directly
• 44:45 How to get traffic on “word of mouth” WeChat platform
• 47:45 How to build a brand in China
• 51:08 Innovative formats in the Wine industry in China
• 53:35 The history of the brand
• 56:52 What does Charles Carrard think about Chinese wine

 Everything you need to know about running a French restaurant in China

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This article China Paradigm 54: Marketing French cuisine and wine in China is the first one to appear on Daxue Consulting - Market Research China.

The spirits market in China is flourishing as the income level of Chinese consumers is increasing. High-end spirits, such as Moutai, Chivas, and Martell, are common guests on Chinese tables. Besides Baijiu, the local spirit of China still dominates the Chinese spirits market; while western spirits like whiskey and brandy have more and more influence on Chinese consumers’ alcohol choices. Western alcohol culture is becoming popular among the younger generation, and the rise of e-commerce platforms (e.g., Taobao, JD, etc.) enable western spirits brands to enter China’s alcoholic beverage market more easily. Nevertheless, the regulations of China’s alcoholic beverage market suffered changes for a long time, and the legislative body has still not reached consensus on how to regulate alcoholic drinks in China.

Spirits regulations in China

Various regulations of alcoholic beverages in China, including spirits regulations in China, are in place. The Ministry of Commerce of China (MOFCOM) issued the new version of the Food Safety Law of China in 2009 and amended it in 2018 as the document to regulate the Chinese spirits market. In 2015, MOFCOM also issued two standards, Management standard for alcohol commodities retailing and Management standard for alcohol commodities wholesale, to instruct alcohol business entities to undertake the purchasing, selling, distributing and storage of alcoholic drinks in China. At the same time, regional administrative bodies, such as provincial governments, also issued local spirits regulations as complementary documents to China’s alcoholic beverage market.

As for exporting alcohol to China, there are spirits regulations which exporters must become familiar with. The State Economic & Trade Commission, which is known as MOFCOM, issued Administrative Rules for Imported Alcohol in Chinese Market for all alcoholic beverages in China that are imported from other countries and areas.

In 2017, MOFCOM also mentioned that it would set up a comprehensive institution to guide and monitor the production, distribution, and consumption of alcoholic drinks in China. This institution would include unified spirits regulations in China as the guideline for the Chinese alcoholic beverage market.

Chinese spirits market size

Seven kinds of spirits are on sale in China, respectively are Chinese Baijiu, Whisky, Brandy, Vodka, Rum, Gin, and Tequila. According to the data on Taobao and Tmall, which are the e-commerce platforms run by Alibaba Group, Chinese Baijiu sold most bottles in China compared to the other spirits. Considering the representations of Taobao and Tmall, it is clear that Chinese Baijiu still beverage of choice in the spirits market in China.

Another thing to be noticed is that Whiskey performs better than western alcoholic beverages in China: about 2 times more than Vodka, 3 times more than Brandy and Rum, and 10 times more than Gin and Tequila.

Consumption of alcoholic drink in China

Spirits brands sell their products mainly through Taobao/Tmall and JD as online channels. These brands set up their official stores on the platforms and attract consumers by multiple discount activities. Some of these brands also build up their own e-commerce platforms or utilize their websites as part of their online sales channels. Among these platforms, JD is the most prevailing online channel for spirits brands. Baijiu brands on JD are 630, which is about 3 times more than those on Taobao/Tmall. Brandy and Whiskey, the other two prevailing spirits in China, both have more brands in JD than Taobao/Tmall as well.

Offline sales channels are also crucial for promotion of to alcoholic drinks beverages in China. Spirits mostly are sold offline in bars, specialized alcohol stores, wholesales market, restaurants and supermarkets, and currently there are a lot of these spots. Taking Shanghai as an example, there are 670 specialized alcohol stores, 2581 bars, and 220 wholesale markets in total, exposing the spirits to more consumers. However, as bars are exotic and cocktail culture seldom includes Chinese Baijiu, bars are usually not the places to sell Chinese Baijiu with other western spirits.

Brands that are famous in the Chinese spirits market are Moutai for Baijiu, Martell for Brandy, Absolut for Vodka, Chivas for Whisky and Bacardi for Rum.

According to Baidu index, around Chinese new year in 2019 is the time when spirits were mostly searched by Chinese consumers. Chinese Baijiu had not as many increments in searching as other spirits; one explanation could be Chinese consumers are not as familiar with foreign liquors which warrant more research before buying, which reflects the desire of buying western spirits grows stronger.

Search results of specialized tobacco and alcohol stores and bars, which are the main spots that Chinese consumers buy alcohol beverage in China, in Baidu map and Dianping show that a good deal of these spots exist in Shanghai: there are about 744 specialized tobacco and alcohol stores and 2519 bars (including night clubs) where provide spirits sales in Shanghai, which are the same places as other cities in China. These alcohol stores and bars consist of Chinese spirits market and boost the sales of alcoholic drinks in China. One point is Chinese Baijiu is mostly sold in specialized stores while western spirits are mostly sold in bars and night clubs as bar culture is more compatible with western spirits, and cocktails are made by western spirits instead of Chinese Baijiu.

Spirits recognitions of Chinese consumers

Since the Chinese spirits market is still developing, Chinese consumers online searches are more queries about alcoholic drinks in China, asking questions about spirits and expressing different feelings of drinking spirits.

What are spirits for Chinese consumers?

The result of Baidu index shows that Chinese consumers know more of Chinese Baijiu than western spirits. When it comes to western spirits in China, related words like ranking, names, brands, and types show up more than before.

On Zhihu, while Chinese consumers are in the learning phase of the different liquors in China, there is a lot of questions on how to distinguish one spirit from another (Brandy and Whiskey), or Japanese Sake from true spirits. It seems that Chinese consumers don’t have much knowledge of identifying western spirits.

Chinese spirits market also has no detailed category of spirits when they are displayed in markets. Street shots of several Chinese specialized tobacco and alcohol stores reveal that spirits are easily separated by two types: Chinese Baijiu and other spirits.

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More Chinese consumers become big fans of western spirits

Despite the fact that Chinese consumers don’t know much about the western spirits, the culture of the western spirit becomes more and more popular among Chinese consumers, especially among the post-80’s.

On Baidu index, it shows that age group 30-50-year-olds to the majority of Badu searches on spirits including Baijiu and foreign spirits. While the 20’s age group has not reached their max earning potential, but there are more people in this age group coming to understand the different spirits in China.

KOLs’ introduction of spirits

Besides the initiatives of Chinese consumers, KOLs on Weibo and other Chinese popular platforms also facilitate the understanding of the spirits in China. Certain KOLs post what they know about alcoholic beverages enabling more and more Chinese netizens to understand the alcoholic drinks in China, including how to drink them.

How Chinese drink western spirits: cocktails or shots

Spirits in China may be consumed differently than in the west. For Chinese Baijiu, it is almost always drunk straight. This method was not suitable to other western spirits for most Chinese consumers at the beginning because they were not accustomed to the flavors of western spirits, and therefore bars and night clubs mainly produced cocktails rather than serving shots. But currently, Chinese consumers are trying to take western spirits in the same way as Chinese Baijiu. Single malt Whisky, for example, is becoming a new favorite in bars as Scotch Whiskey become famous in the spirits market in China.

The four most popular alcoholic beverages in China

Based on the graphs showed above and current market situation, the four alcoholic beverages most popular spirits in China, namely Chinese Baijiu, Whiskey, Brandy, and Vodka.

Competition analysis of Baijiu in China: Moutai still take the first

Chinese Baijiu is the best-selling spirit in the Chinese spirits market. At present, there are dozens of Baijiu brands in Baijiu market in China, and the most popular one is Moutai from Guizhou Province.

According to the pie graph of 2017, Moutai accounts for above 60% of the Baijiu market in China, followed by Wuliangye, which accounts for 26%, the remaining brands’ market shares don’t exceed 10% individually.

The bar graph above shows the preference of Chinese Baijiu consumers. It seems that the brand and the price are the main aspects when Chinese consumers consider most when they buy Baijiu. This can also explain why Moutai has the biggest market share in Chinese spirits: as Baijiu is already the most popular spirit in the Chinese spirits market, Moutai is also in the leading position of Baijiu market in China as it has both high price and low price products, which allow Moutai to keep its brand awareness and give diverse price choices to consumers.

Competition analysis of Whiskey in China: Single malt whiskey booms

Chinese liquor consumers are younger compared to other countries, according to the news report on ifeng. Whiskey brands like Chivas have already noticed this trend and adopted the corresponding tactic to attract young consumers group. Chivas, one of the famous Whisky Brand, invited Kris Wu, who is a pop star in China and is popular among Chinese more youthful generation, to shoot the advertisement for its Whisky. The advertisement aimed to attract Kris Wu’s fans, who mostly are young people as well as the potential consumers of the whiskey market in China. To attract more young consumers, Chivas also cooperated with the NBA and successfully increased its spirits sales in China as basketball is popular in China.

UK (Scotland) and the USA are the original countries of popular brands on Taobao/Tmall.  Due to a good reputation, flavor, high-end images, and fashionable package design, their spirits sales in China are quite high.

There are a few Asian brands (such as Japanese) selling on Taobao/Tmall, but their sales are much lower than Western brands.

With the popularity of Whisky, Scotch Whisky exposes more to Chinese spirits consumers, which creates a new submarket of the Whiskey market in China: single malt Whisky. According to the data released in 2018 by SWA (Scotch Whiskey Association), “a record number of 2,026,779 bottles of single malt 70cl Scotch were exported to China in 2017, a surge of 190 percent compared to five years ago, and equivalent in value to 20.1 million pounds ($25.3 million).” China Daily reported. It shows that the exporting alcohol to China of SWA will increase, and single malt Whiskey is expected to grow in sales and stimulate the growth of the Whiskey market in China. First-tier cities like Beijing, Shanghai, Guangzhou, and Shenzhen have bars specialize in providing single malt whiskey to Chinese consumers.

Competition analysis of Vodka in China: Vodka and fashion

The Vodka market in China is led by Absolut Vodka produced in Sweden, followed by Skyy produced in the USA. The reason that Absolut Vodka has led the Vodka market in China for many years is it cooperated tightly with different sectors. In the past years, Absolut Vodka considered what was popular and utilized the favorite element to decorate its products and create an appealing advertisement. By the upscale images, pleasant taste and creative advertising, Absolut Vodka has been the most popular vodka brand and attracted many high-income consumers in the Vodka market in China, although its price is relatively high.

Competition analysis of Brandy in China: Chinese Brandy producer Zhangyu

The table above shows the Brandy market in China is occupied by French Brandy brands, which enjoy a long history of Brandy production and decent reputation. Their high-end images, good quality, and appealing package designs attracted a large number of Chinese consumers.

Brandy brands in the Chinese spirits market utilize digital activities to advertise themselves and boost Brandy spirits sales in China. Martell, a famous Brandy brand, makes its advertisement by cooperating with e-commerce platforms and social media to build up its high-end image, such as participate in Tmall’s “Super Brand Day” and shoot videos for ads.

One thing noticeable is that Chinese Brandy brand Zhangyu also emerges and accounts for the most market share in the Brandy market in China. It seems that Chinese domestic alcoholic beverage manufacturers are also entering the Brandy market in China to compete with foreign brands. However, as Zhangyu shows, Chinese Brandy products are at a low price to win the market share compared to French counterparts.

The current trend on the Chinese spirits Market

For China’s alcoholic beverage market, the spirits market is promising, and three trends are predicted to be shown as follows:

The majority are young consumers

More and more international brands are targeting young consumers (post-90s) by building fashionable images since they have enormous consuming potential and willing to pay for fashionable lifestyles. At present, as more and more night clubs, bars, pubs are prevailing around 1~ and 2-tier cities in China, and they are the central bodies who receive exporting alcohol to China, younger generation group have more chances to get access to western spirits, knowing more about western spirits culture as well as stimulating the growth of the spirits market in China. With growing China’s alcoholic beverage market, and higher income level, the scale of the market may influence more young consumers to enter the Chinese spirits market.

More sales of mobile shopping apps

Mobile shopping apps are creating new distribution channels for many brands; international brands are trying to increase their sales through the rising mobile shopping in China. At present, 71.7% of mobile devices had shopping apps installed, and as Taobao/Tmall and JD develop their own mobile app to access to their online platforms, the popular spirits brands like and Martell who have already set up official stores on the platforms or had cooperation with them will probably surge their sales in Chinese spirits market.

Author: Dennis Deng

Make the new economic China Paradigm positive leverage for your business

Do not hesitate to reach out our project managers at dx@daxue-consulting.com to get all answers to your questions

This article The spirits market in China: The four most popular alcoholic drinks among Chinese consumers | Daxue Consulting is the first one to appear on Daxue Consulting - Market Research China.

Highlights of this episode include:

• How CHEERS keeps the prices in wine so affordable in China
• Staying cash flow positive while opening up many more stores
• What contracts are involved in franchises
• Why some wine players in China fail
• How to integrate all of China’s delivery systems into one process
• Misconceptions about the consumption of wine in China, and how to understand the market

China paradigm is a China business podcast sponsored by Daxue Consulting where we interview successful entrepreneurs about their businesses in China. You can access all available episodes from the China paradigm Youtube page.

Make the new economic China Paradigm positive leverage for your business

Do not hesitate to reach out our project managers at dx@daxue-consulting.com to get all answers to your questions

This article [Podcast] China Paradigm 41: How to start a trendy wine chain in China is the first one to appear on Daxue Consulting - Market Research China.

Duty Free shops are retail outlet stores that are exempt from paying all local or national taxes. This tax exemption is on the basis that the goods sold in these stores will be sold to travelers who will carry them outside of the country. Inside of duty free shops, products ranging from high-end luxury brands to skin care to specialty food and beverages are sold, at drastically cheaper prices. The products, which would otherwise be highly taxed in stores inside a country’s regular territory, are cheaper because there are no added taxes to them. Duty free shops are generally located inside airports as they target tourists and travelers. Although they are located in airports, not everyone can shop at them.

Using Zhihu, Chinese consumers have expressed that in order to be able to shop inside duty free shops you must:

• Be a traveler. More specifically, a tourist passport holder;
• Have a departing international flight or arriving by an international flight. If you are a passenger on a domestic flight, you cannot enter duty free shops. You have to be going abroad;
• For foreigners, you must register your passport.

You should also:

• Sign up for a duty free membership provided by the operator.

Chinese consumers attitudes towards Duty Free shopping

As China’s economy was developing, the living standard of its individuals improved as well. Chinese people are now choosing to enjoy life more through traveling, choosing to travel as a way to “enrich their knowledge.” When traveling to foreign countries, Chinese tourists purchase a lot of products. This action is the reason behind individuals believing that Chinese tourists are wealthy. However, the majority of them may not be rich and purchases a lot of products because they frequent duty free shops. Chinese consumers specifically look for duty free shops when traveling because they are perceived to provide high-end quality products for cheaper prices than their home countries. The products sold are also perceived to be genuine since countries, including China, strictly control the goods.

 Taking to Zhihu, Chinese consumers have inquired about which duty free shops are the best to shop at and what kind of products are worth buying.

Travel destination such as South Korea, Japan, and Sanya seem to be the three most popular destinations for Chinese tourists and duty free shopping. These are the top destinations because of the quality of the skin care and makeup products and the number of high-end brands provided.

Another reason behind Chinese consumers liking duty free shops concerns the term Daigou. Daigou are known as shoppers who make money by buying products outside of the mainland and then selling them when they return. They mainly specialize in luxury goods but also in everyday items such as groceries, because they cost less and are of higher quality.

Digital platform promotions of Duty Free shops in China

On Weibo, Duty free operators promote their shops and products in numerous ways. Lotte Duty Free and Shilla Duty Free, both Korean duty free shops, have Weibo accounts that have acquired over 8000000 and 5000000 followers, respectively.

Along with the promotion of their products, the accounts also feature services such as giveaways and activities to obtain free products.

These two big Korean duty free shop operators have their websites in Chinese that caters to Chinese tourists.

For Shilla’s website traffic, a percentage of 1.93% comes from social media. Among this 1.93%, Weibo accounts for 1.51%. This means that inside of China, Chinese consumers who visit the website are mainly coming from Weibo.

For Lotte Duty Free Chinese website’s traffic, 1.58% of traffic is drawn from social media. Among this 1.58%, 2.22% is from Weibo.

Thus, Chinese consumers mainly access the site from Weibo, among all the Chinese social media sites.

Online searches for both of these brands of duty free shops in China have displayed constant cycles of highs and lows. Lotte Duty free started to see a decline in searches in early 2018 and continued to decline until early 2019, while Shilla Duty Free witnessed constant growth until early 2018 before seeing a decline. By 2019, it’s searches started to increase again.

The search frequency of Lotte Duty Free Shop on Baidu from 2016 to the present, the highest peak was in at the end of February 2017.

The search frequency of Shilla Duty Free Shop on Baidu from 2016 to the present, the highest peak was at the end of February 2018.

On the official websites, both operators use Korean celebrities to endorse their products, assuming the role of a KOL. They feature the celebrities holding the product, on the promotional materials for the product, and other activities. Lotte Duty Free even utilizes Chinese video platform Youku, to promote their products and to do some KOL marketing. The videos are featured on their website.

Duty Free in China Case Study: China Duty Free Group

China Duty Free Group (CDF) is the only state-owned monopoly company that is authorized by the state-council to carry out duty free business nationwide. They are one of the top three duty free distributors in the world, the largest duty free retailer in China, and have established over 240 duty free shops in the airports of multiple cities. The group has nine duty free types. In the tourism retail business, China Duty Free set-up L’île du Luxe stores that offer top international brands of products such as perfume, cosmetics, clothes, jewelry, and watches, and high-end stores in airports. Currently, there are shops in airports in Guangzhou, Hangzhou, Nanjing, Xiamen, Shenzhen, Dalian, Xi’an, Chengdu, Guiyang, Shenyang, and Changsha, along with shops offshore. The group also established Chinese Specialty shops that are targeted at the market of high-end and high-valuable Chinese specialty souvenirs such as toys, stationery, clothing, bags, food, and household supplies.

In 2016, China Free Group Sanya International Duty Free City won the CTF Travelers Conference “2016 Chinese Tourists Favorite Shopping Shop” Award. Sanya Duty Free City is the world’s largest tax-free commercial complex located in Haitang Bay, Sanya City in Hainan Province. The duty free city has the theme of tax exemption, integrating business, catering, entertainment, and leisure and shopping. It features around 300 internationally renowned brands, five major divisions of national specialty products, Hainan specialty products, outdoor sports, food, customer service, entertainment, and recreational areas. Providing a one-stop shop for customers and enjoyment for the family.

Sanya Duty Free City utilizes Weibo for promotion. The account has attention of 300 and over 270000 followers. KOLs are not frequently used in the promotional materials of the products and mainly include visuals of just the products.  The account also features articles on products and topics related to the shopping experience such as articles about things that customers/fans of the location are most concerned about. These kinds of articles function as a kind of “frequently asked questions” section where the business provides answers to the consumers’ concerns through the articles.

Duty free shopping has become a large part of Chinese tourists’ traveling. With duty free shops, they can obtain goods that are otherwise too expensive in their homeland. These shops offer a way to enjoy luxurious lifestyles within their financial means.

Author: Shyaiah Mitchell

Make the new economic China Paradigm positive leverage for your business

Do not hesitate to reach out our project managers at dx@daxue-consulting.com to get all answers to your questions

This article What do Chinese consumers think of Duty Free shops? | Daxue Consulting is the first one to appear on Daxue Consulting - Market Research China.

Growing popularity and awareness of Craft beer in China

Craft beer has become more popular as Chinese consumers gain more awareness of foreign products. For craft beer alone, a couple of years ago the segment only made up 0.3% of the total beer consumption in China. Since then, however, this percentage has risen to about 5% with Darren Guo an organizer of the Craft Beer of China Exhibition expecting to see a 30% growth in the beer market until 2020 attributing it to the still developing beer culture. This growth is likely to due to millennial interest in searching online to find new products. This is seen as online searches of craft beer are mainly being done in the coastal cities with 50% of search volume coming from those between 20 to 40 years old. The main target for craft beer is often millennial Chinese consumers with this group being highly connected to the internet as they shop among several popular e-commerce platforms curious to discover new products. Moreover, this group is part of the burgeoning middle class which has made craft beer more popular with their willingness to pay more for premium experiences. Online platforms help better facilitate this with the separation of imported and local products making these products standout to consumers.

Further, despite the lower price gap between some foreign and local products, there are still international brands following premiumization trends. This is seen with many Chinese brands struggling with the shift to premium drinks with Snow, Tsingtao and Yanjing dropping in sales volume. This is as younger and more affluent consumers switch to more premium drinks over value for money in order to look more ‘unique’ and ‘cool’ to their peers. Particularly, Heineken has increased its strength with its more expensive offerings. This is along with Panda Brew whose sale of distinctly flavoured brews has tripled since its establishment in 2013 with his products in more than 60 cities. This need for brand recognition and products that provide social value is also driving the development of craft beer within China’s alcoholic beverage industry.

The beer market in China: Consumption habits

When consumers purchase beer to drink at home, the main channels are still grocery stores, shopping malls and supermarkets. This is as grocery stores take advantage of geographical location and tend to satisfy customer’s desire to impulse buy and consume beer. In comparison, supermarkets are mainly based on planned consumption and this trend is particularly seen in the northern regions. Dining channels also take up a large portion of the total consumption with family occasions being the exception to this. Further, data from Katar also states that those from first or second tier cities in China tend to purchase beer at KTV (Karaoke), cinemas, restaurants and convenience stores. This is with restaurants taking up to 50% of the total sales volume and with KTV and bars remaining the main channel for higher-end beer purchases.

Drinking culture in China: Taste preferences

The craft beer flavour is new and not largely spread across the Chinese population. This is as craft beers are stronger, with a higher volume of alcohol and a more bitter taste. The main Chinese consumers targeted by craft beer brands are those in urban growing middle to upper class. These consumers are more willing to try new products and don’t mind paying more in order to do so. However, most Chinese consumers traditionally prefer weak and sweeter flavoured beers which are refreshing and easily drunk during lunch and dinner. These beers are cheaper than their foreign counterparts and are easily consumed by Chinese across all income levels and all parts of China. The brands that are more popular tend to be lighter and closer to Chinese beer flavours, refreshing and easily drinkable. This is in order to match the mass-market taste as lighter beers are more popular in China with the brand Qingdao being an example of this. Brands with a strong identity and taste which differ to these mainstream beers also stand out in the niche market.

An example of this is Trappistes Rochefort, a Belgium brewing company, which offers a darker beer often sold in multi-brand shops with a higher volume of alcohol content at 11.3%. This brand is available in China and describes itself as a ‘brown ale’ and is appreciated by those with ‘more discerning palates’ further emphasizing its differences in the market.

Off and on-trade in the Chinese beer market

There are diverse possibilities available in order to sell craft beer in the Chinese market which includes methods that are both on-trade and off-trade. Particularly, online alcohol sales are forecasted to be promising in the future especially as the market share of online purchases is predicted to increasingly erode the proportion of offline sales in the Chinese market. However, sales in the off-trade market have grown swiftly over recent years, as the fast development of online sales and the trend of consumers enjoying their beer at home both individually and socially.

On-trade is worth 60% of imported beer distribution in China. The on-trade channel includes HoReCa, KTV, nightclubs, bars, beer houses and imported beer dining houses along with beer festivals and events. In comparison, off-trade deals with both on and offline channels including hypermarkets and supermarkets, convenience stores, E-commerce and 020.

Distribution channels for targeting those with interest in new products in the Chinese beer market

Recently imported beer has been deeply promoted in Chinese hypermarkets, supermarkets and e-commerce, with the average price dropping by 18% during the past three years. The price gap between imported and domestically produced beer is increasingly becoming smaller with foreign brands changing their price from 20RMB to 15RMB a liter. The direct competition between imported and domestically produced beer is unavoidable. However, a price should be considered less of an obstacle with the reduction bringing foreign brands closer to domestic competitors for the more common products. There still remains a greater price difference for higher quality products with those in the growing middle class in tier 1 and 2 cities willing to pay the fee for more premium products.

Imported beer consumption in China: E-commerce

E-commerce is very popular with Chinese consumers looking for imported beer products. Specifically, there are three types of shopping avenues that are more popular and targeted to consumers.  Horizontal e-commerce platforms sell larger quantities of imported products in particular categories which allow Chinese to efficiently find what they need. Vertical platforms, in comparison, are usually niche and are dedicated to a more educated and targeted audience especially if the brand is more well known. Examples of horizontal platforms include Tmall, JD and Tmall Global, whereas vertical platforms include Jiuxian and ichinabeer.

Cross-border channels, which is a way of shopping online to buy foreign brands directly, are also another method for businesses in the Chinese market to use. This channel is especially beneficial for international companies when entering the market in order to test the market’s reaction to the products itself. Cross-border method also has tax advantages for foreign brands as sellers can sell products cheaper than some of the goods available in the domestic market. This bypasses the taxes that apply selling products physically thereby making this very desirable for international brands seeking to enter the Chinese market.

E-commerce can be utilized to reach all over China, but for craft beer, this channel is more effective when focusing specifically on urban areas. This is as most rural areas have a lower awareness of niche products. Targeting this way, as a result, better includes and hones in on Chinese millennial consumers who are living in urban areas of tier 1 to tier 3 cities.

Beer distribution in China: Hotels and restaurants

In terms of hotels and restaurants, there is a distinction between traditional Chinese channels and western premium channels. This is as traditional Chinese hotels and restaurants mostly serve mass-consumption beer, with big bottles of local brands generally about 600ml in volume. In comparison, western-style and premium luxury institutions serve high-end products including craft beer which can be an expensive drink. Examples of distribution channels for this category include international hotels with bars with business or high-end positioning or mid-range western restaurants in tier 1 cities. The targeted areas include mostly tier 1 and 2 cities with Chinese and foreigners as consumers from the ages of 20 to 50 years old in urban areas who have knowledge of and are interested in craft beer.

Chinese interested in craft beers: Bars and breweries

Bars and breweries with a large selection of imported beers are flourishing the past few years in the main tier 1 cities. With a larger audience of foreigners and Chinese interested in craft beers, the best way to attract them is to offer imported products that are difficult or are hardly found in other places. Dedicated imported beer bars such as beer89 in Beijing, Beer lady in Shanghai are examples of these. Breweries and sports bars such as the Great Leap Brewing are also an example of this, with a large selection of beers available. Those who usually go to these places are Chinese and foreigners between the ages of 20 to 40 years old in urban areas with beer interests.

China’s alcoholic beverage industry: Offline events

Source: That’s Qingdao

Beer festivals, food and beverage events, imported products fairs. There are plenty of small events to larger fairs where craft beer brands and producers promote and sell their products. Sponsoring events with high participation of the target market, here being mostly millennials from ages 20 to 35 years old, is also a good way to promote brands to consumers in tier 1 cities with an interest in social events. They are more likely to attend summer festivals or events such as the Qingdao beer festival as well as Oktoberfest which takes place in several tiers 1 cities.

2018 best sellers for craft beer in China

The top 4 results on Tmall from October 2018 for the volume of sales online under the category ‘craft beer transported products’ were Corona, Hoegaarden, a mix of Belgium craft beers as well as Trappistes Rochefort. On Tmall these top 4 results show a variety of imported products where consumers can purchase items either individually or in a group in order to try a greater variety of imported products.

Corona is the most popular craft beer imported product. This is with it selling a bottle at 20RMB for a 330ml bottle. It sells in a glass bottle with several sizes available and is imported from Mexico with a self-owned shop on Tmall. In October 2018 the number of sales on Tmall was 2216.

Hoegaarden was the second most popular based on the volume of sales online. It sells one product at 17.5 RMB for a 500ml can. The brands packaging comes in both cans and also glass bottles which are available for other products. The product is imported from South Korea which is the production place and has a self-owned shop on Tmall. In October 2018 the number of sales on Tmall was 1422.

A Mix of Belgium craft beers was the third most sold with 302 sales on Tmall in October 2018. These products sell at 14 RMB a bottle which can be from 330ml to 500ml in volume and are imported from Belgium. The online shop is a multi-brand craft imported beer shop on Tmall and often sell several bundles of different brands suggesting trials of different types of beers and brand packages.

The fourth most sold craft beer is Trappistes Rochefort selling which sold 265 products on Tmall in October 2018. The products sell for 17.5 RMB for 330ml bottles and are imported from Belgium. The online shop has multiple brands of craft imported beer products with several bundles of different brands also trying to get customers to try different types of beers and brand packages.

Beer preferences evident through Chinese consumer buying practices

E-commerce has become increasingly more important in China with the market amount equaling $636,087 million US dollars. Chinese E-commerce is the largest in the world with it expecting to grow even further to a market volume of $1,086,111 million by 2023. Of this, Tmall is the largest E-commerce platform in China with 52% of the market share. When searching on Tmall for ‘craft beer’, an analysis of the first page ‘popular products’ provides insight into Chinese consumer preferences and trends.

Source: Statista

A trend that is evident is the prevalence of multi-brand stores. Multi-brand stores are a good opportunity for a new brand in China with limited cost and visibility thanks to packing offers. To do this, small craft beer brands are sold in multi-brand craft beer shops with the most popular products are bundles of different beers from the same or different brands. Further, this is beneficial as when gathering several brands, shops have more resources to promote themselves. In comparison, many famous international famous brands have their own self-owned shop with a large number of products being sold from this platform.

In terms of packaging, glass bottles tend to be more popular. For high-end products, this packaging is more suitable and is seen on more imported beer which is thought to be premium and higher quality. An analysis of 60 products showed that only 23% of products were offered in cans (14 out of 60).

To keep the premium image of products, small brands do not discount products while international brands which are already popular in China tend to give discounts. This applies especially on 11/11 which is one of the more important shopping festivals for China and is similar to Black Friday. In order to create awareness for craft beer brands, special packs for 6 or 12 different brands in order for consumers to try new products. It is especially good for smaller brands trying to create awareness.

Craft beer conferences in Mainland China

Conferences are also very useful for foreign organizations looking to enter the Chinese market. This is as foreign brands can collect useful contacts as well as get acquainted with the trends of the beer market in China. Particularly, the Craft Beer China Conference & Exhibition 2019 run by NürnbergMesse China along with the Beer Link and the China Light Industry Machinery Association provides insight into the craft beer market. This event includes experts talking about brewing technology, insights into operations, brand management methods, e-commerce platforms, investment institutions and marketing channels among other topics which are of interest to those in the craft beer industry.

Free Trade Zone Development in China helping international businesses

In China, the recent development of the Free Trade Zone Development (FTZ) has made doing business in China easier with favourable policies for cross-border trade. This is seen with the simplification of clearance procedures which shortens clearance time and lowers cost for importers. This is especially good news for international brands trying to enter the market. There are four provinces that have set up Free Trades Zones including Shanghai,Tianjin, Fujian and Guangdong which all have their own rules. In particular, Xiamen is especially of note with one of the largest beer ports due to its favourable policy towards importers which allows beer importers to save 2,000 RMB per cabinet.

Opportunities for foreign brands wanting to enter the Chinese beer market

Over the past 5 years, there has been fast growth in the imported beer market in terms of volume and value. The slowdown of the Chinese economy has had a limited impact on the imported beer market. Further, the consumption of imported beer in China is likely to grow due to the rise of the middle-class population and the correspondingly more westernized dietary habits and interest in beer culture. This is evident as these middle-class consumers situated in urban areas tend to demand higher quality and prestige beer. The number of consumers in the upper middle class in urban areas is expected to grow from 36 million to 192 million in 2022. Moreover, the overall demand for beer from in 2020 is expected to reach 49 million kilolitres. These consumers with higher incomes have higher living standards and a demand for higher-end products. Further, the development of simplified procedures through Free Trade Zones have further facilitated beer imports making it easier for those wanting to enter the Chinese market. As such, craft beer is likely to see an expansion in the future and provides a plethora of opportunity to those who want to enter China’s alcoholic beverage industry.

A blind tasting is a great test to check how customers react without knowing the brand. One of the main goals is getting objective data-collection and unbiased preferences. Daxue Consulting can help you to get precise of view where your beer brand stands from a user’s point of view.

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