January 17, 2021

Chinese Gen-Z’s thirst for international drinks brands drives market boom

The tremendous opportunities that the Chinese market presents the world were recently underlined on 9th September, when China raised a glass to toast Beverage Day – the country’s annual wine and spirits shopping festival. Here, Zarina Kanji, Food and Beverages UK, Alibaba Group, discusses how the market is being driven and the potential it holds for UK producers.

Although the rise in popularity of wine and spirits has its roots amongst China’s wealthy elite, the trend has since caught on with the country’s growing middle-class (which, by 2022, is estimated to reach 550m) – and it is international drinks brands, in particular, which are really tickling tastebuds.

Data from Tmall Global – Alibaba’s cross-border e-commerce platform – shows that foreign wine sales increased by 220% in the first half of this year, while brands such as Scottish whisky manufacturer Loch Lomond Group launched special editions for collectors in China.

This strong and growing demand presents a significant opportunity for international drinks brands, whether they’re already operating in China, or considering expanding their footprint into the market.

Driving demand: introducing China’s Gen-Z

China’s Gen Z (typically comprising of those born between 1995 and 2002) is becoming an increasingly important demographic for brands across the board. Research by management consultancy Bain & Company predicts that the generation will account for more than 46% of purchases in the global consumer market by 2025.

For overseas alcohol brands specifically, the demand from China’s Gen-Z is stronger than ever. Data from Tmall Global shows the important role that foreign wine and spirits brands are playing as young people meet and socialise, as the country emerges from the pandemic. More than half of 18-29 year olds on the Tmall Global platform are now buying overseas wine and spirits brands. In fact, looking at wine specifically, sales of imported products are nearly six times higher than domestic products. In the aftermath of widespread social restrictions, many of these get togethers are taking place at home – a trend that, alongside more creative shopping experiences, has accelerated as a result of the pandemic.

Home bartending

The Home-cooking trend, and now a new phenomenon, ‘home bartending’, have both sky-rocketed in the last few months. Young consumers who miss sipping on cocktails and the experience of being in a bar have started learning how to make their favourites at home and turning their homes into bars – with lots looking to Tmall’s customer service for inspiration and the latest cocktail recommendations.

In response to this demand, Tmall Global released a guide to making cocktails in August, designed specifically for the country’s Gen-Z consumers. Overseas brands are also seizing the opportunity to capture the imagination of these aspiring bartenders by releasing their own exclusive ‘special blending packages’ on the platform, offering menus and blending suggestions to attract new customers. The German brand Jägermeister, for example, has seen great success already, offering a free ‘Mojito Set’ when consumers purchase its trademark spirit – currently it is selling more than 10,000 per month.

As a key ingredient in cocktails, gin is a spirit which is seeing particularly strong growth in China. In the last three years, China imports of gin from the UK has almost tripled in value to nearly £17.5m. And while overall numbers still place baijiu as the spirit of choice in China – followed by whiskey and cognac – younger consumers are predicted to change that as they seek the heritage and innovation that comes with British gin brands.

For overseas brands in China, it is also important to consider the regional differences across the country. For example, data from Tmall Global shows that, in Beijing, whisky is the choice of tipple, with sales from January to July increasing by 76% year-on-year. In Shenzhen, sake takes the top spot, while brandy lovers abound in Guangzhou, with the same period recording a year-on-year increase of 64% and 47% respectively.

Leveraging digital

Once brands understand who their potential Chinese consumers are, and where they are based, they must be ready to apply technology in new and creative ways to engage with them. China’s Gen-Z are looking for innovative online and digital experiences. Brands need to be ready to tell a story, rather than just sell a product.

Chinese consumers already had high expectations for brand experience and retail prior to the Covid-19 pandemic, with the trend towards ‘shoppertainment’ elevating shopping beyond a transaction to an experience.

Take Absolut Vodka, for example. In February this year it launched its Absolut Nights series – a DJ event livestreamed right to Chinese consumers’ living rooms. Looking back pre-Covid, drinks brands were already innovating at Alibaba’s 2019 Global Shopping Festvial, seeking to target consumers with more than just promotional messaging. Scotch whisky maker Johnnie Walker, for example, wowed the audience with a theatrical music-and-dance performance that featured its limited-edition Game of Thrones-themed whiskys.

The export opportunity

The opportunity for internatinal drinks brands is clear, though even the best-laid plans can risk failing. In a competitive market, it is paramount to understand the nuances of your target audience. Brands looking to explore China and capitalise on growing consumer demand must think carefully about what makes Gen-Z click – looking beyond product messaging and discounts to sell products, and considering how to maximise digital engagement and build a story that creates not just customers, but fans.