China’s Wine and Spirits Market (3): Spirits Purchase Preferences

As China’s imports have continued to expand in recent years, a wider range of imported spirits has become available on the market. In a survey conducted by HKTDC Research, 789 people who consumed spirits in the past six months were interviewed¹. According to the findings of this survey, 92% of these respondents rated themselves as beginner level consumers with limited knowledge about spirits, while 8% rated themselves as intermediate level with some knowledge about spirits. Social etiquette (44%), expression of a tasteful life (41%) and relieving stress (40%) were the main reasons given by the respondents for drinking spirits.

Cocktails (30%) and vodka (27%) are the spirits which respondents are most interested in buying or consuming in future. The survey also found that the respondents spend an average of RMB3,059 a year on buying or drinking spirits, with 18% of them spending over RMB5,000. The survey concludes that China’s spirits market is at a developing stage. Liquor dealers should consider promoting the spirits culture at appropriate venues such as bars to increase consumers’ awareness of and desire for spirits.

Spirits Consumer: Far from Well-Informed

Mainland consumers’ knowledge about spirits is currently limited compared to their knowledge of wine. According to this survey, 92% of spirits drinkers rated themselves as beginners and 8% rated themselves as intermediate, whereas 75% of the wine drinkers rated themselves as beginners and 24% rated themselves as intermediate². The percentage of intermediate level wine consumers is significantly higher than that of intermediate level spirits consumers. Respondents of different gender, age, monthly household income or city of residence did not vary greatly in their level of knowledge about spirits.

The difference in consumers’ level of knowledge about wine and spirits is also reflected in the frequency of their drinking. 24% of the respondents consumed spirits once or more a week. Respondents aged 36-45 and intermediate level spirits consumers’ frequencies of drinking spirits are slightly higher, respectively 33% and 36% of them drink spirits once or more a week.

By comparison, 41% of the respondents drank wine once or more a week, and 95% of intermediate level wine consumers drink wine once or more a week. These findings suggest that for the majority of consumers, drinking spirits is not yet a part of their daily lives.

Social Etiquette Boosts Spirits Consumption

Observing social etiquette was the most popular reason for buying and drinking spirits (44%). More of those aged 36-45 (49%) named social etiquette as the reason for buying and drinking spirits, compared with respondents in other age groups. It is probable that respondents in the 36-45 age group are striving to reach the height of their careers, and so attend more business networking events. Meanwhile, more beginners (45%) than intermediate consumers (39%) cited social etiquette as the reason for buying and drinking spirits. This shows that many beginner consumers drink spirits when they socialise. One focus group participant said: “I drink brandy more often on business occasions. Since the price of brandy is generally higher, entertaining clients with brandy seems classier.”

Other reasons given by the respondents for buying and drinking spirits included expression of a tasteful life (41%), relieving stress (40%), and trying novel things (35%). More intermediate consumers (55%) than beginner level drinkers (40%) reckoned that expression of a tasteful life was the reason for buying and drinking spirits. When spirits drinkers move up from beginner to intermediate level, their attitude appears to shift from merely observing social etiquette to actually appreciating spirits. Among respondents in the 36-45 age group, 35% said they chose spirits to pair with their food, a proportion higher than the overall average of 29%. Spirits tasting events instructing people how to pair spirits with food are therefore probably more popular with consumers aged 36-45. The reasons for purchasing and consuming spirits given by respondents of different incomes and cities of residence did not vary significantly.

Drinking Occasions

This survey found that consumers mainly drink spirits at gatherings and social networking events. The majority of respondents consumed spirits when going out with friends (60%), followed by gatherings at home (58%) and business entertainment (54%). By comparison, the proportions of own consumption at home (36%), eating out alone or with family (33%) and to go with a regular meal (24%) were lower. Evidently, consumers generally feel that drinking spirits is a social activity and such drinks can often improve the atmosphere of gatherings. One focus group participant said: “I find clubs and bars the most suitable venues for drinking spirits. Getting together with a few close friends at these venues is great fun, and downing spirits can liven up the atmosphere.” The views on appropriate venues for consuming spirits did not greatly differ between respondents of different gender, age, knowledge of spirits, or city of residence.

Popular Business Gift

Among the respondents who consumed spirits in the past six months, 42% (331 respondents) said they had purchased spirits as a gift, with 70% of them doing so during business visits at festivals. The percentages of respondents with a monthly household income of RMB20,000-30,000 and over RMB30,000 giving spirits as a gift during business visits at festivals were even higher, at 76% and 73% respectively. Other occasions on which spirits were bought as a gift included regular business visits (35%), gifts of appreciation (30%), and visits to relatives and friends at festivals (28%). Consumers believe that spirits can serve as a social lubricant and enhance interpersonal relationships, and use them as a gift for their business associates at festivals in the hope that this will strengthen the relationship.

Polarised Preferences

Although a wide variety of spirits is available in the mainland market, the acceptance of different types of spirits differs. Of the different types of spirits bought or consumed by the respondents in the past year, cocktails (35%), vodka (34%), whisky (33%) and brandy (27%) accounted for relatively large shares, whereas rum (14%), liqueur (13%), gin (11%) and tequila (10%) were less sought-after. The mainland spirits market is dominated by cocktail, vodka, whisky and brandy.

The preferences of different consumer groups vary slightly. Male respondents (36%) preferred buying or consuming vodka more than their female counterparts (30%); while respondents aged 46-55 tended to buy or drink vodka (38% vs overall average 34%) and rum (19% vs overall average 14%). Respondents earning a monthly household income of over RMB30,000 preferred buying or drinking whisky (40% vs overall average 33%) to brandy (21% vs overall average 27%).

Intermediate drinkers favoured liqueurs (20% vs overall average 13%), gin (14% vs overall average 11%) and tequila (14% vs overall average 10%), so that the range of spirits bought or consumed varied with the consumer’s level of knowledge about spirits. There was little variation in the types of spirits bought or drunk in the past year among respondents residing in different cities.

Cocktails Tipped to Stand Out

Cocktails topped the list of spirits purchased or consumed by the majority of respondents in the past year. Furthermore, a significant amount of respondents (30%) indicated that they were interested in buying or drinking cocktails in the future. Respondents in the 46-55 age group were most interested in purchasing or consuming cocktails (34%).

Vodka (27%) and brandy (22%) were also popular spirits. In particular, vodka was more popular with those aged 36-45 (30%). It is worth noting that only 10% of the respondents said they had purchased or consumed tequila in the past year, the lowest percentage among all types of spirits. Yet, 16% of them said they were interested in buying or drinking tequila, a percentage trailing only whisky (18%). This shows that consumers are beginning to show greater interest in tequila. Respondents of different gender, income, knowledge of spirits or city of residence did not vary greatly in the types of spirits they were interested in buying or drinking in future.

Among the different types of spirits, cocktails are tipped to emerge as the most popular alcoholic beverage in future, thanks to their low alcohol content and the rise of quieter bars³ and bartenders. 65% of the respondents admitted that “the alcohol content of spirits is generally too high, making it necessary for one to down spirits along with other drinks”; and 63% of them admitted that “the rise of bartenders in recent years has aroused my interest to drink”.

Respondents in the 26-35 age group (65%) and those earning a monthly household income of over RMB30,000 (69%) agreed strongly to these views. One focus group participant said: “I find the alcohol content of spirits too high, so normally when I drink I would have to add ice. Cocktails really suit my taste.” Another participant said: “When I visit bars, I would order alcoholic drinks that I cannot make at home. Cocktails, which offer a wealth of flavours, are my favourite.”

In recent years, a large number of bartenders in the mainland use online channels and short video streaming to recommend different cocktails and demonstrate their mixing techniques. Many bars also attract customers by offering a wide range of cocktails. All these are expected to further propel the popularity of cocktails.

Biggest Spenders

This survey found that the respondents spent an average of RMB3,059 a year on buying or consuming spirits, with 18% of them spending over RMB5,000. The average annual spending of respondents in Beijing and Shanghai was higher, at RMB4,134 and RMB3,809 respectively, while the percentages of these consumers spending over RMB5,000 were 30% and 24% respectively. However, the proportions of respondents in these two cities who consumed spirits once or more a week did not differ significantly from their counterparts in the other surveyed cities. It can therefore be deduced that respondents in Beijing and Shanghai are likely to buy or drink spirits at more expensive venues.

The spending on spirits is directly tied to monthly household income. Respondents with a monthly household income of under RMB20,000 spent an average of RMB1,513 a year on buying or consuming spirits, with only 4% of them spending more than RMB5,000. By comparison, the average annual spending on spirits of respondents earning a monthly household income of RMB20,000-30,000 or over RMB30,000 was RMB3,516 and RMB4,839 respectively, with 24% and 33% of them respectively spending over RMB5,000. The percentages of respondents with different monthly household incomes drinking spirits once or more a week did not vary markedly. Respondents earning a higher monthly household income may purchase more expensive products and patronise higher-end venues.

The survey also found that when consumers gain more knowledge about spirits they do not necessarily spend more on drinking. 36% of the intermediate consumers drank spirits once or more a week, a percentage higher than that of the beginners (22%). However, the average annual spending by intermediate consumers (RMB2,938) and beginners (RMB3,070) was about the same. Among the intermediate respondents, 23% spent over RMB5,000 on average a year (overall average 18%), while 27% of them spent less than RMB500 (overall average 20%). As consumers’ knowledge of spirits grew, some of them would spend more on spirits while others would purchase cheaper products or patronise lower-end venues. For annual spending on spirits, the difference between respondents of different gender or age group was not significant.

Branding Effect

When purchasing spirits, brand was the most important factor for the respondents, accounting for 44%, followed by flavour at 39%. Other important selection criteria included grade (35%), production region (33%) and quality certification (30%). Overall, the respondents’ considerations in buying imported wine and spirits were more or less the same, with brand and flavour ranking the top two. But more respondents named brand as a major consideration factor in buying spirits than in buying wine. Since consumers usually consume spirits on social occasions, buying well-known spirit brands can reflect the status and wealth of the buyer; and when giving spirits as a gift the recipient will know the value of the gift. One focus group participant said: “When buying a gift for business associates, I normally choose a well-known brand of spirits. As many spirits brands are household names, the recipient immediately knows the price of the gift and appreciates my sincerity.”

Respondents of different backgrounds have similar considerations when buying spirits. Females placed more emphasis on production region (38% vs males 31%), while beginner consumers attached more importance to the grade of the product (36% vs intermediate consumers 28%). For 16% of the intermediate drinkers, price was the primary factor in buying spirits, a higher proportion than that of beginners and the overall average (both at 9%). This indicated once again that intermediate consumers were more price-sensitive. Apart from this, respondents of different age, income or city of residence did not vary greatly in their selection criteria.

Conclusion

This survey found that for many consumers, spirits are reserved for more formal occasions. They are closely tied to social networking; consuming spirits on social occasions is a form of social etiquette; giving spirits of well-known brands as a gift can show the sincerity and wealth of the giver; spirits are mostly given as a gift to business associates. However, following the emergence of the cocktail culture in the mainland in recent years, consumers are gradually beginning to appreciate the lighter aspect of spirits.

Liquor dealers wishing to expand the sales of spirits in China should note that mainland consumers like to drink spirits on social occasions. They should promote spirits and spirit drinking culture at bars and restaurants so that more consumers shift from merely observing social etiquette to actually appreciating the drink. However, it is worth noting that increased knowledge about spirits may not necessarily mean that consumers will spend more on the product. So liquor dealers should offer spirits at different price points to meet the different demands of consumers. Spirits suppliers can also consider proactively tapping the business gift market, especially gifts given at festivals. As the mainland spirits market is still at an early stage and the majority of consumers are still learning about spirits, the growth potential of the market is huge.

¹ Such bars are bars that play light music and offer a quiet and leisurely atmosphere.

² For details, see China’s Wine and Spirits Market (1): Wine Consumption Trends and Habits.

³ See Appendix for background information on this consumer survey.

Appendix

Survey Background

Mainland China is one of the world’s fastest-growing markets for wine and spirits. As the Covid-19 pandemic continues, it has also been one of the few regions where economic activity has been able to recover within a short time. The mainland’s retailing and catering sectors have been developing rapidly in recent years, and as they are likely to grow continuously after the pandemic is under control, the chances are that sales of wine and spirits will be sustained in the future.

Since the removal of wine duties in 2008, Hong Kong has become a trading hub for the industry in the Asia-Pacific region. Not only is there a full range of wine-related services available in Hong Kong, but wine traders can also benefit from customs-facilitation measures when importing wine to the mainland through the city. With the mainland wine and spirits market developing apace, more business opportunities are in store for Hong Kong. In view of this, HKTDC Research conducted a consumer survey on the mainland’s wine and spirits market to grasp some knowledge of the mainland middle class’ demand characteristics, spending mentality and purchase preferences for wine and spirits, in order to help Hong Kong companies understand this market and expand their businesses on the mainland with a more targeted approach.

Methodology

The survey carried out in May 2020 polled 1,440 mainland wine and spirits consumers by online questionnaire. Six online consumer focus group discussions had earlier been held in Guangzhou, Shanghai and Xian – two in each city – with the objective of taking an in-depth look at the spending mentality of mainland wine and spirits consumers.