China’s alcoholic beverage market is experiencing significant upheaval in 2024, following a turbulent year in 2023. A recent report by IWSR Drinks Market Analysis reveals that while overall volume growth for alcoholic beverages in China was minimal from 2022 to 2023, there were substantial declines in the spirits and wine sectors. Spirits saw a notable 9% decrease, while wine volumes dropped by 14%. Conversely, beer and ready-to-drink (RTD) beverages experienced slight increases of 3% and 1%, respectively.
A critical issue facing the market is the high inventory levels of premium products, such as Cognac XO and aged whisky, which have led to persistent destocking challenges into early 2024. This trend is also visible in the baijiu market, though premium and superpremium segments are performing better than their lower-priced counterparts.
Shirley Zhu, IWSR’s Director of Research for China, reports that despite efforts by brands and wholesalers to reduce stock, high inventory levels continued into late 2023. Scotch malt whisky, for the first time since 2000, experienced a decline across all price levels, dropping 11% in 2023. This downturn is anticipated to persist in 2024, although a compound annual growth rate (CAGR) of 4% is projected from 2023 to 2028.
The challenging market environment has also impacted companies such as the Artisanal Spirits Company, which owns the Scotch Malt Whisky Society. The company highlighted China as a significant obstacle to growth in its mid-year trading update.
The Cognac sector faces additional uncertainty, particularly with potential tariffs on European brandy imports. The ongoing real estate crisis in China has notably affected demand for high-end spirits typically used for entertainment and gift-giving. This has had a considerable impact on Cognac XO and expensive whiskies. In contrast, volumes of Cognac VSOP and blended whiskies have remained stable, with Cognac VS showing moderate growth due to its more accessible price range.
Chinese consumers are increasingly prioritizing discretionary spending on travel and experiences over alcohol purchases. The downturn in the real estate sector has severely impacted the Chinese economy, influencing both business and consumer confidence. Although there was an initial rebound in consumer sentiment following the lifting of pandemic restrictions in 2023, this confidence has since waned and remains low.
Emerging trends indicate a shift towards more modest consumption among middle-class consumers, particularly those earning between 5,000 and 15,000 RMB per month (approximately $700 to $2,000 USD). IWSR forecasts that while total volumes of alcoholic beverages are expected to remain largely unchanged from 2023 to 2028, the market’s total value is projected to grow, adding over $14 billion USD by 2028.
Baijiu is expected to account for approximately two-thirds of this growth, driven by an increase in middle-upper and upper-income households, which will support sustainable growth in the medium to long term. Overall, there is a noticeable trend towards less ostentatious consumption, with a decrease in purchases of high-end spirits and champagne for night events. Younger consumers are increasingly favoring beer served in buckets or drinks served by the glass.
As China navigates economic uncertainty and evolving consumer preferences, the alcoholic beverage market is adapting to new realities. Brands and producers face challenges related to inventory management, shifting consumption patterns, and broader economic factors. The future of the market suggests a focus on value growth over volume, driven by a more discerning and experience-oriented consumer base. As these trends continue to develop, the market is likely to evolve, reflecting the dynamic interplay of cultural, economic, and consumer influences shaping China’s approach to alcoholic beverages.
