Ben Cooper

CHINA: Canny marketing required to win Chinese consumers - research

By | 8 March 2007

If prime target consumers for international spirits in China have as much difficulty telling whisky from Cognac as a recent report suggests, marketers may have to up their game to reap the rewards the mother of all emerging markets has to offer. Ben Cooper reports.

While there are clear opportunities for international spirit brands in China, there are also distinct marketing challenges to overcome, according to a report from market research and consultancy Data Driven Marketing Asia (DDMA), recently published by just-drinks. And not least of these is low consumer familiarity with the products on offer.

In addition to listing challenging factors such as a highly competitive marketplace, a fickle consumer base with low brand commitment and the high level of counterfeiting and paralleling, the report - The international spirits market in China - forecasts to 2012 - suggests that spirits companies still have a considerable amount of work to do in basic consumer education.

One of the most alarming findings of the report for spirits producers - and one that must have distillers in both Scotland and Cognac blinking in disbelief and horror - concerns unfamiliarity with international spirits. In a poll, 471 regular international spirits drinkers in Shanghai, Beijing and Guangzhou were asked if whisky and Cognac are the same drink. Some 19% said they agreed that whisky and Cognac were the same drink, and although 38% said they were not, a further 43% said they weren't sure.

The report's authors describe this as one of the key challenges international spirits marketers have to overcome. "With the exception of vodka, no international drinks category has built a level of familiarity or product knowledge in the market," the report states. "This leads to confusion among consumers as to the difference between categories as opposed to brands."

The low level of familiarity with the different categories is exacerbated by the very similar promotional strategies that are undertaken by the key international spirits brands in China.

According to the report, the focus of these promotions is generally the "modern lifestyle account" channel, while the promotions generally position the subject brand as the drink for the "new lifestyle, new China, new freedoms, new wealth". In addition, the execution of these promotions generally involves a mixture of gifts, discounts and lucky draws. They are invariably supported by promotional girls dressed in the subject brand's regalia.

"The homogenous style of promotion only serves to reinforce the confusion between categories, and helps create the perception that all international spirit brands and categories are the same," the report states.

Like the rather disconcerting poll research, the focus group discussions conducted with Chinese consumers make salutary reading for international marketing executives. For example, a 26-year-old male white-collar worker and international spirits drinker, participating in a focus group, said: "Foreign brands are always on promotion. I go to my favourite KTV about once every two weeks and they always have a new or different international brand on promotion. We always buy it as it is cheaper and when we mix it with tea, Coke or Sprite they all taste the same anyway."

Another focus group member, a male 26-year-old business owner, said: "It is sometimes annoying. When I go to a bar with my friends, the promotional girls will ask: 'Would you like this beer, would you like that beer?' Then we are asked about foreign sprits by another one. Generally, we just drink the beer on promotion and, if we stay late, then the foreign spirit on promotion. No one knows the difference and they all taste the same after mixing."

Although these are only views expressed by individuals, the consumers are precisely in the demographic spirits brands are looking to hit, and the suggestion that such consumers seem to have so little appreciation of different kinds of spirits, and are fairly unconcerned about developing their palates, could be a cause for concern.

The report concludes that the "high level of focus by international drinks companies on the same channel and the same target consumer, combined with the continual communication of the same positioning statement, helps to create low brand and category familiarity and low brand commitment".

Regarding the problem of low brand commitment specifically, the report points to two key factors. Firstly, the core target group for most international spirits groups, young, affluent males and females aged under 35 years, from the developed cities, constitute the target group for most consumer products in China. This group is continually bombarded with messages which encourage them to switch brands and change behaviour. The huge level of focus on this group has created a segment of serial switchers. This group has developed an 'inverse commitment'.

In addition, the report cites what it calls "the freedom factor" as a key challenge. "The current generation is the wealthiest in modern Chinese history," the report points out. "They have high levels of disposable income, good standards of education and work in a market that has a vast shortage of trained personnel. They can easily travel overseas and are constantly exposed to foreign media and content. The younger generation enjoys exercising its new found freedom. Part of this process is trying new things."

As the anecdotal research suggests, international spirits brands are looking to rise to this challenge by investing more and more in advertising and promotion. Indeed, the report points out that while overall advertising spend has slowed in recent years, spending by large international spirits groups has increased. However, DDMA's research would seem to suggest that it is not just a question of throwing money at the market, but investing judiciously and creatively.

Expert analysis

The international spirits market in China – forecasts to 2012 (download)

This report is the first country specific, consumer based study offered by just-drinks. We have conducted extensive consumer and trade research and learned who the Chinese consumer is, explaining their drinking behaviour, and introducing the challenges that international spirits face in the market. The findings are used to forecast the growth and volumes of the key international spirits brands in China. The report also gives an overview of the whisky, cognac and vodka categories, and offers market projections until 2012.

Sectors: Spirits

Companies: Coke, Sprite

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If prime target consumers for international spirits in China have as much difficulty telling whisky from Cognac as a recent report suggests, marketers may have to up their game to reap the rewards the mother of all emerging markets has to offer. Ben Cooper reports.

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