Blog: Olly WehringChina: traditional and modern clash - and the winner is?

Olly Wehring | 4 December 2006

Chaotic order. Massive opportunity. Just two of the many descriptions of China just-drinks heard on a visit to the country last week with brewing giant SABMiller.

Both are true. From the chaos of the traffic in Beijing, where crossing any road is an exercise in taking your life into your own hands, to the order of a society where traditional Chinese culture is all around you and where the importance of the family is still key.

One measure in which China is streets ahead of the west is the potential of the country’s economy. The area of Beijing under construction is said to be equivalent to an area three times the size of Manhattan. It’s impossible to get a complete grip on a city of this size in just four days but, when considered in that perspective, it’s clear that the pace of change and development in China does present domestic and foreign investors with a massive opportunity for growth.

However, although drinks companies around the world will benefit from that potential, China’s economy is still a way off from being an antidote to the stagnant consumption in some parts of the west. The message from drinks multinationals has changed somewhat in recent years; where they once spoke of China’s potential, they now talk of significant, tangible growth from the booming economy.

You’ll see more on SABMiller’s progress in building its business in China on just-drinks in the coming weeks, but, during our visit, I was struck by the lack of a thriving on-premise in Beijing, which seemed to cast some doubt on repeated claims, particularly from the world’s spirits giants, that the Chinese were demanding premium imported brands in their droves.

True, it would be remiss of us to remark on the lack of top-end bars in Beijing and extrapolate that across the rest of the country. But the city is the country’s capital and I saw little evidence of anything approaching a western-style drinking culture there. While embracing the west’s desire for wealth and financial gain, Chinese society remains traditional and is a world away from replicating the bar scene that we see in cities over here. The only places where back-bars were stocked with the world’s top spirits brands were in international hotels.

Minggao Shen, an economist at Citigroup, said this week that, despite the country’s newly-found wealth, consumption in China remains relatively weak. China’s social security and welfare provision remains under-developed, Shen said, which means the Chinese are saving their cash instead of splashing out on luxury goods. Furthermore, China’s new money is being spent more on buying private property and on consumer goods like brand new cars and iPods rather than premium whiskies and Cognacs.

There’s no doubt China has great potential and represents a massive business opportunity, not least for the drinks industry. However, let there be equally little doubt that there is a long way to go - and a lot of work that needs to be done - before sales growth in China matches the projections drawn up in industry boardrooms around the world.


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