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Chinese liquor producers feel hangover

Updated: 2013-07-18 01:55
By XIE YU ( China Daily)

No doubt, high-end liquors are less popular nowadays, but Chinese people say no banquet is complete without liquor, and no business negotiations can be concluded without a banquet, Shi said. Chinese distillers will not die out, even though imported wine is now considered more posh by some people, he added.

As for sales, online platforms are largely reshaping the industry, said Wang with UBS.

Ten percent of liquor purchases are made online, according to China Wine News.

"The e-commerce industry is bringing down the cost of liquor companies' nationwide expansion, which is a big benefit for low-end brands.

"High-end brands are also going online to promote their less-mature, secondary brands," Wang said.

According to Frost & Sullivan, a United States-based market consultancy, white spirit production will reach 17.05 billion liters in 2016, compared with 4.94 billion liters in 2007, for a compound annual growth rate of 14.8 percent.

Sales of white spirits are expected to grow from 110.9 billion yuan in 2007 to 926.5 billion yuan in 2016, with a compound annual growth rate of 26.6 percent.

But analysts said that consolidation of the industry will continue, and excess production capacity will be eliminated in the process.

The output of the nation's distilling industry reached 12 million tons in 2012, or 8 kg per person, which means the oversupply is clearly there, no matter whether it is at the high or low end of the market, said Wang.

According to the China Cuisine Association, by 2015, the number of primary white spirits customers who are aged between 30 and 49 will be 441 million. The post-1980 generation will make up 22 percent of them.

"Chinese liquor is in the blood of Chinese people," said Wang. Companies with clearer branding strategies and a comprehensive pricing mechanism will ultimately win the competition, he said.

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