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Write | Jetek China Digital’s Team

Translate and Edit | Jetek China Digital’s Chris

 

Chinese Baijiu, as a kind of traditional alcohol that made major proportion in China market, has a large market capacity and strong profitability.

Chinese Baijiu has always been at the top of the competition in channel resources. However, with lowered expectation of price increase of famous Baijiu represented by Maotai, some wine distributors believe that the situation that channel resources occupied by Baijiu is expected to be improved.

 

Prices of Baijiu continued to rise

According to the third-quarter report of Maotai in 2018, the revenue of Maotai from July to September was 197.18 billion RMB, with an increase of 3.81% over the same period last year, and its net profit was 89.69 billion RMB, an increase of only 2.71% over the same period last year.

Moutai’s third-quarter report in 2017 achieved a 59.40% increase in revenue and a 60.31% increase in net profit growth.

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At the same time, stock price of many Baijiu enterprises represented by Moutai also fell for several consecutive days at the end of October.

 

Enlargement of wine space

“Last year and the first half of this year, due to the strength of the head brands Maotai and rising prices, most of our distributors spent money and energy on famous top-quality Baijiu. Although they were selling our imported wine, they could not even fulfill their scheduled tasks.” Mr. Hu, marketing director of a wine company based in Shandong, told the Jetek China Digital’s.

In his view, the momentum of price increase of famous and excellent Baijiu has begun to decline at present , and the stock price has also begun to fall, which makes the imported wine have the space for development.

Mr. Hu believes that running business means holding expectations. After the expectations of Baijiu price increase change, the monopoly situation of Baijiu channel resources could be changed, and more alcohol varieties will be chosen by distributors to disperse risks.

He believes that distributors will pay more attention to wine next year, which will help improve the overall market of wine in China.

Ms. Hu, head of a wine studio in Chengdu, told Jetek China Digital’s that the transformation from high alcohol to low alcohol is the world consumption trend, and the guidance of national industrial policy. The increase of rational consumption concept and health consciousness will make wine market prospect better and better.

Nowadays, most of the drinking scenes in popular movies and TV series are wine. Although this kind of influence will not suddenly erupt, it will obviously change the drinking ways and styles of friends around us.

 

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Clearance sales for Baijiu inventory will not benefit the whole wine category

For Baijiu and wine, some said that one falls another rises. However Zhang Taiping, general manager of a Chengdu wine importing company believes that for retailers and distributors with low-end industrial chain, their status is relatively weak in wine industry, and they are realistic in choosing categories and brands, mainly considering the profit margin and quantity of categories and brands. And regional distributors or brand operators selling many kinds of wines may consider a longer term effect, they may go to the layout of wine categories.

In Zhang Taiping’s view, it’s true that this round of Baijiu price rising has hit the highest point. The phenomenon of raising prices in several famous Baijiu producers will be hard to see in 2019, and distributors have to clear stock one after another.

But the clearance sales in Baijiu will not necessarily benefit the wine sales, more importantly, the wine brand operators themselves should seize the opportunity of industry changes and overtake in the curve.

Chen Ruxing, a long-serving marketing man, pointed out that there has always been a game between famous Baijiu producers and big distributors or agents. Baijiu producers hope to flatten and strengthen market control. While distributors try their best to avoid being flattened in sales channel.

For this reason, they will choose to break through and find imported wines with their own brand control and profit margin. From this point of view, the change of Baijiu really brings opportunities to wine.

But at the same time, he believes that the era of barbaric growth is over, and growth on wine will be squeezing growth in the future . Only wine companies equipped with innovative quality, brand, team and service, sales could be grow afterward, while wine companies running in a simple and direct way on wine promotion, they will not share any space for sales growth.

 

 

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