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NEW YEAR BRINGS a new animal when it comes to the Chinese zodiac, and 2019 is the Year of the Pig. According to ancient Chinese tradition, the lucky things to look out for are: the numbers two, five and eight; the colour gold; daisies and the month of February – good timing. But the real fortune right now is in the booming state of the Chinese booze industry. Its spirits market is predicted to reach a value of $450bn by 2021, according to Global Data, and although baijiu, China’s national spirit, is still dominant there is now an opportunity for international craft brands to get in on the action.

Traditionally western spirits brands have struggled to penetrate the Chinese market thanks to the sheer popularity of baijiu, communication difficulties and logistics issues for distributors. But these social and economic situations have changed, and will continue to do so.

In 2002 the Chinese middle class made up 4% of its population, but a decade later this had climbed to 31% – around 420m people. Fast-forward another seven years and we’re looking at half a billion people minimum who fit the status. As this immense middle class population continues to grow and demand more premium international products, the baijiu industry has begun to show signs of vulnerability.

According to Forbes magazine, baijiu sales by volume have dropped by around 20% since 2017, which resulted in a staggering 72% price increase. This means that, although the value of baijiu has increased, 20% of the volume of the biggest spirits category on the planet is either up for grabs for different spirits producers, or already taken.

CRAFTY SPIRITS

Major western companies have been pushing sales in China for a while, using Chinese New Year as an opportunity for exposure. For example, according to its financial report, Chinese New Year drove Pernod Ricard’s revenue up by 9.3% on an organic basis in the quarter leading to March 2018, mainly due to growth in sales of its Martell cognac brand. But it isn’t just the big dogs – or pigs – who are now benefiting from a wealthier, more curious Chinese population. Smaller craft brands from the US and Europe are proving popular in China – and it’s impossible to discuss the modern craft spirits movement in China without mentioning millenials, simply because the country has so many of them. They’re one of the biggest driving factors behind the rising interest in craft spirits as, not only do they travel internationally more than any other demographic, exposing themselves to western brands, they’re also more curious than the generations before them, experimenting with different spirits other than just baijiu.

China’s immense e-commerce is also a major opportunity for spirits brands around the world. Pernod Ricard reported at the tail end of 2018 that 10% of its entire business in China comes from e-commerce alone and if western brands can get their products on Wechat or Alibaba it could be a huge revenue stream.

Alibaba is one of the biggest online retailers in the world, and on Singles Day 2018, a Chinese national holiday, it broke the record for the most sales in a day – US$30.8bn.

These numbers, staggering as they are, might not be as easy to tap into for craft brands because not only is it difficult to forecast sales via e-commerce, but if more stock is required it can take weeks to arrive with the consumer if the products are coming from Europe.

Communication is also lacking. Language barriers, although improving, are still problematic on a business level and the use of different messenger applications such as Wechat instead of Whatsapp. It sounds basic but if you want to tap into the Chinese markets, communicating on their terms is a big advantage.

LEADING THE CHARGE

The London Distillery Company is at the forefront of the craft spirits push in China. LDC produces Dodd’s gins, Kew Spirits and a rye whisky at its London-based distillery, but the company is doing particularly well in China. In fact, it has recently signed several new distribution deals and branched out into duty free for the first time with the launch of Kew Hong Kong Edition gin at Hong Kong International Airport.

LDC chief executive Killian O’Sullivan says: “The Chinese market is generally very proud of Chinese brands, but the growth in our premium shipments to China increased 200% in 2018.

“We’re quite a small company but we’ve experienced significant growth in China, with a focus on the on-trade. Cocktail culture in Shanghai is very strong, which makes it one of the bigger pushers for craft spirits in China.”

But it’s not just Beijing and Shanghai which have potential. In Shenzhen it is reported that 10 new bars are opening a week – you could argue this would supple the demand for a company just to focus on this city alone.

LDC is in a fortunate position in that it has a stake in China-based distributing company Gotham East, which makes international growth significantly easier for the London distillery.

But O’Sullivan thinks there need to be more companies like Gotham East.

He adds: “There are lots of distribution companies in China, but I’d say there’s a demand for good-quality distributors. That’s the real issue at the moment.

“I think there’s still good headroom for craft spirits to grow in China but the brands trying to tap into the market need genuine provenance and to be top quality.”

The issue certainly isn’t the number of brands which classify themselves as craft. In the UK alone there are more distilleries in London than ever before, with Scotland beginning to make its own rum, Irish whiskey brands emerging rapidly and a new gin brand launching almost weekly.

It appears the priority for western craft spirits in China is on the distribution side – not surprising when you think of the logistics of delivering liquid across the vast landscapes of China.

Attempting to supply the entire country with a local gin brand may not be the solution, but targeting one city alone could. There are now 12 cities in China with a bigger population than Madrid – get a foothold in just one of these cities and sales will rocket.

There just needs to be more quality, focused, trustwortrhy Chinese-speaking distributors to make it possible. But if you’ve been inspired to launch your own distribution company in Tianjin, or ship stagnant stock to Shanghai, remember that to get good luck in the year of the pig you’ll need it to be the 258th batch of daisy-infused gin with a gold foil label.