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China's alcohol imports lose fizz as austerity move crimps sales

Publication Date : 10-06-2014

 

Alcohol imports slid in the first four months as an official crackdown on lavish entertainment and a weaker economy cut corporate and government spending on beverages.

In value terms, imports of alcoholic beverages fell about 8 per cent year-on-year to $847 million from January to April, according to the China Chamber of Commerce of Foodstuffs and Native Produce. But by volume, imports were up 12.9 per cent to 212 million litres as drinkers turned to cheaper beverages such as beer.

China's thirst for foreign alcohol, especially fine wines and liquors, has been declining because of the government's campaign against extravagance and weaker growth in the world's second-biggest economy, experts said.

Both wine and liquor imports declined in the first four months after a rough year in 2013, when many high-end goods were taken off menus and gift-giving lists. For example, imports of wine plummeted about 17.3 per cent to $461 million during the first four months.

Remy Cointreau SA, the French maker of Remy Martin cognac, said operating profit in the year to March declined to 150.2 million euros ($204.3 million) from 245.4 million euros a year earlier, a report by Bloomberg said.

The earnings decline was at the high end of the 35 to 40 per cent drop that Remy warned of in April, when it posted sales that fell further than analysts had estimated due to "a transforming Chinese spirits market and a weak macroeconomy in western Europe".

Imported wines from France, though, still take the lion's share of the market for foreign wines in China, or 43 per cent.

Yang Zhengjian, a wine expert and trader in China, said that fine wine imports are down partly because many companies are holding large inventories.

He said that China has a total inventory of fine wines worth more than 3 billion yuan ($497 million) "so the market needs a long time to 'digest' that stock".

Cutbacks on purchases by companies and government departments will push wine importers and sommeliers to explore a younger group of individual consumers.

"I think young people, generally those born in the 1980s and 1990s, will become the new drivers of wine consumption, because they often like to sample a variety of fine wines," he said.

The official austerity drive in China has meant that people are increasingly turning to cheaper wines and other cheaper drinks such as beer and blended spirits.

Beer is a big beneficiary of this trend. Experts said the rising interest in craft beer, sparkling wine and mixology, could peel off marginal wine drinkers.

Imports of beer from countries such as Germany, Belgium and the Netherlands climbed nearly 95 per cent to $86 million from January to April. By volume, imports more than doubled to 68 million liters, according to the chamber.

 

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