The once-booming market for imported alcoholic drinks, once dominated by French wine, is gradually shifting toward greater diversification in both origin countries and product categories.

The latest data in 2018 shows that driven by e-commerce platforms, the craze for imported goods has continued to grow. However, in terms of alcoholic drink consumption, while the range of origin countries has become increasingly diverse, the product mix has also changed from the previous wine-dominated pattern: the share of foreign spirits and beer has gradually increased, while the growth rate of imported wine has declined for the first time.

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Similar to other imported goods, imported alcoholic drinks are witnessing a trend of diversified origins and categories, with young people becoming the main consumer group for imported products.

According to the 2018 Insight Report on Cross-Border Consumption New Normal and Young Consumers released by Tmall Global: Cross-border e-commerce experienced explosive growth in 2018, with total import volume increasing significantly, and cross-border consumption has become a new normal in modern life. By October 2018, the total import volume of cross-border e-commerce had increased by 53.7% year-on-year, with imported goods coming from over 200 countries and regions worldwide, and the import value exceeding 10 billion yuan. It is estimated that by 2020, the number of cross-border consumption users in China will exceed 200 million.

This change is related to the state’s preferential tax policies for imported goods and its support for cross-border e-commerce.

The 2018 Insight Report on Cross-Border Import Consumption jointly released by the China Business News Data Center (CBNData) and Tmall Global shows that in cross-border consumption of alcoholic drinks, consumers are increasingly diversifying their choices of origins, with alcoholic drinks from niche origins such as Mexico, New Zealand, and Sweden registering the fastest growth rates.

Statistics on the sales share of alcoholic drinks from different origins on Tmall Global in 2018 indicate that French alcoholic drinks still ranked first in cross-border e-commerce on Tmall, followed by Australia, with Italy, Chile, and Germany taking the 2nd, 3rd, and 4th places respectively.

This trend of growing diversification in origins and categories will continue. The latest information shows that benefiting from policy liberalization, more imported goods will flood into the market in 2019.

In November 2018, the State Council Executive Meeting decided to continue and improve the cross-border e-commerce retail import policy starting from January 1, 2019, expand its scope of application, raise the upper limit of the quota for goods eligible for preferential tax policies, and make it easier for consumers to purchase more cross-border goods. Among these measures, the bonded business was officially expanded from the original 15 cities to 37, and 63 new tax items of goods were added to enrich product categories – this is a strategic support for the cross-border e-commerce industry.

Experts analyze that as the coverage of preferential tax policies expands step by step, more imported alcoholic drinks from a wider range of countries will appear in the domestic market.

Previously, purchasing agents were prevalent because the price gap of imported alcoholic drinks caused by different tax rates at home and abroad was relatively large. However, with the adjustment of China’s personal postal articles tax rates – from the original four tiers of 10%, 20%, 30%, and 50% to three tiers of 15%, 30%, and 60% – the personal postal articles tax rate for foreign spirits has been raised to 60%, which is higher than the general trade import tax rate for foreign spirits after tax reduction. Moreover, general trade imports of foreign spirits have lower import prices due to large batch volumes. Therefore, this tax reduction for the cargo channel is conducive to further shifting the purchase of foreign spirits from the personal postal channel back to the cargo channel, increasing the import volume of foreign spirits through the cargo channel (personal postal items are not included in general trade statistics).

Imported wine is no longer the sole dominant category, while foreign spirits are emerging as a new force with rapid growth.

Starting from January 1, 2018, the average tariff rate for 187 types of goods was reduced from 17.3% to 7.7%, among which three types of foreign spirits were included:

In 2018, the comprehensive import tax rate for these three types of foreign spirits dropped by an average of more than 50%. Driven by the tax reduction effect, the quantity and variety of imported spirits surged, changing the previous niche consumption pattern of high-end foreign spirits such as Remy Martin and Martell in the domestic market.

While preferential tax policies were introduced, the import volume of foreign spirits such as brandy and whiskey grew rapidly. According to incomplete statistics, the import volume of strong foreign spirits such as cognac and whiskey in mainland China in 2017 increased by approximately 23% and 17% respectively compared with 2016. The import volume of aperitifs (Vermouth-style fortified wines) also saw a sharp increase in 2017, with a growth rate of 168% compared with 2016. This indicates that the domestic market’s acceptance of these three types of foreign spirits has increased significantly, and the consumer market has been quietly expanded.

The 2018 Drinking Big Data Report released by Jiuxian.com shows that in the high-end alcohol market (priced above 1,000 yuan), Baijiu (Chinese liquor) ranked first with a 33.09% share, while foreign spirits ranked second with 29.03%. The most popular products were Baijiu priced above 1,000 yuan (33.09% share), wine priced below 100 yuan (41.13% share), and foreign spirits priced between 100 and 300 yuan (35.11% share).

The 2018 Insight Report on Cross-Border Import Consumption points out that in cross-border consumption of alcoholic drinks, consumers are gradually shifting from traditional wine consumption to beer and foreign spirits.

The list of “Top 5 Growing Categories of Imported Alcoholic Drinks on Tmall Global in 2018” shows that imported beer ranked first in popularity, followed by whiskey (2nd), brandy (3rd), vodka (4th), and rum (5th). The list of “Top 5 Growth Rates of Sales from Different Origins and Major Brands of Alcoholic Drinks on Tmall Global in 2018” indicates that Diego Tequila from Mexico ranked first, Greystone Wine from New Zealand ranked second, Absolut Vodka from Sweden ranked third, Penfolds Wine from Australia ranked fourth, and a whiskey brand from the UK ranked fifth.

These data show that various categories such as whiskey, vodka, and rum have gradually gained popularity. While France maintains its dominant position, it is gradually being caught up by some new origin countries.

While the overall import volume of alcoholic drinks is growing, the growth rate of imported wine has declined for the first time.

Data shows that from January to December 2018, the import value of French wine in the Chinese market was US$1.00613 billion, a decrease of 8.75% compared with US$1.10256 billion in 2017.

As the data of French wine declined, the data of many other major origin countries also fell:

Among them, the import value of Chilean wine was US$343.55 million, an increase of 4.5% compared with US$328.77 million in 2017.

In fact, imported wine performed well in the first three quarters of 2018, but the slowdown in growth at the end of the year, especially in the fourth quarter, further dragged down the annual growth performance of imported wine.

Previous statistics show that from January to June 2018, China’s imported wine volume was 390,000 kiloliters, an increase of 9.3% compared with the same period in 2017; the value was 12.71 billion yuan, an increase of 17.6%. According to the database of the China Commercial Industry Research Institute, China’s imported wine volume grew from 2013 to 2017, with a total increase of 380,000 kiloliters (a growth rate of 93.96%); in 2018, China’s imported wine volume declined to 720,000 kiloliters, a year-on-year decrease of 7.3%.

The industry believes that the decline in the growth rate of imported wine is due to multiple factors: The previous phenomenon of “rushing into the market” driven by high-speed growth has led to a large number of imported wines with uneven quality. Under increased competitive pressure, many low-quality products have cut prices to survive, resulting in a decline in consumers’ preference for low-end imported wine and affecting the overall sales share.

In addition, the rapid changes in channels have left some import distributors unable to adapt to the times, falling behind and being eliminated by the market. Experts say that most consumers of imported wine are young people, who are accustomed to mobile payments and instant consumption, and attach importance to the consumption scenario of wine. When the traditional channels relied on by distributors can no longer meet these needs, they will be quickly abandoned. At this time, comprehensive e-commerce platforms such as JD.com and Tmall have not only demonstrated advantages in brand and traffic acquisition but also shown great strengths in delivery and after-sales services. This has caused the immature imported wine market to quickly concentrate in a few channels, squeezing the original market share.