Text: Zero State LT Zhang Yao
Edited by Hu Zhanjia
Operation|Chen Jiahui
In 2023, the overseas market is unprecedented, and Chinese entrepreneurs are gearing up overseas in the hope of being able to export China's business model, entrepreneurial ideas, and strategic play overseas, and they still firmly believe in the "time machine theory" and hope to bet on China 20 years ago in advance.
The hour hand is about to be dialed into 2024, and LT has launched the overseas observation column "Reflection Mirror" to record the new journey of Chinese enterprises going overseas from multiple dimensions. This article is the 39th article in the series, focusing on whether Chinese liquor can go overseas collectively and successfully go overseas.
Liquor companies under the involution are accelerating the pace of going to sea.
Since 2023, first-tier liquor companies such as Kweichow Moutai, Wuliangye, and Luzhou Laojiao have led teams to go overseas to investigate new markets, and second- and third-tier liquor companies are unwilling to be left behind, and have also expanded the spread of Chinese liquor through innovative products and cross-border cooperation, and explored the internationalization of liquor.
Since January 2020, after the liquor production was removed from the restricted industry catalogue, the production capacity of the liquor industry, which has entered full market-oriented competition, has been fully released. Under the fierce competition, the total output of liquor has been declining in recent years, and the inventory has continued to rise, and reducing inventory has become the top priority of liquor enterprises.
In the face of stock competition in the domestic market, wine companies have tacitly chosen the international market, which is still in the blue ocean state. However, although major liquor companies have increased investment in overseas marketing, so far, liquor exports can only be called in their infancy.
In 2022, the cumulative export volume of mainland liquor will be 816,400 kiloliters, of which the export volume of liquor will account for only 2%. In the same year, mainland spirits imports were US$2.28 billion and liquor exports were US$716 million, with a trade deficit of US$1.564 billion.
Trade barriers, dietary differences, and cultural exports are all "roadblocks" on the journey of wine companies going overseas.
How to speed up the internationalization process of liquor has become a common topic for many liquor companies.
01 Why do you choose to go to sea as a group?
Since the beginning of this year, liquor companies have made frequent moves in overseas markets.
In terms of leading liquor companies, Wuliangye Party Secretary and Chairman Zeng Congqin led a team to inspect the British and Hungarian liquor markets, Zhang Liandong, Secretary of the Party Committee and Chairman of Yanghe Co., Ltd., went to Paris for inspection and exchange, and Luzhou Laojiao also started its 2023 global journey of "Let the World Taste China" in Singapore.
Figure: Zeng Congqin, chairman of Wuliangye, the official account of Wuliangye
Some second- and third-tier wine companies have also caught up with the wave of going overseas.
In March ~ April this year, Shede Liquor held a brand listing meeting in many overseas countries; then in June, Xifeng Liquor held a "Chinese Red Xifeng" Fengxiang Feast in South Korea, and conducted a detailed investigation of overseas markets; and then in July, Henan Yangshao Liquor Industry and the French Henan Association opened a strategic cooperation, and appeared in the first International Food Culture Expo hosted by UNESCO and won the gold medal.
Wine companies go to sea, what is the quality?
From the perspective of overseas markets covered, Kweichow Moutai has covered 64 countries and regions around the world, Yanghe has direct cooperative relations with 12 European countries, Gujing Gongjiu has entered more than 30 countries and regions in Asia, Europe, the United States, Africa and Australia, Wuliangye products have been directly sold to 56 duty-free shops abroad, and the distribution business covers more than 100 countries and regions.
In this wave of going overseas, major wine companies continue to explore their own ways to go overseas.
Visiting overseas distributors and carrying out discussion and exchange activities is one of the common ways for wine companies to go overseas. On June 26 this year, the Moutai Southeast Asia and Hong Kong and Macao Market Work Symposium was held in Bangkok, Thailand. On July 5, Zeng Congqin, Secretary of the Party Committee and Chairman of Wuliangye, led a team to inspect the liquor markets in London, England and Budapest, Hungary, and had a discussion with local distributors. Also at the beginning of July, Zhang Liandong, Secretary of the Party Committee and Chairman of Yanghe Co., Ltd., went to Paris for inspection and exchange.
Taking advantage of the major international stages, expanding their influence through brand marketing is also a common choice for wine companies to go overseas, among which Yanghe is the best at it.
The 2018 World Cup in Russia, the 2022 "51st Anniversary of China-US Table Tennis Diplomacy" event, the Qatar World Cup, the 2023 Summer Davos Forum, etc., all have Yanghe's presence, and Yanghe has recently announced that it has become the first batch of "partner-level members" in the liquor industry of the World Economic Forum.
Yanghe shares and Qatar World Cup, the source of the official account of Yanghe
A more novel way to go overseas is to combine liquor products with other categories and innovate and launch more distinctive liquor products, which Moutai has set an example for liquor companies.
In terms of the construction of the international market, Moutai explores the overseas layout of Moutai ice cream, coffee, chocolate and other gourmet products, and cultivates the first taste buds of foreign consumers Moutai. Wuliangye Restaurant showcases Chinese food and wine culture to the world with the model of "Chinese wine + Chinese cuisine", and establishes a deeper emotional connection with overseas consumers.
Behind the liquor culture is Chinese culture, and cultural identity is the premise of consumption, and it is also the key to the "going out" of liquor enterprises. Therefore, some liquor companies have embarked on the path of cultural dissemination to the sea, in order to promote product identity through cultural identity.
In 2023, Gujing Gongjiu will set up the first cultural research center in China's liquor industry in Berlin, Paris and London, Gujing Gongjiu Vintage Puree Culture Research Institute, and hired a number of researchers from the liquor industry and cultural circles to further expand and extend the internationalization process of Chinese liquor culture.
Earlier, in 2018, after Shede was listed in Los Angeles, USA, she made great efforts to create poetry, music and dance "The Fragrance of the Great Country", which presented the origin and colorfulness of Chinese liquor culture through song and dance, poetry, dance, drama and other ways.
Since 2017, Luzhou Laojiao has hosted seven consecutive sessions of the International Poetry and Wine Culture Conference, and poets, writers, artists, scholars, and culture and art lovers from more than 60 countries and regions in the world have become acquainted with each other, showing the style of liquor to the world and conveying Chinese culture.
02 The internationalization of liquor is both a "retreat" and a "way out"
The most direct reason why liquor companies have gone abroad is that the domestic liquor industry is facing growth difficulties.
The most obvious manifestation is that the liquor sector has weakened in the capital market. Since the beginning of the year, among the 20 A-share liquor listed companies, about half of the liquor companies' stock prices are falling, and the liquor sector continues to be under pressure.
In the first three quarters of this year, the total inventory of A-share liquor listed companies was 136.35 billion yuan, a year-on-year increase of 12.6%, and only Shunxin Agriculture's inventory among the 20 liquor companies was decreasing. Among them, the inventories of five leading liquor companies, Kweichow Moutai, Yanghe, Wuliangye, Luzhou Laojiao, and Shanxi Fenjiu, all exceed 10 billion yuan.
Behind the continuous increase in inventory, the number and output of liquor enterprises are decreasing.
According to data from the National Bureau of Statistics, in the first half of 2023, the output of liquor enterprises above designated size in the country decreased by 14.8% year-on-year. In the first three quarters, the output of liquor enterprises above designated size fell by 9% year-on-year. Since reaching a peak of 13.584 million kiloliters in 2016, the output of liquor has fallen for six consecutive years.
The increase in the inventory of wine companies means that the inventory of distributors is not small. The inventory pressure of distributors even led to the postponement of the "2023 Hangzhou International Wine Industry Expo". The China Liquor Circulation Association said that the expo originally scheduled to be held on December 11~13 has been postponed and will be combined with the "2024 Beijing International Liquor Expo" on May 25~27, 2024.
Picture: Notice of postponement of the exhibition
Under the pressure of inventory, dealers are eager to liquidate, and the price of liquor industry has inverted. According to the "2023 China Liquor Market Mid-term Research Report" released by the China Liquor Industry Association, the liquor industry and the liquor market have entered a new round of adjustment cycle this year, and the prices of first- and second-tier liquor have been inverted to varying degrees.
The price inversion of liquor means that the actual retail price of liquor is lower than the ex-factory guide price of the distillery, and even lower than the purchase price of the distributor. At present, in the liquor market, including Luzhou Laojiao, Xi Liquor, Gujing Gongjiu, Langjiu and other well-known liquor brands, there is a price inversion, with a decline ranging from 300 yuan to 400 yuan.
The cold of the exhibition, high inventory and inverted prices are all manifestations of the weakening of liquor. On December 19, the China Liquor Industry Association released the "2023 Annual Report on the Development of China's Liquor Industry", which pointed out that the liquor industry is currently facing challenges such as insufficient effective demand, some overcapacity, reduced consumption expectations, and many hidden risks.
The domestic liquor market is in crisis, and in order to seek a way out and cultivate future growth poles, liquor companies have to go overseas.
In fact, liquor companies have already gone overseas a hundred years ago. In 1915, Yanghe Daqu participated in the Panama International Exposition and won the gold medal and certificate of international famous liquor. In 1932, Wuliangye took the lead in printing trademarks for export in the liquor industry.
It is not easy to go to sea, and as of today, there is no liquor company that can be said to have gone to sea.
As of 2022, according to data released by the General Administration of Customs and the China Liquor Industry Association, the export volume of liquor in 2022 was 16,400 kiloliters, with an export value of 716 million US dollars. In 2022, the cumulative export volume of mainland liquor will be 816,400 kiloliters, with an export value of 1.506 billion US dollars, and the export volume of liquor will account for only 2%, but the export value will account for nearly 48%.
Compared with the slowdown in the growth of domestic liquor sales, the growth of liquor exports and the amount of liquor shows that the overseas liquor market is still a blue ocean, and it is expected to become a new increment in the liquor industry in the future.
In 2021, the "Guiding Opinions on the Development of China's Liquor Industry in the 14th Five-Year Plan" proposed that the mainland liquor industry should build a world-class industrial cluster in terms of industrial structure and implement a cultivation plan for world-class brands in terms of brand cultivation.
This also means that exploring the internationalization of liquor has become the main proposition for the development of China's liquor industry.
03 Crossing the river by feeling the stones, the road is long and obstructive
"The internationalization of liquor is not only an inevitable demand for the release of the liquor industry, but also an important direction of the supply-side reform of the liquor industry and an important meaning of the blue ocean increment. He Yong, secretary general of the China Liquor Industry Association, said recently.
The internationalization of liquor is an inevitable trend, but how to speed up the process of going overseas is a common topic for liquor enterprises.
At the two sessions this year, Zeng Congqin, chairman of Wuliangye, said that China's liquor is facing four major problems when going overseas, namely a large trade deficit, high trade barriers, heavy tariff burdens and few policy tools.
Many countries impose high tariffs on liquor, and the comprehensive tax rate imposed by individual countries is even as high as 300%, so the export cost of liquor is high. Most mature spirits markets such as whiskey, vodka, and brandy will adopt discriminatory policies against Chinese liquor, using policy means such as tariffs, standards, quotas, inspection and quarantine to set up barriers to market entry, and Chinese liquor faces barriers to entering other countries.
In this regard, Zeng Congqin, chairman of Wuliangye, suggested that in the future, we can help liquor export to overseas markets at key nodes such as building a standard system for international trade of liquor, striving for fair treatment of liquor trade, reducing the cost of liquor exports, and establishing an external promotion mechanism.
In terms of policy, there is naturally room for negotiation, but the change of drinking Xi and the export of liquor culture will not be achieved in a day.
Wang Junlin, chairman of Langjiu Group, once bluntly said, "The difficulty of liquor going to sea is essentially a difficulty in cultural identity. Wang Junlin also believes that the drinking Xi habits of Chinese and foreigners are different, and it takes time to influence people overseas, which may require the efforts of one or two generations.
Baijiu is a high-grade liquor, mainly mellow and spicy, while foreign spirits such as whiskey, brandy, etc. can be combined with other drinks or additives to achieve a flavor transformation. Based on this, representatives of liquor companies also proposed new promotion methods, Wu Xiangdong, chairman of Zhenjiu Li Du, said that liquor can be "matched" with Chinese food culture to go to sea, and enter the global market through the upgrading of Chinese food.
Picture: The scene of the 2023 Moutai Global Brand Culture Tour in France
In order to reduce the difficulty of going to sea, the current export direction of mainland liquor is still mainly concentrated in the Asia-Pacific region. From the perspective of export destinations, customs data show that the main export destinations of mainland liquor are Asia-Pacific countries such as South Korea, Myanmar, Singapore, and Malaysia, as well as some European and American countries such as the United States and Australia.
In 2022, mainland China's liquor exports from Japan, South Korea, and Australia accounted for 37.72% of the total. Among them, South Korea is the largest foreign market for China's liquor exports, accounting for 31.92% and 30.38% of its exports in 2021 and 2022, respectively.
Sun Baoguo, academician of the Chinese Academy of Engineering and president of Beijing Technology and Business University, pointed out that at present, most of China's liquor consumers are overseas Chinese, and the liquor in the European and American markets is not only small in type, but also in small quantity, and the liquor is not really recognized by the mainstream market in Europe and the United States.
However, the biggest problem on the road of liquor "going to sea" is still the export of oriental culture.
Baijiu carries a lot of Chinese culture and folk customs, and is a carrier of oriental culture. To a certain extent, overseas consumers identify with liquor culture, which is equivalent to identifying with oriental culture. Therefore, on the one hand, wine companies need to learn from the experience of overseas products such as whisky, brandy, liqueur and other overseas products in the domestic market, and pay more attention to cultural export, on the other hand, they should also recognize that the overseas export of oriental culture cannot be achieved in a short time.
At present, although first- and second-tier liquor companies are looking for new increments in overseas markets, the reality is that the sales revenue of liquor in overseas markets is not high.
Taking 2022 as an example, among the top liquor companies, Kweichow Moutai's export revenue will be 4.24 billion yuan, accounting for less than 5% of the total revenue, and Luzhou Laojiao's overseas revenue will be 153 million yuan, accounting for only 0.61% of the total revenue.
Among the second- and third-tier brands, the export volume of Gujing Gongjiu, Shuijingfang, Laobai Dry Liquor, Tianyoude Liquor and Jiugui Liquor has not reached the level of 100 million yuan, with a minimum income of only 2 million yuan, and overseas revenue accounts for about 1% of the company's current revenue, or even lower.
Liquor goes to sea, and the road is long and resistant.