Tequila producers pouring on promotions in China
For most Chinese consumers, tequila — a distinctive product from Mexico made from the fermented juice of agave plants — is an exotic liquor compared with foreign rivals cognac and whiskey.
But it may not be long before they list the exotic beverage as their favorite during get-togethers or in bars as Mexico pushes ahead with an ambitious plan to make China its second-largest market after the United States within five years.
Mexico exported 525,000 liters of tequila to China in 2013, a 28 percent increase over 2012. According to the Tequila Regulatory Council of Mexico, the export momentum started in 2009, with solid double-digit growth in the following four years.
This led the Mexican government to set an annual export target of 10 million liters of tequila for the Chinese market by 2019.
Mexico exported 132 million liters of tequila to the United States, its largest export market, last year.
The United States accounted for nearly 80 percent of Mexico’s tequila exports last year, followed by Germany and Spain.
Despite the relatively small tequila market in China, Eduardo Orendain, president of the National Chamber of the Tequila Industry, sees a large potential for Mexican tequila exports to the country.
“When the two countries’ presidents agreed to allow the imports of 100 percent agave alcohol (in China), they opened up vast prospects for the tequila industry,” he told China Daily.
When the two countries’ presidents agreed to allow the imports of 100 percent agave alcohol (in China), they opened up vast prospects for the tequila industry.”
EDUARDO ORENDAIN
PRESIDENT, NATIONAL CHAMBER OF THE TEQUILA INDUSTRY
Before President Xi Jinping’s visit to Mexico in June 2013, China imported only “light tequila” with a lower intensity of agave juice out of concerns for its highmethanol content. As part of an agreement to increase bilateral trade, China agreed to lift the ban, greenlighting imports of premiumtequila fromMexico.
To take advantage of the favorable policy, the National Chamber of the Tequila Industry launched a campaign in Beijing and Shanghai to promote the products to Chinese traders and consumers in late June.
But it has not all been toasts and celebrations for the upstart imports. “The major difference between China and established markets is that people in the US and Europe have better knowledge about tequila. This is what we need to work hard on (in China),” Orendain said.
Drinking alcohol, however, has long been part of the Chinese culture. The country consumes about 5 billion liters of liquor every year, but the market is dominated by baijiu, a traditional Chinese spirit.
Currently, imported liquor accounts for less than 10 percent of the Chinese market, led by cognac and whiskey, according to the International Wine & Spirit Research.
Mexico’s attempt to promote tequila comes at a time when foreign alcohol sales have plummeted in China due to the government’s austerity drive and anti-graft campaign in addition to a slowing economy, which has seen public liquor consumption shrink.
Remy Cointreau, owner of cognac brand Remy Martin, reported a 40 percent drop in profits in China for the fiscal year ending March 31.
Pernod Ricard, the world’s second-largest spirits group and owner of tequila brand Olmeca, saw first-quarter sales in China sink by 28 percent. But Ian Strachan, director of Jose Cuervo Asia-Pacific, is confident in China’s large market potential due to an expanding younger consumer base.
“Our target consumers are young adults. They are the ones with rising disposable income and are not necessarily the people who would go to institutional banquets with gifting opportunities,” he said.
Jose Cuervo, the global leader in tequila, saw its China sales surge 38 percent last year.
The company has been in Chinese markets for about 20 years with its lower-agave product, Especial. It looks forward to bringing its full product range to Chinese customers thanks to the trade policy change. Jeff Ji, a 29-year-old bar owner in Beijing, said, “Tequila is becoming increasingly popular in China, especially among young people who enjoy taking tequila shots in groups.”
The price of a bottle of tequila ranges from $15 to $60, with some high-end products carrying a price tag of up to $100. In addition, curiosity among the Chinese about the salt and lime accompaniments to tequila has helped attract more drinkers, Ji said.
Strachan said it is hard to enter a consumer-driven market “top-down” by concentrating on high-end products first.
“Our focus is to develop (the lower-agave) Especial, even though the long-term opportunity in China comes in the super premium tequila range,” he said.
Despite Jose Cuervo’s seeing great opportunities in the Chinese market, the company still faces challenges that require it to invest greater amounts of time and money.
“The main issue is to educate consumers to understand what they are drinking and what brand they are drinking. Branding is the key,” Strachan said.
Patron — which produces super-premium 100 percent agave tequila and registered a 66 percent jump on its yearto-date shipments to China through May — shared similar views.
“As 100 percent agave tequila is new in the market, education is essential,” said Greg Cohen, vice-president of corporate communications at Patron. Jose Cuervo has three “brand ambassadors” in China who focus on brand education for potential customers. Their job is to take tequila products to bars and retail outlets to showcase the beverages and demonstrate ways to enjoy them.
But Strachan said this is a strategy that many smaller companies simply cannot afford to pursue. Both Jose Cuervo and Patron have welcomed the National Chamber of the Tequila Industry’s promotional activities in China but viewed its five-year target as “too ambitious” because of the dominance of whiskey and cognac in the foreign spirits market.
Strachan said, “We can’t do a week of promotions and think it is over.” This is where he thinks the chamber comes into play: “It has to be on board for the long term.”