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What You Need To Know About Importing and Distributing Spirits in Shanghai

05/11/2018

If you are a western spirits brand and looking to enter into the Chinese market, here are some important insights that you need to know on spirits import & distribution in the country.

For the past 18 months, the pace of spirits being imported into China has continued to rise at a breathtaking pace. According to the China Association of Imports and Exports for Wine and Spirits, the volume of spirit imports during the first 9 months of 2017 was up 27.69% compared to the year-earlier period. And the focus has clearly been on premium spirits, especially cognac and whisky. So if you’re a Western spirits brand trying to crack into the Chinese market, what’s the best path to import and distribution in Shanghai?

Top importers

For many spirit brands, the starting point is finding an importer or distributor that already has a sizable market footprint. There are literally hundreds of smaller importers, many of them serving just a single product or a single city. If you are looking for as wide a footprint as possible in the Chinese spirits market, it is worth looking at numbers provided by research firms, China Customs, or Chinese spirits associations, to see which companies are big enough to serve your import needs.

Moreover, since wine is currently a bigger market opportunity than spirits, you can essentially piggyback on the success of the biggest wine importers, which already have very defined distribution channels in place. Some of the more noteworthy Chinese wine & spirits importers with offices in Shanghai include the following:

EEDC is generally considered to be Mainland China’s leading distributor of quality spirits. The company was one of the first to enter the Chinese market as soon as China entered the World Trade Organization (WTO) back in 2001, and has gained recognition for being a top distributor of Remy Martin’s Louis XIII cognac. This is a great example of a company with a long track record of getting foreign spirits onto Chinese retail shelves.

Summergate is another China company with a long tradition of serving the Shanghai market. Formed back in 1999, Summergate now has a portfolio of 100+ brands from 19 countries, as well as 11 different offices across Mainland China. On its website, you’ll see a list of the high-end spirits that it represents, including Teeling Whiskey and Delamain cognac. While other importers might focus only here on whiskey and cognac, Summergate also imports aperitifs, bitters, gin, pisco, rum, tequila and vodka. Thus, Summergate might be a better match if you are looking for ways to import premium spirits, not in the cognac or whisky categories.

China Distribution and Logistics has also been in the Chinese market for 25 years and has exclusive deals with Alize, Depuy Cognac, Scottish Eagle, Dalmore Scotch and Majestic Cognac.

Events to connect with importers and distributors

That being said, Shanghai now hosts a growing number of offline events designed to connect importers, distributors, brokers, producers and brand owners. For example, the upcoming International Bulk Wine & Spirits Show (organized by Beverage Trade Network) is coming to Shanghai in 2019, offering opportunities to meet face-to-face with potential importers and distributors.

Other events for the spirits industry are starting to come to the Shanghai New International Expo Center (SNIEC), including the Shanghai International Wine & Spirits Exhibition, the That’s Spirits Live Show, and Pro Wine China. In addition, the Whisky L! International Expo and Spirits Show, held at the W Shanghai, is now celebrating its 10th year.

The traditional beverage distribution network in Shanghai

In terms of distribution channels in Shanghai, 70% of spirits distribution goes to megastores, hypermarkets and supermarkets, with the other 30% headed to on-premise establishments, such as bars, clubs, and (mostly) Western restaurants and cafes.

One important point to keep in mind is that the distribution of spirits within Shanghai is surprisingly complex, with lower profit margins than within Western markets. Thus, while a Western distribution model might only have 3 tiers (producer-wholesaler-distributor), the Shanghai distribution model has as many as 7 tiers. With so many tiers in the model, it can be hard to squeeze out high enough profit margins. (Just think of each tier as a middleman, and paying a small commission to each middleman along the way, and you’ll see why even Coca-Cola complains about distribution in China!)

New online e-commerce models for import and distribution

While many distributors follow the 70/30 model of off-trade and on-trade distribution, one attractive market opportunity that has opened up recently is the ability to sell directly to Shanghai consumers online. While the alcohol e-commerce market in the United States may be still in its early stages, the alcohol e-commerce model is very much developed in China.

The idea is simple: work directly with a huge online e-commerce platform like Tmall or JD.com and get your spirits sold online instead of worrying about getting into retail stores. These e-commerce giants function much like Amazon.com in the United States – they have warehouses around the country, and a very efficient distribution network that handles all of the back-end logistics for you.

Moet Hennessy, for example, has had extraordinary success selling cognac online, all from a branded storefront on Tmall. And that led the company to innovate with new 100 ml and 200 ml bottle sizes for Scotch and cognac products, both of which are designed to be consumed in a single setting or at a single occasion.

In addition to these B2C models, there are also Direct-to-Consumer (DTC) models and O2O (Online-to-Offline) models. Thus, a major e-commerce player like Jiuxian also offers an O2O alcohol delivery service. And Shanghai9.com has become a Shanghai version of Drizly in New York – an alcohol home delivery service that will get your bottle of premium liquor into the hands of waiting for customers in the city with same-day delivery.

To maximize your success, look for an importer/distributor with an office in Shanghai and a sizable enough portfolio of premium spirits that you will be assured of maximum distribution potential. And remember – the most successful premium spirits brands in Shanghai are those that maintain an active on-the-ground presence in the city, through offline events and online social media. It’s important to stay top-of-mind consumers so that when they do decide to shop for products online or in retail stores, your spirits will be an easy first choice.

 

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