According to a marketing report from Millward Brown, the Chinese income’s growth and the time they give for leisure are positively impacting the travel industry but we can not say the same about the alcohol one. The report contact catalogue the top 10 « value » brands based on several key criteria. What has been notice, is the tourism prosperity and the development of travel agencies and Chinese hoteliers everywhere across the country at all segments of the market. On the contrary, the repression and the government control on alcohol has affect the Chinese alcohol companies unfavorably especially on the wine and baijiu.
The most impressive growth of the year has been attributed to Ctrip (a travel company) that gained a massive 98% in brand value while Moutai, which is an alcohol company, declined by 6%. Usually hotel chain are not even listed but for the first time, this year, some of them has appear emphasizing the domestic travel boom in China. On the other hand, baijiu company like Moutai and Wu Liang Ye or wineries like Great Wall and ChangYu are having difficulties selling but still spend quantity of money on banquets and luxury gifting. Moutai is a good exemple of this crackdown. They are listed 12th this year but has still decreased by 19% while Wu Liang Ye which is placed at the 46th position declided by 66% ! Both brand had a hard time sustaining the bottle prices this year and the the company’s stock « declined to new lows » in 2013. The report assignment also says that « as distributors sought to drive sales with price-cutting, Moutai’s attempt to maintain price stability ended in government anti-trust action ».
The brutal crash of alcohol company
In the same time, Shui Jing Fang’s company droped by 50% last September making the owner Swellfun Diageo feel « the impact of new government regulations aimed at taming extravagant spending ». The only company that didn’t felt the collapse of the alcohol market is Yanghe that first enter the list getting to the 27th seat and « successfully repositioned the brand toward the mid-price part of the baijiu market ». This success is in part due to its recent engagement in several corporate social responsibility (CSR) like an eco-friendly marketing compaign or some sponsored charity event.
Two other alcohol firms that have been struck by the government’s anti-extravagance campaign, the Chinese wineries Great Wall and ChangYu. The competition coming from abroad is also a factor of declined. For exemple ChangYu’s value declined by 53% and made the company fall down to the 36th seat and Great Wall is barely in the ranking at the 95th place.
Far from worry, those companies see this drop as temporary and hope to bounce back thanks to the expansion in the country. Especially with the announce of the « wine city » construction supposed to be achieved in 2016 for almost 1 billion €. In the case of alcohol companies, they are also hoping that their overseas sales will help them to make up for their domestic failed. Moutai has the excellent idea of establishing a Bordeaux vineyard in France while Diageo has been marketing the brand in the UK, Italy, Qatar, Spain, and the United Arab Emirates. Most of the brand are now perfectly exported abroad and can brag about being present in over 40 countries which is the case of Luzhou Laojiao (listed 47th) or selling a mass-market line with premium and popular prices like ChangYu do with ViniPanda
The progress of the traveling sector
Compared to the baijiu and winery company, the hotel and travel agency are taking advantage of an increadible local travel boom. The online booking agency Ctrip is a good exemple of it with an increase of 47% this year bringing them to the 54th position. The e-commerce and the mobile platforms are needless to say, one of the reason for it. The report says that the mobile transaction for the company had tripled during the second quarter of 2013 and its mobile app was downloaded over 50 million times ! It’s mainly young travelers with disposable income and leisure time that use the app. Thanks to this majority, the company’s profit increases of 76% over the year.
We have seen several new travel and hotel company enter in the list thanks to the foreign and domestic travelers growth. Thus, China International Travel Service (CITS) at the 83rd, Home Inn (57th), Hanting (84th), Huatian (89th), and Jinjiang (96th) all got into the ranking this year. All those range hotel are targeting wealthy clients and are planning to develop more five-star hotel from Paris to China but also investing in furnished apartments, residential building, conference center, business complex…