02 NOV. 2012

Using Digital in the Chinese High-end Alcohol Beverages Market

China is a booming market for high-end alcohol brands with high end liquor, wine and champagne consumption growing at double digit rates year after year. However high end alcohol brands in China also face mounting challenges. While they are currently riding the wave, many are facing intense competition and must tailor their approach to a fast evolving consumer base and have yet to create a strong and defendable bond with their clients based on solid brand understanding and high levels of brand loyalty.

In such a context, it is interesting to look at how digital platforms can help high-end alcohol brands address their key China challenges and consider how such brands are currently leveraging digital in China to identify best practices and areas of improvement.

It is safe to say that high-end alcohol brands have not been at the forefront of the digital marketing revolution in China. In last year’s “Digital IQ: China” study by think tank L2, the first alcohol brand (see also 2010’s “Digital IQ: China” report co-published by L2 and Labbrand), Hennessy, was 27th and most other liquor or champagne brands were concentrated in the lower echelons of the ranking. Some brands have of course progressed since the publication of the report but research conducted by Labbrand suggests that digital is still under-utilized by most alcohol.

But why should alcohol brands pay attention to digital in the first place? Alcohol is not a product category traditionally associated with online marketing and most brands in the Chinese market currently rely more on real life events and sponsorship to carry out their message. However digital can be very effectively leveraged to help brands build defendable brand equity in the Chinese market through:

Increased reach: despite the boom in spending on high-end alcohols, wine and liquor sales still represent only 10% of the total market for alcoholic beverages. Brands’ most pressing challenges is thus to find innovative ways to get their brand message across and increase brand reach across customer segments and city tiers. Through effective digital strategies that encourage user-involvement and content forwarding, alcohol brands can quickly and cost effectively reach out to millions of customers, increase product exposure and acquire top of mind status in a market where notoriety is a key factor of success. It should also be noted that while high-end alcohol brands’ target customers in western markets are not the most digital-savvy crowd, this is not the case in China where the target base is younger and thus much more susceptible to be influenced through digital.

Greater brand knowledge: poor customer education and product understanding currently leads many customers to see high-end alcohol brands as interchangeable. In such a context, the challenge for brands is to build differentiation by showcasing more than the brand name. Digital platforms offer exceptional flexibility in producing and promoting targeted, localized content that can shed light on the most distinctive elements of the brand’s identity (be it it’s history, heritage, production process etc…), thus building knowledge and defendable differentiation against competitors.

Education on a large scale: Having no real history with most high-end alcohols, Chinese customers have little knowledge of how to choose, buy and appreciate these alcohols. This not only affects intent to buy but also gives brands less power to influence the customer journey. While the market is currently still showing strong growth, sustaining the momentum will require brands to step up their games in fostering a real culture around their product. Many brands have acknowledged this issue. Johny Walker for example has created a “Whisky house” in Shanghai entirely dedicated to educating customers about the culture of whisky. Such efforts however are very expensive and not scalable. Through digital however, brands can move the concept of a “club” online and, through educative, engaging content, create communities and educate their customer base on a scale hitherto unimaginable.

So how are high-end brands currently fairing in the Chinese digital scene? Who are the winners and laggards?

While the category as a whole is not especially digital-savvy; a few brands stand out amongst which Johny Walker is without a doubt the best in class. The Diageo-owned brands is using digital to add depth to its brand by producing content based on its “keep walking” motto. Its website and Tudou space feature inspirational videos about individuals who embody the “Keep walking” spirit while its Weibo page (that has the most followers of all the brands surveyed) also participates in carrying out the promise. On Douban, it hosts a t-shirt design contests around the phrase “I love Johny Walker” and curates discussion threads about alcohol.

Hennessy adopts an original approach by building an entire website around its super-premium Louis XIII cognac. A relevant strategy that would certainly be even better if it did not contrast with the near total lack of web content regarding its other products. Chivas also stands out through its rich website and “Chivas collective” microsite.

Other brands such as Moet & Chandon or Hennessy VSOP have a good presence but their web content lacks originality and their digital platforms are mostly used to promote offline events. Champagne brands as a whole have extremely weak digital presence, which is of all the most surprising given that their target audience is younger and more titled towards women (populations that are heavy digital users).

Overall we clearly see that there are many opportunities for high-end liquor and alcohol brands to use digital to build an edge in the Chinese market that are currently not being tapped. Brands that move in early can reap a significant early mover advantage in this still nascent market and we expect more and more brands to hop on the digital wagon, if only because they will not be able to afford not to.

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