Bright future for white spirits
The Chinese liquor industry is expected to have impressive growth potential in the future despite the present downturns caused by the government's crackdown on luxury banquets, said Frost & Sullivan, a US-based market consultancy.
But opinions differ on length of time to deal with difficulties
According to a recent report by the consultancy, the white spirit production will reach 17.05 billion liters in 2016 from 4.94 billion liters in 2007 with a compound annual growth rate of 14.8 percent. Sales revenue from white spirits is expected to grow from 110.9 billion yuan ($18 billion) in 2007 to 926.5 billion yuan in 2016, with a compound annual growth rate of 26.6 percent.
The report attributed the robust growth potential to the following factors. First, the white spirit industry is closely associated with the macroeconomy and currently China is still at a stage of rapid economic development as well as rising disposable incomes.
Second, multi-sales-channels marketing strategies have been vigorously used by domestic alcohol makers, such as group purchases and online sales, which have been greatly welcomed by younger customers.
According to the report, Chinese white spirit is one of the seven renowned distilled spirits in the world. Sichuan, Guizhou, Shaanxi, Anhui and Shanxi provinces are the most recognized origins of it in China. Each province has its own special drinking habits and brands. There is Wuliangye in Sichuan, Moutai in Guizhou, Xifeng in Shaanxi, Gujing in Anhui and Fenjiu in Shanxi.
Sichuan is the most high-yielding province in China. In 2011, white spirit output in Sichuan made up around 30 percent of total output in China and has maintained a compound annual growth rate of 38 percent for nearly five years. There are numerous famous white spirit brands in Sichuan, including Wuliangye, Luzhoulaojiao and Swellfun (Shuijingfang).
Shandong is anther traditional high-yielding province, said Frost & Sullivan. In 2011, the output of baijiu in Shandong made up around 10 percent of the total output in China, with stunning revenue of around 30 billion yuan. Taking Confucian Family Liquor (Kongfujiajiu) as an example, since 2007, its sales volume has maintained an annual growth rate of 100 percent.
But, there are also some restraints on the industry, said Frost & Sullivan, such as local governments' protection of local brands, which jeopardizes fair competition in the market, as well as a lack of product research and innovation capabilities, as the new generation of young customers seek personalized and diversified products.
Telephones ring nonstop everywhere in the spacious glass-walled modern office overlooking a relatively less developed neighborhood. Staff greet their customers over their headphones with the words "Hello sir/madam. How can I help you?" while quickly typing on their computers and searching for the required product information. The boss sits opposite his workers, checking out how everyone is doing. Welcome to a setting similar to the US television sitcom Outsourced that was first broadcast three years ago.
The situation comedy is set in a call center in Mumbai, India, where an American novelties company has recently outsourced its orders processing.
In his bestselling book The World is Flat: A Brief History of the Twenty-First Century, Thomas Friedman recounts a journey to Bangalore, India, and points out that outsourcing has allowed companies to split services into components that can be subcontracted and performed in the most efficient and cost-effective way.
Of course India is known for its business process outsourcing industry thanks to its language advantages, but now it is also taking place in the inland cities of China. Hefei, the capital city of Anhui province has pioneered the oriental idea the world is "flat".
There are three business processing outsourcing industrial parks in Hefei, namely Hefei High-Tech Industry Area, Hefei (Shushan) E-commerce Industrial Park and the International Business Outsourcing Industrial Park of Hefei Lakeshore New District, with the latter one developing the most rapidly.
Having set foot in the Lakeshore New District in May last year, leading Chinese online travel service provider eLong Inc quickly expanded its call center team in Hefei from zero to the current 1,300 people. Ding Haochuan, vice-president of operations at the company, said it aims to increase the number to 1,500 by the end of this year.
"At present, our call center in Hefei is regarded as mid-level in terms of size compared with larger businesses such as insurance companies or telecommunication operators. But, over time, we hope to increase the headcount to about 3,000 in the long run. It is not a very large number because you can't expand recklessly," he said.
Elong's call center is the company's second, the first being in Beijing, where it is based. There are about 1,000 operators working in the capital's call center. Ding said they would like to establish two core centers in China, both of which will be complementary to each other. At the same time, having two centers will help to ensure the security of users' information.
The cost of the Hefei call center is about 20 percent less of that in Beijing, according to Ding. But he added that this is not the only reason that they have chosen to settle down here. To have the right people working for the call center weighs as much.
"Hefei is known as a city of scientific technology and education. The large number of university graduates here provides us with ideal candidates for the call center," he said, adding that the convenient transportation to more developed Jiangsu province and Shanghai facilitates communication between talented people.
The local government has also made great efforts to attract companies to settle here. Apart from providing favorable conditions regarding rental tax and construction supporting facilities, the government has also established the business process outsourcing centers right in the center of the city, thereby providing lively attractions for workers here, Ding added.
The local government of Hefei mapped out a goal of building the city into China's call center capital in July 2010. Local authorities were ambitious enough to expand the scale to 100,000 customers within five years. It is also the government's goal to make business process outsourcing one of its signature industries.
Overall, there are already 21 model cities in China featuring BPO services. Hefei, not only enjoys convenient transportation to the developed Yangtze River Delta region but also boasts a sufficient supply of qualified candidates for call center workers.
"At present, there are four science and technology bases in Hefei. More than 60 colleges and universities in Anhui province will provide the people call centers need," said Wu Songjiang, director of the BPO work office at Hefei Bureau of Commerce.
The relatively lower business cost of Hefei has also attracted companies to set up here. The Lakeshore District aspires to grow into an international financial BPO center with the cooperation of Shanghai Pudong Lujiazui financial district.
The next stage of development of the Lakeshore District, Wu explained, is to attract the 14 major commercial banks in China including Industrial and Commercial Bank of China, Bank of China, and Agricultural Bank of China to set up their call centers here. Also those of insurance and securities companies as well as the telecommunication companies already here.
Other major obstacles also exist, said the consultancy.
At the end of last year, the central government unveiled a series of anti-graft rules called "The Limitation of the Three kinds of Government Consumption". They include the regulation that receptions for high-ranking military officials should no longer include liquor or luxurious banquets, which has led to a sharp decrease in the purchase of white spirit by government and business organizations. Some high-end white spirit brands have faced a sharp decrease in demand and sales volume.
It did not take long for the stock market to feel the effects.
Just two days after the announcement, shares in Chinese distillers such as Wuliangye Yibin Co and Kweichow Moutai Co fell.
Shares in Moutai fell 5.55 percent on the Shanghai Stock Exchange, while shares in Wuliangye slid 3.02 percent on the Shenzhen stock market. Moutai's market value shrank by 12.5 billion yuan on the same day.
"Moutai and another two high-level alcohol brands, which are popular with government officials and military officers, account for 20 percent of the total liquor market," said Jian Aihua, a researcher with CIConsulting, a leading industry research institution.
Yuan Renguo, Kweichow Moutai's chairman, said recently that the company will slow its growth rate to reach an 18 percent year-on-year rise by the end of this year.
"There has been a slump in Chinese liquor sales and in the catering industry since late last year, mainly caused by the government's anti-corruption calls," said Su Qiucheng, head of the China Cuisine Association. "Restaurant sales in some big cities even posted negative growth, such as Beijing and cities in Jiangsu and Zhejiang provinces."
Duan Kaiyun, assistant secretary-general of Beijing Cuisine Association, said: "The difficult time will last for a long time because it's a key part of the new government's vow to curb corruption."
But Bian Jiang, assistant director of the China Cuisine Association, said the habit of pleasing business clients with extravagant banquets has been deeply rooted in Chinese culture and will not be reversed overnight.
According to a recent report by the consultancy, the white spirit production will reach 17.05 billion liters in 2016 from 4.94 billion liters in 2007 with a compound annual growth rate of 14.8 percent. Sales revenue from white spirits is expected to grow from 110.9 billion yuan ($18 billion) in 2007 to 926.5 billion yuan in 2016, with a compound annual growth rate of 26.6 percent.
The report attributed the robust growth potential to the following factors. First, the white spirit industry is closely associated with the macroeconomy and currently China is still at a stage of rapid economic development as well as rising disposable incomes.
Second, multi-sales-channels marketing strategies have been vigorously used by domestic alcohol makers, such as group purchases and online sales, which have been greatly welcomed by younger customers.
According to the report, Chinese white spirit is one of the seven renowned distilled spirits in the world. Sichuan, Guizhou, Shaanxi, Anhui and Shanxi provinces are the most recognized origins of it in China. Each province has its own special drinking habits and brands. There is Wuliangye in Sichuan, Moutai in Guizhou, Xifeng in Shaanxi, Gujing in Anhui and Fenjiu in Shanxi.
Sichuan is the most high-yielding province in China. In 2011, white spirit output in Sichuan made up around 30 percent of total output in China and has maintained a compound annual growth rate of 38 percent for nearly five years. There are numerous famous white spirit brands in Sichuan, including Wuliangye, Luzhoulaojiao and Swellfun (Shuijingfang).
Shandong is anther traditional high-yielding province, said Frost & Sullivan. In 2011, the output of baijiu in Shandong made up around 10 percent of the total output in China, with stunning revenue of around 30 billion yuan. Taking Confucian Family Liquor (Kongfujiajiu) as an example, since 2007, its sales volume has maintained an annual growth rate of 100 percent.
But, there are also some restraints on the industry, said Frost & Sullivan, such as local governments' protection of local brands, which jeopardizes fair competition in the market, as well as a lack of product research and innovation capabilities, as the new generation of young customers seek personalized and diversified products.
Telephones ring nonstop everywhere in the spacious glass-walled modern office overlooking a relatively less developed neighborhood. Staff greet their customers over their headphones with the words "Hello sir/madam. How can I help you?" while quickly typing on their computers and searching for the required product information. The boss sits opposite his workers, checking out how everyone is doing. Welcome to a setting similar to the US television sitcom Outsourced that was first broadcast three years ago.
The situation comedy is set in a call center in Mumbai, India, where an American novelties company has recently outsourced its orders processing.
In his bestselling book The World is Flat: A Brief History of the Twenty-First Century, Thomas Friedman recounts a journey to Bangalore, India, and points out that outsourcing has allowed companies to split services into components that can be subcontracted and performed in the most efficient and cost-effective way.
Of course India is known for its business process outsourcing industry thanks to its language advantages, but now it is also taking place in the inland cities of China. Hefei, the capital city of Anhui province has pioneered the oriental idea the world is "flat".
There are three business processing outsourcing industrial parks in Hefei, namely Hefei High-Tech Industry Area, Hefei (Shushan) E-commerce Industrial Park and the International Business Outsourcing Industrial Park of Hefei Lakeshore New District, with the latter one developing the most rapidly.
Having set foot in the Lakeshore New District in May last year, leading Chinese online travel service provider eLong Inc quickly expanded its call center team in Hefei from zero to the current 1,300 people. Ding Haochuan, vice-president of operations at the company, said it aims to increase the number to 1,500 by the end of this year.
"At present, our call center in Hefei is regarded as mid-level in terms of size compared with larger businesses such as insurance companies or telecommunication operators. But, over time, we hope to increase the headcount to about 3,000 in the long run. It is not a very large number because you can't expand recklessly," he said.
Elong's call center is the company's second, the first being in Beijing, where it is based. There are about 1,000 operators working in the capital's call center. Ding said they would like to establish two core centers in China, both of which will be complementary to each other. At the same time, having two centers will help to ensure the security of users' information.
The cost of the Hefei call center is about 20 percent less of that in Beijing, according to Ding. But he added that this is not the only reason that they have chosen to settle down here. To have the right people working for the call center weighs as much.
"Hefei is known as a city of scientific technology and education. The large number of university graduates here provides us with ideal candidates for the call center," he said, adding that the convenient transportation to more developed Jiangsu province and Shanghai facilitates communication between talented people.
The local government has also made great efforts to attract companies to settle here. Apart from providing favorable conditions regarding rental tax and construction supporting facilities, the government has also established the business process outsourcing centers right in the center of the city, thereby providing lively attractions for workers here, Ding added.
The local government of Hefei mapped out a goal of building the city into China's call center capital in July 2010. Local authorities were ambitious enough to expand the scale to 100,000 customers within five years. It is also the government's goal to make business process outsourcing one of its signature industries.
Overall, there are already 21 model cities in China featuring BPO services. Hefei, not only enjoys convenient transportation to the developed Yangtze River Delta region but also boasts a sufficient supply of qualified candidates for call center workers.
"At present, there are four science and technology bases in Hefei. More than 60 colleges and universities in Anhui province will provide the people call centers need," said Wu Songjiang, director of the BPO work office at Hefei Bureau of Commerce.
The relatively lower business cost of Hefei has also attracted companies to set up here. The Lakeshore District aspires to grow into an international financial BPO center with the cooperation of Shanghai Pudong Lujiazui financial district.
The next stage of development of the Lakeshore District, Wu explained, is to attract the 14 major commercial banks in China including Industrial and Commercial Bank of China, Bank of China, and Agricultural Bank of China to set up their call centers here. Also those of insurance and securities companies as well as the telecommunication companies already here.
Other major obstacles also exist, said the consultancy.
At the end of last year, the central government unveiled a series of anti-graft rules called "The Limitation of the Three kinds of Government Consumption". They include the regulation that receptions for high-ranking military officials should no longer include liquor or luxurious banquets, which has led to a sharp decrease in the purchase of white spirit by government and business organizations. Some high-end white spirit brands have faced a sharp decrease in demand and sales volume.
It did not take long for the stock market to feel the effects.
Just two days after the announcement, shares in Chinese distillers such as Wuliangye Yibin Co and Kweichow Moutai Co fell.
Shares in Moutai fell 5.55 percent on the Shanghai Stock Exchange, while shares in Wuliangye slid 3.02 percent on the Shenzhen stock market. Moutai's market value shrank by 12.5 billion yuan on the same day.
"Moutai and another two high-level alcohol brands, which are popular with government officials and military officers, account for 20 percent of the total liquor market," said Jian Aihua, a researcher with CIConsulting, a leading industry research institution.
Yuan Renguo, Kweichow Moutai's chairman, said recently that the company will slow its growth rate to reach an 18 percent year-on-year rise by the end of this year.
"There has been a slump in Chinese liquor sales and in the catering industry since late last year, mainly caused by the government's anti-corruption calls," said Su Qiucheng, head of the China Cuisine Association. "Restaurant sales in some big cities even posted negative growth, such as Beijing and cities in Jiangsu and Zhejiang provinces."
Duan Kaiyun, assistant secretary-general of Beijing Cuisine Association, said: "The difficult time will last for a long time because it's a key part of the new government's vow to curb corruption."
But Bian Jiang, assistant director of the China Cuisine Association, said the habit of pleasing business clients with extravagant banquets has been deeply rooted in Chinese culture and will not be reversed overnight.
