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Ddma snapshot report_baijiu-july-22-2013

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Baijiu Blues: Chinese Corporate Entertainment Expenditure Plummets as New Government Policies Bite

This report by DDMA, a Shanghai based market research group, shows that over 50% of Chinese companies have reduced expenditure on corporate entertainment in the past three months.

High-end restaurants and Premium baijiu sales to be hit hardest in this new wave of austerity.
The sales of premium baijiu has long been linked to the levels of corporate entertainment expenditure. As corporate expenditure declines, sales of premium baijiu will also suffer in China.

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Ddma snapshot report_baijiu-july-22-2013

  1. 1. 2013 July 22nd DATA DRIVEN MARKETING ASIA W W W . D D M - A S I A . C O M Data Driven Marketing Asia (DDMA) was founded in 2001 and is a full service market research company based in Shanghai China A DDMA China Market Snapshot Report Baijiu Blues: The impact of Chinese government policy on premium and super premium Baijiu consumption
  2. 2. DDMA was founded in 2001 and has conducted consumer, B2B market research across China and Asia Pacific for some of the world’s leading alcohol and consumer brands. Introduction to this report The recently appointed Chinese leadership has government spending as a key component of its reform orientated policies. This policy has led to a very steep reduction in the levels of corporate and government entertainment. The purpose of this DDMA snapshot report is to measure the effect that these new government policies are having on corporate and government entertainment across Brief Introduction to Baijiu largest individual spirit category in the world. distillation of a mash which is made up of a variety of ingredients including rice, sorghum, beans, corn, barley, wheat, and a selection of generally varies between 38% and 65% and and grade. About this study: Data collection and methodology Data Driven Marketing Asia (DDMA) interviewed the owners and senior management of 103 medium to large sized Chinese companies in order to ascertain the impact that tightening fiscal policies and new government policies towards corporate entertainment are having on these companies’ survey also measured how these changes are and were conducted in June 2013. DDMA China Market Snapshot Report July 22nd, 2013 DongLong AIA Building, Office 401, 223 Xikang Road, Jing An District, Shanghai 200040 People's Republic of China www.ddm-asia.com E: info@ddm-asia.comP1
  3. 3. DDMA initiated, negotiated, established and set up a joint venture in Chengdu between JianNanChun, the second largest Baijiu producer in the China, and V&S Sprit, makers of Absolut Vodka. The project lasted four years, and involved extensive market research of the Baijiu market at consumer, trade, industry and government levels 46% of Chinese companies have entertainment. The largest decreases were in the service, retail and banking sectors. 51% of Chinese companies have reduced the amount of money that they spend on corporate entertain-ment. The largest decreases were in the banking, manufacturing and the service industries. Over the past six months….. Frequency of Corporate Entertainment – By Industry Total (n=103) Service (n=12) Retail (n=13) Banking (n=16) Manufacturing (n=14) Staff & HR (n=16) Construction (n=13) Travel & Tourism (n=15) Decreased No Change Increased 33% 24% 33% 27% 15% 42% 41% 52% 21% 18% 8% 17% 29% 15% 26% 30% 46% 59% 58% 57% 56% 42% 33% 19% -25% -41% -50% -40% -27% -27% -7% 11% Please note that the small sample sizes in these subgroups Spending of Corporate Entertainment – By Industry Decreased No Change Increased -24% -70% -36% -41% -37% -11% -23% 5% Total (n=103) Service (n=12) Retail (n=13) Banking (n=12) Manufacturing (n=14) Staff & HR (n=16) Construction (n=13) Travel & Tourism (n=15) 21% 10% 24% 38% 22% 54% 65%27% 10% 32% 18% 13% 33% 12% 20% 51% 80% 68% 59% 50% 44% 35% 15% Please note that the small sample sizes in these subgroups July 22nd, 2013 DongLong AIA Building, Office 401, 223 Xikang Road, Jing An District, Shanghai 200040 People's Republic of China www.ddm-asia.com E: info@ddm-asia.com P2 DDMA China Market Snapshot Report 42% of all Chinese companies have entertainment because of new government policies. An additional 11% state that increased financial constraints on corporate entertainment. Why has expenditure decreased? 2% Government Policy & Company Internal Policy Company cannot afford Clients can not afford 42% 11% Recent changes in Chinese government policies towards expenditure on corporate entertainment have had a significant impact on the sector.
  4. 4. 21% 26% 40% 45% of entertainment alcoholic beverages Eat less or cheaper food Select cheaper restaurants DDMA conducts market research studies on behalf of international and domestic clients across all markets in China Entertainment of clients from around China and entertainment of local, regional and central government officials has been reduced the most. 40% of Chinese companies state that they are reducing corporate less alcoholic beverages July 22nd, 2013 DongLong AIA Building, Office 401, 223 Xikang Road, Jing An District, Shanghai 200040 People's Republic of China www.ddm-asia.com E: info@ddm-asia.com Which entertainment occasions have been impacted….. How is corporate entertainment expenditure being reduced? P3 DDMA China Market Snapshot Report Reduction of expenditure on alcoholic beverages, particularly baijiu, has been a key way to reduce corporate expenditure. Decreased Increased All occasions (n=103) Entertaining clients from around China (n=39) Entertaining local clients (n=79) Entertaining local & regional government (n=52) Entertaining business colleagues (n=24) Entertaining Overseas clients (n=11) 51% 21% 27% 36% 38% 46% 54% 56% 27% 33% 23% 19% 15% 36% 25% 29% 27% 26% 0% Net Change 24% 30% 27% 17% 13% - Stayed the Same 1% 1% 3% 4% 10% 25% Premium Beer International Spirits Standard Wine Premium Wine Standard Baiiu 35% of Chinese companies state that to reduce costs. In addition, 25% of Chinese companies state that they are Which alcoholic beverage categories are being impacted?
  5. 5. Impact for profitability of Chinese Baijiu companies Expect a minimum decline of 20% in Baijiu producer profits profits are generated from corporate entertainment and gifting. China. July 22nd, 2013 DongLong AIA Building, Office 401, 223 Xikang Road, Jing An District, Shanghai 200040 People's Republic of China www.ddm-asia.com E: info@ddm-asia.com P4 DDMA China Market Snapshot Report DDMA Market Research provides data collection capabilities, and conducts large scale consumer, trade and research projects across China, and in other Asian markets. DDMA Market Research uses a variety of different methodologies in our data collection operations including: telephone interviewing, face to face interviews via central location, street intercept, and online surveys.
  6. 6. July 22nd, 2013 P5 DongLong AIA Building, Office 401, 223 Xikang Road, Jing An District, Shanghai 200040 People's Republic of China www.ddm-asia.com E: info@ddm-asia.com About DDMA DDMA is a full service market research company based in Shanghai, China. Our clients include: DDMA China Market Snapshot Report

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