Tea, wine and the story of Southeast Asia

Wine and tea are typical symbols of Chinese culture, and their related products and brands have formed mature business logic in China. Whether it is a Chinese wine brand or a tea brand, they both have a huge audience and a broad market space.

In recent years, with the rise of foreign trade boom, many practitioners in the traditional tea and wine industry have begun to explore ways to expand Chinese business to overseas markets. They are thinking about whether tea and wine products with high customer unit prices can successfully go overseas and enter overseas markets on a large scale?

What is the current development status of Chinese tea and Chinese wine in overseas markets? Which brands actively promote Chinese tea and wine products overseas? Which types of products are more popular in overseas markets? How to overcome and break through the differences in cultural habits? Is this type of Chinese-style business really feasible overseas?

Since last year, many high-end wine companies have accelerated their pace of going overseas. In the middle of last year, Luzhou Laojiao and Moutai were active in Southeast Asia such as Singapore and Bangkok, Thailand. Entering 2024, Wuliangye has become the official partner of the New York Times Square New Year Countdown Opening Ceremony, Luzhou Laojiao will participate in the Australian Open as a co-sponsor and official partner, and Fenjiu will also appear at the 2024 UAE Overseas Chinese Spring Festival Gala. Moutai has even opened up some overseas distribution rights to encourage domestic dealers to expand into the international market.

According to 2023 data from the Alcohol Importers and Exporters Branch of the China Chamber of Commerce for Import and Export of Food, Native Produce and Livestock, my country’s total alcohol exports reached US$1.79 billion last year, a year-on-year increase of 38.5%. Among them, beer has the largest export volume, reaching 620,000 liters, a year-on-year increase of nearly 30%; while spirits including liquor have the highest export volume, nearly 1.2 billion US dollars, a year-on-year increase of 45%.

However, due to multiple factors such as cultural identity, brand promotion and market demand, the sales of Chinese liquor in overseas markets are still mainly concentrated in East Asian markets such as Japan and South Korea, which have similar cultural identities, and Southeast Asian markets such as Myanmar. The demand for Chinese liquor in the US market Also performing strongly. Last year, the export value of Chinese liquor to Japan increased by nearly 88% year-on-year, ranking fourth in China’s overseas liquor market. The Southeast Asian market is also relatively receptive to strong-flavor and sauce-flavor liquors.

Despite this, the industry generally believes that Chinese liquor still faces many challenges in large-scale overseas expansion. Veterans pointed out that liquor is difficult to be widely accepted by the international market in terms of taste, price and culture, and even successful overseas brands are mainly limited to the Chinese circle. From a product perspective, the flavor profile of liquor is significantly different from that of Western alcoholic beverages, resulting in low international acceptance. In terms of brands, the international visibility and recognition of Chinese liquor needs to be improved, and promotion and sales channels are also facing challenges. In terms of price, Chinese liquor lacks a competitive advantage in the international market, and the price is even lower than that in the domestic market, making liquor companies hesitant to go overseas.

The traditional concept in the liquor industry is that “production capacity is wealth”, and the production capacity scale of a winery directly reflects the company’s strength and business scale. However, in the context of baijiu going overseas, this logic has changed significantly. The acceptance and sales logic of liquor in overseas markets are very different from those in China, and they face many challenges, making it difficult to achieve large-scale sales growth.

There are mainly three different routes for Chinese liquor to go overseas. First of all, it is a tasting session for the high-end circle, which is mainly suitable for well-known domestic brands such as Moutai, Wuliangye, etc. These brands are mainly sold to overseas Chinese groups and duty-free shop channels through tasting activities overseas. However, this method is more like a reverse brand marketing operation. The main purpose is to open up the high-end Chinese circle and generate positive feedback to the domestic market.

Secondly, it is a taste adjustment strategy for overseas middle-class consumers. In order to cater to the taste preferences of the local market, Chinese liquor may need to adjust its original taste and produce “mixed drinks” that are more suitable for the local market. However, this strategy is mainly suitable for Chinese liquor with a relatively light taste, and may not be suitable for specific types of liquor such as Maotai-flavor liquor.

Finally, it is the low-price strategy that opens up the foreign low-end alcohol product market. In some markets that do not have high requirements for wine quality but high alcohol content, or markets with a large demand for low-priced wines, Chinese liquor can be sold through a low-price strategy. But this approach may not be in line with China’s liquor brand image and long-term development strategy.

It is worth noting that there is a significant difference in cost between exporting alcoholic products overseas and exporting tea products overseas. Different countries have large differences in the import and export tax costs of alcohol products, which may have a greater impact on the overseas market layout of liquor. In contrast, the main challenges for tea products going overseas lie in brand building and increasing added value.

Compared with the acceptance of alcoholic products in overseas markets, Chinese tea has indeed gained higher recognition. This may be due to the significant differences in cultural background, taste preferences and consumption habits between tea and wine.

Chinese tea occupies an important position in the global tea market, and about 40% of the world’s tea is produced in China. However, despite the huge export volume, most of the tea is exported in the form of raw materials without undergoing deep processing or brand packaging, so it does not receive the corresponding brand premium. On the contrary, these teas re-enter the market at higher prices after being processed, packaged and branded by foreign brands, and even flow back to the Chinese market.

In overseas markets, the main challenges faced by Chinese tea include technical operational barriers and cultural differences. The traditional way of making tea emphasizes experience and feeling, involving complex tea making techniques, water temperature control, tea set selection and other factors, which makes it difficult to standardize and quantify Chinese tea culture when exporting. In contrast, Western tea bag brands such as TWG focus on efficiency and speed to meet consumers’ needs for convenience.

However, some Chinese tea brands have begun to innovate and adjust in overseas markets. They promote Chinese tea in a way that is more suitable for overseas market needs through improved packaging and product innovation. For example, some brands have launched lightweight packaging with Chinese cultural characteristics, which is easy to carry and serve as souvenirs; at the same time, they have also developed a variety of functional brewed teas to meet the tastes and needs of different consumers.

In terms of promotion strategies, Chinese tea brands need to pay more attention to brand localization and education market. This means that they need to deeply understand the needs and emotional values ​​of overseas consumers, and enhance brand recognition and acceptance through localized marketing strategies and integration with local culture. At the same time, they also need to popularize the knowledge of Chinese tea culture to overseas consumers through various channels and enhance their awareness and interest in Chinese tea.

In short, although Chinese tea has gained a certain degree of recognition in overseas markets, it still needs continuous brand innovation and market adjustment to adapt to the market needs and cultural backgrounds of different countries and regions. By increasing brand premium, achieving standardization and quantification, and strengthening cultural promotion, Chinese tea is expected to further expand its share and influence in overseas markets in the future.