ZJLD Group, Hong Kong’s first listed producer of baijiu, the traditional alcoholic drink, is betting on its niche products to grow market share in China as it seeks to compete with bigger rivals.
Baijiu is the world’s most consumed liquor, although very little is found outside the country. It is distilled from grain such as sorghum or rice, with addition of sticky rice, wheat or corn, and it has a high alcoholcontent ranging from 35 to 55%.
The Rmb 600 billion (US$83.2 billion) market has nearly 1,000 players, as such product differentiation is the key to success in this market. “There is considerable market gap in many parts of China in which ZJLD needs to fill-up,” said Guo Liang, General Manager of ZJLD.
ZJLD has already established around 150 bases across the country to further expand the market in provinces such as Henan, Shandong and Guangdong.
Baijiu products fall into 4 primary categories or aromas namely strong aroma, sauce aroma, light aroma and rice aroma. ZJLD’s strategy is to squeeze the share of other aromas in different provinces instead of competing with other sauce-aroma brands, according to Guo. He said, “Sauce aroma potential is still huge in various provinces. Therefore, we don’t have to ‘fight until the death’. What we need to do is to fight for shares of other aromas’ brands.”
Baijiu is the dominant alcoholic drinks category in China with 69.5% share in value terms in 2021. For the Chinese people, baijiu is not only an alcoholic drink, but also a cultural heritage drank during special occasions. There is a growing demand for premium and deluxe baijiu products as disposable incomes increase in the cities.
Presently, ZJLD ranked 4th among the privately-owned baijiu makers in China in 2021 and its 4 major brands include Zhen Jiu (65%), Li Du (15%), Xiang Jiao (12%) and Kai Kou Xiao (6%) respectively. Its main products Zhen Jiu and Li Du saw a decline in sales in 2022, however this is considered only a temporary setback due to existing market condition.
ZJLD is expected to continue expanding its market share in China. According to Zhang Yi, Chief Analyst with Guangzhou-based iiMedia Research, sauce-aroma baijiu has the potential to capture more market from other aromas due to its more important role in China’s business social occasions. ZJLD will focus on its mid-range to high-end products to mainly target SME owners and establish its sauce-aroma brand among this group of consumers. These products can challenge Mao-tai dominance, as the latter is often unaffordable to this group of consumers.
