Liquor industry banks on surge in online sales

Companies ink deals with big e-commerce websites

As the liquor industry continues to experience a market slowdown, more manufacturers are focusing on online sales and forging ties with e-commerce websites, industry insiders said.

At the recent annual liquor expo in Guiyang, capital of Guizhou province, leading companies from home and abroad called for more comprehensive cooperation between both sides.

Chen Zeming, head of the Guizhou Liquor Association, said that although sales figures remain low across the board, online sales are bound to play a big role in reviving the liquor industry.

According to a China Alcoholic Drinks Association report, the industry's total output was 845.3 billion yuan ($137.3 billion) in 2013. The value of online sales accounted for 7.3 billion yuan, almost double the number for 2012.

The number of liquor shopping websites also have increased dramatically. While JiuXian.com leads the sector, with 42 percent of the market, sites like Tmall.com and JD.com are increasingly a factor.

Huang Bei, general manager of Guizhou Baijiuhui, an Internet platform that focuses on high-end liquor, said the Web is becoming one of the most effective ways for liquor manufacturers to expand their sales.

Take Kweichow Moutai, for example. Huang said the maker of China's most famous white spirit suffered significantly from the central government's anti-corruption campaign. So it changed its focus from government and military consumption to individuals and corporate groups.

"This is why online sales are so important, because compared with purchasing liquor from retail stores, ordering it online is very convenient," Huang said, adding that online sales also offer more choices to shoppers.

According to the official website of Kweichow Moutai Co Ltd, more than 3,000 deals were made online last year, for a total value of 10 million yuan, while Xi Jiu, another brand under the Moutai group, did 530 million yuan in online sales in 2013.

Liu Zili, general manager of Moutai, said the Internet will be the focus of a major marketing push by the company. The company has invested over 100 million yuan to establish its own e-commerce company, he said.

Foreign liquor companies also are showing interest in the Web, especially after US-based e-commerce giant Amazon.com announced the launch of a cross-regional delivery service, in which Chinese buyers can receive orders in seven to 10 days.

Allen Hallerman, sales manager for the US-based 16 Area Wine Co Ltd, said for foreign liquor companies seeking to expand into China, having a good distribution partner is crucial.

"Currently, my company is operating over 20 American brands in many cities of south China, and it is hard to find a distributor that fits our requirement when we expand to a new city," he said.

"If online sales can turn the same profit as we get from a distributor, it would be a great way to lower the company's costs," Hallerman said.

Jared Gorez, assistant manager of Pillitteri Estates Winery, a Canadian company that deals in high-end ice wine, believes moves like Amazon's will help foreign wine companies enter China's market but said there are still many obstacles.

"The biggest problem with online sales is anybody can post a picture of a product, but what the customer receives in the mail might be different," he said.