2013July 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

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

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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

Ju ly 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.

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?

Impact for profitability of Chinese Baijiu companiesExpect 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.

Ju ly 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