The recent decline in the consumption of traditional Chinese baijiu has sparked a noteworthy trend—the rise of "light-bottle liquor." This new phenomenon prompts a compelling question: can this type of liquor, aimed at the mass market, serve as a safety net for the beverage industry as consumer preferences rapidly shift?

Changes in the baijiu market are not simply a matter of declining demand for higher-priced products; they signify deeper transformations. The demographic of baijiu consumers is aging, and there is an increasing pursuit among users for value-priced yet quality products. Simultaneously, younger consumers exhibit diverse and evolving preferences that traditional brands often struggle to meet.

While the established pyramid structure of baijiu—where premium brands sit atop the market—has been stable for years, it is beginning to face unprecedented challenges. The capacity of light-bottle liquor to support one side of the evolving "dumbbell" market structure remains uncertain and is influenced by a multitude of factors.

Light-Bottle Liquor Defies Trends

In the current context of downgrading consumption patterns, light-bottle liquor, defined by its affordability and larger packaging, has captured the attention of a broad consumer base. Businesses tapping into this trend have reported significant growth, with leading companies reaping substantial benefits. For example, Shanxi Fenjiu Co. has found great success with its affordable Guojiao brand, which has resonated well with cost-conscious consumers.

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In the first three quarters of this year alone, the company reported a 26.87% increase in revenue, totaling around 8.54 billion yuan, largely attributed to its bottle liquor and other product lines. The light-bottle category has become a substantial growth source for many regional liquor enterprises as well.

One of the champions of this growth has been the well-known Xifeng liquor. The sales of its iconic high-neck green bottles in Shaanxi have surged approximately 34.6% in early 2024 compared to the same period last year. Such data highlight the positive momentum and adaptability of established brands in response to shifting consumer preferences.

Even brands that traditionally struggle within the high-end segments have found a resurgence through light-bottle products. The once underperforming Laobai Gan liquor has rebounded dramatically, reporting a 33% revenue increase—highest among the A-share liquor sector—in the same timeframe.

Interestingly, new entrants into the liquor sector have also sensed the allure of light-bottle products. A notable example occurred in June when a 500ml light-bottle liquor introduced by the German supermarket chain Aldi sold out rapidly at a price of just 9.9 yuan, igniting widespread discussion on social media platforms regarding price and quality equity. Furthermore, collaboration between prominent retail figures, such as the popular streaming shop Pang Donglai and Baofeng Distillery, produced a co-branded customized liquor that recorded impressive sales, demonstrating the concept's extensive reach.

Moreover, Hema Fresh has enjoyed success with light-bottle sales, reporting a remarkable 60% increase in sales volume in H1 2024. The data from the China Alcoholic Drinks Association reveals that the market for light-bottle liquor achieved an average annual compound growth rate of 14% from 2013 to 2021, far outpacing the industry's overall growth rate. Projections indicate that by 2024, the market will surpass 150 billion yuan. This immense growth opportunity is attracting numerous players eager to carve out a space in the expanding market.

Mid-Range Baijiu Faces Hardship

In stark contrast to light-bottle liquor, the mid-to-high-end baijiu market is currently in a painful adjustment period. Premium varieties face significant price pressures, evidenced by the notable decrease in the wholesale price of famous labels, such as Moutai, which has dropped from 2,700 yuan to below 2,200 yuan per bottle. Similarly, Wuliangye and Guojiao have also seen their prices drop significantly from their original pricing structures, indicating a wider market retraction.

The distress signals are especially pronounced among brands once considered dark horses. The high-end Neicheng series of Jiangjiu liquor witnessed a staggering 60.85% decline in revenue during the first half of the year. Overall, many companies within the mid-to-high-end sector are grappling with plummeting sales, demonstrating a significant shift in consumer demand.

One remarkable player in the industry, Shanxi Fenjiu, has reported impressive gains that seem almost uncorrelated with the broader market trends. Companies like these that successfully leverage light-bottle segments seem well-positioned during these tumultuous times, and their growth rates have markedly outpaced traditional high-end products.

In response to evolving preferences, many high-end brands have begun launching their own light-bottle products. Examples include Wuliangye's Jianzhang Glorious and Luzhou Laojiao’s budget-friendly black cap variations, reflecting an industry shift to adapt to these changes.

Can Light-Bottle Liquor Sustain the Market?

In the wake of the economic downturn in 2015, the value of light-bottle liquor began to stand out. But as the economy rebounds and the trend toward premiumization regains momentum, the relevance of light-bottle products becomes somewhat ambiguous, suggesting that they may need to lower their expectations to compete.

With a clear downward trend in consumption, light-bottle liquor seems poised for growth—provided that it aligns with broader consumer trends. However, understanding the driving factors behind consumer choices is vital. While packaging simplification may draw consumers, the successful products will remain those that also deliver exceptional value. Major brands with product power, production capabilities, and established channels hold a substantial advantage; should they decide to contend for market attention, they could profoundly impact other players.

The story of Niulanshan, dubbed the "King of Light-Bottle Liquor," demonstrates this risk. Despite previously reaching peak sales of 840 million bottles, Niulanshan’s sales have dipped sharply to less than 500 million bottles in 2023.

Amid these uncertainties, Niulanshan attempted to enter the mid-range sector, but due to brand positioning, this pivot has yet to yield significant results. Currently, mid-range and high-end products account for only 16.3% and 14.33% of Niulanshan's overall sales, respectively.

This balancing act between premium and mainstream markets poses a vital challenge for leading companies. For instance, Shanxi Fenjiu leverages its light-bottle lines to grow; however, to enhance product focus, the company has strategically managed the production of its light-bottle series to assist in elevating its higher-end labels.

In a complex market landscape, the evolving preferences of consumers present ongoing challenges for industry participants. In the short term, the overall trajectory for light-bottle liquor appears favorable, yet the associated pressures from diverse fronts loom large. The unfolding situation will determine whether light-bottle products can truly fortify the baijiu market's new "dumbbell" structure, a question that remains open-ended.