China’s Spirits Market: Stabilisation Signals, but the Rebound Remains Uneven

Frederic Noyere and Ed Mundy at Jeffries

Frederic Noyere, Managing Director at Jebsen Beverage, a Tier 1 distributor in Greater China, recently joined Jefferies for a call hosted by Ed Mundy, European Beverages Analyst. The discussion offered a clear picture of a complex market: signs of stabilisation are emerging after several challenging years, but deep structural headwinds remain.

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Signs of Confidence Returning

Consumer confidence in China is slowly rebuilding from the lows of the past few years. While still below pre-COVID levels (now ~90 vs ~120 before the pandemic), it has recovered significantly from a low of ~80. Confidence gains are concentrated among employed consumers, while high savings rates (~30%) and a more stable property sector are laying the groundwork for future demand.

On-trade traffic is recovering gradually. However, the consumption pattern has shifted. Large-volume VIP-led spirits culture has not returned. In its place, a new preference for lower-volume, experience-led drinking has emerged—fuelled by younger consumers, quality-focused venues like speakeasies, and an increase in live house events (albeit still largely beer-dominated).

Home-based occasions are growing in importance. Fast commerce and home entertainment now offer near on-trade quality at a lower cost. These dynamics are reinforcing home consumption as a mainstream drinking occasion, with pricing and convenience outpacing status signalling.

Premium Is Growing. But Not at the Top End

Standard and premium spirits are showing solid growth. Brands such as Jameson, Absolut and Jim Beam are seeing double-digit expansion, thanks to accessible price points and relevance in new drinking occasions. In contrast, super and ultra-premium segments, especially aged malts and XO cognacs, remain subdued. Sales are soft, pricing is volatile, and concerns about parallel imports persist.

Inventory trends also reflect this two-speed market. Standard and premium inventories have largely normalised. Super and ultra-premium levels remain elevated due to slow sell-through, and this imbalance is expected to continue through the Chinese New Year.

Pricing Stays Flat Despite Cost Pressures

Tariff changes and minimum transfer pricing policies have increased import costs. Spirit tariffs doubled to 10 per cent on 1 January 2025, while minimum transfer pricing began in summer 2025. However, market prices have remained essentially flat for the past two years, particularly at the high end. XO pricing is notably fragile.

There is some relief: duties on Scotch were halved from 10% to 5% as of 2 February 2026, which could support entry-level Scotch in the year ahead.

Brand-Level Outlook: Winners and Pressures

Pernod Ricard appears well placed due to its multi-category approach. Standard and premium brands such as Jameson and Absolut are performing strongly. Within cognac, Martell Noblige and VSOP continue to outperform the more challenged XO and Cordon Bleu segments, which remain exposed to underperforming traditional on-trade channels.

Rémy Cointreau is more focused on cognac and benefits from a younger mix (VSOP+ and Club) and a strong ecommerce channel. However, it is underweight in on-trade, and Louis XIII remains weak—mainly due to political caution rather than affordability.

LVMH’s Hennessy is under pressure. It has lost share to Martell and Rémy and is now the number three brand in China. A recent leadership shift from HR to MD indicates internal restructuring. The business model remains relatively traditional and slower to adapt.

Diageo operates through four fragmented RTMs (ABI, MHD, Shui Jing Fang and Diageo China). Limited synergies suggest that exiting the Shui Jing Fang joint venture would not be disruptive. In the long term, the company appears more focused on local whisky as a growth opportunity than on expanding further into baijiu.

Among emerging players, Suntory, Bacardi and Jack Daniel’s are positioned to outperform in 2026. Their portfolios align well with local tastes, and pricing remains competitive in the mainstream segments.

2026 Outlook: Flat Base Case, Divergent Scenarios

The base case for 2026 sees the spirits market broadly flat. Standard spirits are expected to remain strong, premium spirits modestly positive, while the super- and ultra-premium categories, including cognac, continue to face challenges. Entry-level Scotch is likely to benefit from tariff cuts, while southern regions of China may outperform due to more vigorous consumer activity.

In a bull case, a further lift in consumer confidence, improved traffic, and growth in home occasions could drive a broader rebound and help stabilise XO. In a bear case, persistent unemployment, renewed pressure on the property sector, and continued overstocking at the high end would deepen challenges, particularly for super-premium segments.

Our Point of View

The idea of a sweeping luxury rebound in China is misleading. The Chinese consumer is not returning in familiar form; instead, they are re-emerging with new expectations, behaviours, and constraints.

Many luxury executives hope that government stimulus, rising consumer confidence, and “quality consumption” policies will drive a renewed boom. But double-digit growth, landmark flagships in tier-one cities and Golden Week shopping frenzies are no longer the norm.

The real question is not when China will come back, but which version of China brands are preparing for.

The market is fragmenting. Older consumers remain cautious, prioritising savings and security. Younger buyers are drawn to cultural relevance and authenticity over heritage.

Domestic brands are gaining traction by speaking to these shifts more fluently, reflecting new values rather than imitating Western cues. Quality is being redefined around local aesthetics, not legacy. Pricing power, symbolic storefronts and legacy campaigns are no longer sufficient.

Meanwhile, emerging cities are showing intense interest in luxury, but with distinct expectations and unfamiliar rules. For Western brands, three strategic shifts are now essential:

1. Move on from the pre-COVID playbook.

2. Rebuild desire through significance, not just status, and understand the new shape of aspiration: individual expression over inherited prestige.

3. China still matters, but the framework has changed. Influence remains, but the narrative is no longer written abroad.