China continues to be a powerful driver of the world’s wine growth, with consumption set to increase by over a third to nearly US$23 billion over the next five years.
Currently the fifth-largest wine market in the world, China will become the second largest in value by 2021, surpassed only by the US, according to Vinexpo CEO Guillaume Deglise.
China has also emerged as the seventh largest wine producer in the world, according to Deglise, who was opening the fully-subscribed China Market Conference on the first day of Vinexpo Hong Kong, one of the key events at the premier wine and spirits global gathering, which has this year attracted more than 1,465 exhibitors from around 30 countries.
The conference featured a distinguished line-up of industry experts comprising moderator Don St Pierre, CEO of Vinfolio; and panelists Master of Wine Sarah Heller; Alberto Fernandez, managing partner of Torres China; Mike Hu, president of the FMCG Business Unit of Alibaba’s Tmall; and Tommy Keeling, head of Asia Pacific Research at IWSR.
Changes in the structure of the wine industry in China have seen the previous dominance of a handful of large and established brands such as Margaux, Concha y Toro, Penfold’s and Torres gradually making way for smaller brands, much like the trends seen in the fashion and beauty industries, the panelists noted.
Alberto Fernandez said that while wine producers previously relied heavily on a single importer to represent them, now wholesalers were often going to wine producers directly, changing the nature of the market significantly. However some concerns were expressed that this has made it harder to build brand equity in the China wine market.
“There is definitely interest among Chinese consumers to explore new brands that fit with their lifestyle, but wine producers need to invest in providing more content and engaging with wine influencers and key opinion leaders to create interest in their brands,” said Tmall’s Mike Hu.
He noted that 80 percent of the wines sold on Tmall are for home consumption, and that of these sales, two thirds are to consumers born after 1980. Mike Hu believes that there is a big opportunity for wine producers to create “flagship stores” online, which with the right rich content, interesting stories, conversations with winemakers and so on will build interest, awareness and market share.
It was also noted that home consumption is strong in China because ‘bring your own’ is actually protected by legislation, with restaurants and hotels obliged to allow consumers to bring their own wine to drink.
Sarah Heller MW noted that consumers were being influenced much more by the tastes and opinions of their peer groups through social media WeChat groups than by official resources or wine experts.
“Expert opinion such as Robert Parker scoring is much less influential in China than in other markets in determining wine choice,” she explained.
The importance of wine tourism was also cited, as Chinese consumers are much more likely to buy wines that they have encountered while travelling and can therefore show their friends. China wine tourism to Australia is a particularly strong trend.
In terms of the types of wine, China is still an overwhelmingly red wine market, with white, rose and sparkling wines barely accounting for 20 percent of the market. All panelists agreed this is due to a market resistance to chilled drinks, which are traditionally not seen as very healthy by Chinese consumers. However, Tmalls’s Mike Hu believes that with the increase of online sales of wine, much of which is to younger consumers, this can be overcome.
Geographically, while the first tier cities and coastal cities may still be larger markets, the third and fourth tier cities are actually growing faster – largely as a result of online wine sales which have made wine more accessible further into the country. Culturally, wine drinking is still slower to be adopted in north China than in the rest of the country.
The issue of fake wines was also discussed, and it was agreed that this is still a challenge in the China market. There are still many copycat brands, and because of the lack of consumer wine knowledge, end users might not know the difference.
Alberto Fernandez of Torres China reiterated the need to trademark brands, and also recommended that whole wine regions could also collectively trademark the area’s name to protect their regional brand.
• WBM – Australia’s Wine Business Magazine, has devoted 26 pages to the Chinese market in the May-June issue. To subscribe visit www.wbmonline.com.au/shop