In China, a country better known for its own local variety of fiery spirits–baijiu, wine has yet to become the alcoholic beverage of choice. According to recent market research, wine is still being introduced to the country, with most buyers having limited knowledge about what constitutes a good wine. Chinese consumers take other factors into account, like pricing, where the wine is sold as well as professional advice offered by on-site sommeliers. In fact, the first wine shops in China looked more like exhibition halls rather than retail stores.
French wine was the first to arrive. Right at the beginning of the economic reform that would put the country in the center of the international economic scene. Remy Martin came to the mainland to set up the first joint venture in Tianjin – Dynasty Wine Ltd. However, most of the products were sold abroad due to the low income of the Chinese population.
The financial landscape has changed dramatically since then. An industry report put the scale of wine retail in China at RMB 78 billion (approx. USD 11 billion) in 2015 with imported wines accounting for RMB 26 billion (approx. USD 3.7 billion) and the number of potential consumers able to afford the beverage was estimated at 200 million people. China is forecasted to become the world’s largest wine market by 2020, reaching US$21 billion in value. Data from customs show a continuous rise in imported wines: in 2016, 638 million liters of wine were imported into the country.
Recent years have seen a substantial shift from local alcoholic beverages, like baijiu, to wine – and even more so, imported wine. While wines from well-known and prestigious wine-making regions like Bordeaux continue to be the favorites, many wine drinkers are bypassing conventional best-sellers and delving into lesser-known regions like New Zealand, Australia, and South Africa.
Another shift is the average price per bottle. As import taxes on are lower, retail prices are lower as well. And with wine drinking becoming an affordable hobby, rather than an unattainable luxury, there is a noticeable transition to higher volumes and lower prices.
The imported wine market in China is still highly fragmented, mostly represented through small importing companies focusing on a single city. But with the new market developments, this may change as well
Tom Morris, co-founder of Shanghai-based wine importer LaoWines, in his interview to china-briefing.com predicts that “smaller importers will join forces through mergers and acquisitions” to be able to better compete on price, with Euromonitor highlighting that price competition and discounting will be the key trends in the coming years.
Local wines are also entering the scene with fruit varieties like plum and litchi wines becoming increasingly popular and receiving a positive reception at international wine exhibitions.
Though China has more vineyards than France, its grapes are mostly sold as fruit. But with a powerful resource base, wine production in China can potentially increase, lowering its reliance on imported beverages. Currently, Asia’s dependence on imported wines is still strong with 1.19 billion bottles of imported wine estimated to have been consumed in Asia (most of it in China) by the end of 2017.
Sales channels: offline. vs. online
Brick and mortar wine stores are aplenty in 1st tier cities in China. Large wine agencies like Everwines, Aussino, and Ruby Red welcome potential buyers with posh interiors, famous brand names, comfortable seating, wine sampling and complimentary snacks. Both 1st and 2nd tier city residents have access to smaller retailers like the Japanese Enoteca and Watson’s Wine Cellar selling mid to high-end wines. Domestic retailers take the lead in 2nd and 3rd tier cities with the local wine retailer E-Jiujiajiu having 23 outlets in the city of Hangzhou.
Low to mid-level wines are sold in international supermarkets like Carrefour and City Super while more expensive varieties can be found on the shelves of boutique supermarkets like Ole’.
With a highly developed e-commerce infrastructure, it’s no surprise that a lot of China’s wine shopping is done online. Shanghai-based YesMyWine.com praises itself on being the world’s largest online wine retailer with over 1 million registered users while the online marketplace JD.com estimates its sales of imported alcoholic beverages to total at more than RMB 10.5 billion in 2017. Despite its popularity, online wine shopping does have its challenges: inability to sample wines before buying, delivery problems and the risk of getting a fake product are just some of the issues voiced by shoppers.
As wine consumption grows, so will the desire among Chinese consumers to understand and appreciate good wine. Experts predict that associated industries like wine tourism, wine clubs, and wine education are being viewed as highly promising sectors given the anticipated strong growth in wine consumption and sophistication among Chinese consumers.
About us: Mersol & Luo is a Hong Kong-based market strategy consultancy that helps producers of alcoholic beverages bring their products to the largest consumer market in Asia: Greater China. Services include: finding local distributors, delivering top quality market intelligence, helping meet regulatory requirements, designing and managing winning brand localization strategies and marketing campaigns.