The wine market in China in 2014!
It has been a while since Marketing to China had not written an article about Chinese wine …
Let me first tell you about the events that marked the wine industry in China.
China is becoming the first consumer of red wine worlwide!
The Middle Kingdom is the fifth largest consumer of wine in general, including the so-called still wines and sparkling wines, far behind the United States, France and Italy.
China became the first consumer of red wine in the world and dethroned France, according to the study “Vinexpo”. With 1.865 billion bottles consumed in 2013, an increase of 136% compared to 2008, China “including Hong Kong” now lies before France, Italy, the USA and Germany according to the Figaro.
On the 22nd of April 2014, Fleur Pellerin, French State Secretary for Foreign Trade signed a declaration supporting the traceability and authenticity on the exports of French wine and spirits to China. The same day, the minister in charge of promoting tourism and French overseas signed a declaration of intent in enhancing the traceability and authenticity of the French wine and spirits in China.
The signing follows a commitment by the French customs and indirect taxation authorities (DGDDI), in coopeartion with partner authorities and the French wine industry.
More specifically, the Chinese authorities will have access to extracts from electronic administrative records (DAE) to verify the authenticity of French wines arriving in China. This information is intended to assist the Chinese authorities in their efforts to fight against forgery (PDO-PGI theft, counterfeiting, etc…).
Source: French Customs
Exports of Bordeaux in China dropped
China is responsible for the 28% plunge in the exports of Bordeaux wines during the first half of 2014, according to the Federation of Exporters of Wines and Spirits (CFTS). A decline caused by the fall of the Chinese market, highly demanding for fine wines and first customer of Bordeaux in recent years. Bordeaux has experienced strong growth in China with very good promotion throughout the country.
The law against corruption in China
The big change is the new law enacted by the central government in Beijing against corruption.
The targets are:
- lavish spendings in wines and spirits at official banquets .
- gifts considered as excessive, such as classified Grands Crus
- To decline the officials attendance to entertainment establishments such as KTV, Grand restaurant, along with declining the consumption of classified Grands Crus.
Most of the French large winemaking houses benefited from the consumption bubble created by the officials. Today both distributors and importers that had bet on the “governmental” strong distribution are found lacking.
Many actors of the wine market had enjoyed the explosion of wine exports to the Middle Kingdom between 2007 and 2012, jumping 168% in value and 231% by volume. Today they it is time for them to change their strategies, giving up on the super margins.
Low prices or a recognized brand
The most significant changes are observed in the Chinese daily consumption. The new world wines are gaining more and more favor with Chinese customers through lower prices, fruity taste and a more original packaging… The market has good growth prospects. With the spread of the culture of wine and the increase in the consumers’s standard of living, the ‘noble’ wines gradually enter into the lives of common people, especially among the young consumers target aged from 20 to 30 years, with purchasing power, and the good news is ‘common Chinese consumption’ grows.
Explanation of Li Jiang, a player in the wine in China “The Chinese wine market is still at an early stage, Brand and reputation are really significant to the consumers, which makes it impossible for new brands of wine to acquire these two factors in a short-term period.”
It is necessary to develop a brand if you want to avoid continuous fighting on the price, he explains to Vinexpo at a conference.
The wine consumed in China could reach 1.38 billion bottles in 2014, but the consumption per person is only about one bottle.
Catherine Etchart, director of SOPEXA said: “The wine market in China is booming and still has huge potential It is a market for everyone.”.
The growth of eCommerce
Ecommerce increases in all sectors in China, wine is no exception to this phenomenon. The problem remains for brands that have their prices cut on retail sites, this can be a negative aspect to the distributors networks.
Actors on the Chinese wine market are arriving on the high-end wine Market
Businesses in the wine industry in China mainly manufactured medium and low-end wines, but they are now developing on the “upscale” segment.
For example, the Chinese food industry leader COFCO, purchased the “Château de Viaud” in France, following the acquisition of a château in Chile and in Australia last year.
Besides, Changyu accelerated its internationalization strategy by cooperating with foreign châteaux.
Dynasty also plans to purchase foreign châteaux. After its acquisition of vineyards in six quality wine regions of the country.