Perspectives on the Wine Industry in China
2014 Chinese Wine Market Overview
The Wine Industry has experienced a sudden and broad expansion over the past decade, displaying over 30% of annual growth. Starting from almost nothing, Chinese wine market is now breaking records: 5th largest producer, 5th biggest consumer of wines and 1st for red wines. This fast growing market has so far been a godsend for foreign producers, who have benefited from the Chinese eagerness for foreign brands.
The total wine market has been valued at US$ 1.56 billion in 2014, for a total volume of 1,400 million liters wine sold. The market has, however, shrunk by 2.5% this year, as a possible consequence of Xi Jinping’s anti-corruption policy.
Even though the total market has recently lost its past momentum, the consumption per capita has kept on rising, reaching 1.5Litre per person and per year. This rate is still much lower than in most developed countries, with France topping at 52Litre/person/year and a global average at 3.5Litre/person/year. As a consequence, despite this year’s slow-down, the market is still promising.
In 2014, Chinese have had a predominant taste for red wines, the color being associated with happiness and prosperity while white means death. The consequence of this cultural trait is striking: red wines market accounts for 90% of the total market and white wines only for 8%.
It is interesting to note that Chinese still have a poor knowledge in wine tasting. Therefore, wine bottles are rather purchased as a symbolic gift rather than as a (luxury) consumption good. It directly impacts the price strategy, as perceived quality is strongly linked to higher prices, and the consumers being unable to assess it through other characteristics.
Local production supplies about 80% of the demand while 20% is imported. Domestic production shouldn’t be underestimated as it is gaining worldwide acknowledgement for superior quality. Local producers are, however, aiming at mid to low prices, compared to imports that are mostly sold at higher prices. Half of the wines imported are French, their long-lasting and high-quality reputation offering them a natural and decisive advantage on the market.
2020 Wine Market Perspectives
This year’s slight decrease in sales isn’t here to last. According to the latest surveys, the wine market is still expected to grow annually by 11% during the next five years, as wine consumption keeps on worming its way in the Chinese culture, traditionally more oriented towards spirits and beers.
As wine consumption is developing, the way wine is consumed is expected to refine. Traditional Chinese heavy drinking at banquets will tend to decrease while a more sophisticated wine tasting trend will emerge. Wine bottles will be purchased for personal consumption rather than to be offered as a gift. This will tend to normalize the pricing strategy of retailers, forcing them to further correlate their prices to their products’ quality.
However, this change is unlikely to happen quickly, with a risk that consumers looking for quality experiences find themselves lost in front of the products diversity. This uncertainty would raise purchase barriers that companies should try to lower down. A good way to achieve it is to help your consumers to better understand your products: increase your marketing, offer wine tasting lessons, explain why your product is different. The Chinese fondness for Internet is one of the first levers you should aim for: be visible on the different networks used by Chinese.
Chinese tastes for wines will diversify over the next five years. As a consequence of the purpose shift from gift to personal consumption, Chinese will go for new products, offering alternative markets to the current predominant red wine one. According to the latest surveys, white wines market is expected to grow by 69% while red wines one only by 53%.
In the same time, there will be a growing demand for middle-price wines (US$ 5-20): this market is expected to increase by about 65% over the next 5 years, while lower and higher price wines will face slower growth, with respectively -7% and +24%. Note, however, that the niche market of very expensive wines will still grow by 60%.