Exporting wine to China: not for everybody!

New Zealand being an exporting nation for its wine as for most of its agricultural products, it was not surprising to see that the Chinese market was a hot topic at the 2010 wine business conference held in Hawke’s Bay June 29-30. Many participants were looking at the huge market opportunities that Chinese consumers represent.  Lawrie Stanford, Wine Industry Analyst based in South Australia, offered a thorough review of the current wine market in China as well as the challenges and opportunities for exporters wishing to establish themselves in China.

Lawrie’s  key messages were:

  • China is big, but not a monolith _ diversity and niches are key. Only few regions have the infrastructure to support wine imports and distribution. Four main centres include Beijing, Shanghai, Guangzhou, Shenzen and take a 38% of the urban GDP.
  • Wine awareness is low – wine education will open up the market: For most Chinese consumers, wine is grain based and mainly rice wine. Introductions of wines made from grapes require some education and change of consumption habits.
  • Wine in china is predominantly red, low value and local. China is a beer drinking country. Most of the imported wines have targeted the ultra-premium market. For Chinese consumers grape wine is by definition red and from France (i.e. Bordeaux)
  • In a polarized market, a smaller high value segment exists. Wine has a positive image; it conveys prestige and health attributes related to red wine are favorable to Chinese consumers
     
  • High value wines and imports are expected to grow. However, it is also expected that local wines will improved in quality satisfying the local demand. Will Chinese wine flood the global market one day? Some experts are indeed concerned.
  • The relative small import sector is crowded: In volume, Chile is the biggest importer whereas in value France is.
  • The route to market can be difficult. Business rules are different and require adapting to the local culture and practices. Having a local associate helps make the route to a deal smoother.
  • Local culture, relationships and identifying the target consumer are essential. The emerging wine drinkers are the younger generation. The “Trail Blazers” or the Millenials as we would call them represent 300 millions + of individuals. The Little emperors, the youngsters aged less than 15 year olds will have high level of disposable income and will likely be receptive to wine in their adulthood.
  • It’s not a market for everybody. From 1999 to 2008, 70 countries have attempted to export wines in China. In 2008, only 50 are still in the “ring” (According to USDA).

What do we know about Chinese wine consumers?

A recent study conducted by the Australian Wine Research Institute showed that the majority of Chinese consumers preferred sweeter wines with less strong aromas and flavours. When asked which type of wine they like the most, Chinese respondents indicated that they preferred Bordeaux wine style, made by Mouton Cadet (Brand), from France (country), with a bright and fruity style and a price higher than 100RMB. This study illustrates the misalignment between what one thinks s/he likes and the true blind preference.  Wine imagery tends to be very strong with new wine consumers, relying on extrinsic cues such as brands or awards to select a bottle of wine.

According to Wine Intelligence, the number of Chinese consumers who could afford to buy imported wine regularly will rise from around 23 mill in 2010 to 80 mill in 2025. Who will capture this market? Canadian wine businesses are familiar with the Chinese market considering that Icewine is a popular wine offered as a gift or poured for celebrations. Although Canadian dry wine production remains small on the global scale, is it unrealistic to think of exporting some of our whites or even reds to China niche markets?

Looking forward to reading your thoughts.

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