In its restless drive to accumulate decades of wine market evolution and experience within a handful of nanoseconds, China is doing what no leopard ever thought possible. It’s changing its spots and at such a frenetic pace that wine producers and entire wine industries are left wondering what might lurk around the next corner.
Wine businesses need to be more strategic than ever in China – a view confirmed in recently published reports by Wine Intelligence, a research-led strategy consultancy I deeply respect. Here, based on its observations and my experience, are some essentials for wine business success in China.
- Understand the power of the millennials
The emergence and increasing spending power of the millennial generation is driving the increasing size and influence of China’s middle class. This group is driving the 37% increase in sales of imported wine witnessed by the IWSR in 2015. Wine Intelligence (WI) reports around 48 million urban upper middle class imported wine drinkers in China, up from 38 million in 2014. Despite the austerity measures introduced in late 2012, wine is becoming more accessible and affordable to more Chinese households. In its 2016 China Wine Market Landscape survey, WI found that 35% of consumers drank imported wine on a weekly basis compared with 23% the year before.
WI reports that 18-29 year-olds are more experimental in their wine buying and are more likely to choose from lesser known countries and varieties. Unlike their parents’ generation, they are also more likely to drink wine for relaxation rather than for health-related expectations. Millennials are more likely to spend up on wine – with over 80% feeling that wine is reasonably priced – an opinion shared by just 66% of consumers aged between 40-54.
- Online is essential – but a website not necessarily…
With WI reporting that 49% of urban upper-middle class imported wine drinkers buy their wine online – exceeded only by the 61% who buy at specialist wine shops – the online has become considerably more important than a first stop shop for research. Online is now a bigger channel than hypermarkets and department stores in China.
The millennials – plus most people under 60 – live online in China, but not necessarily via the Internet. A presence on WeChat, the ubiquitous and very Chinese social medium, is essential today since it marries all-important peer recommendation with an avenue to purchase. All without having to visit a website – which Chinese are becoming ever less willing to do.
- Different tier, different customers
Generally speaking, inhabitants of lower tier cities are likely to have lower incomes and are less likely to have sophisticated wine knowledge. They are more likely to make purchases based on face and prestige, to choose from a narrower range and are generally more risk-averse. This might mean buying wines with more traditional label designs and seeking third-party recommendations. Education is an important factor here.
On the other hand, consumers in high-tier cities are more likely to take a risk, trying new and different wines frequently. They need to have their curiosity satisfied.
- Invest in brand
Brand recognition, region of origin and wine style or variety are the three most important cues in buying wine in China. Brand Australia is strong, second only to France. 38% of wine drinkers claim to have purchased a bottle of Australian wine in the last 3 months.
With WI saying that 19% of drinkers claim to have purchased a bottle of Penfolds in the last 3 months, it is the leading imported wine brand in China. Penfolds also rates number one in China for brands ‘for people like me’ and as a brand people would recommend to others.
The three most important non-Chinese brands in the China wine market are all Australian, with Penfolds, Jacob’s Creek and YellowTail listed as 3-5 behind Changyu and Great Wall in terms of the number of people who have purchased their wines within the past three months.
- Respect the Chinese taste
WI’s research pinpoints a decline in popularity of Italian wine. Anecdotally, it’s becoming clearer that Chinese wine drinkers take less readily to the leaner structure and high acid profile of many Italian reds. Those wishing to sell high volumes of wine in China should note that the preference for (red) wine in the lower end of the market tends towards ripe, juicy, full-flavoured and slightly sweet reds with soft acids and smooth tannins.
