With around 40% of China’s wine being imported, foreign wineries and wine distributors have been presented with an enormous opportunity for expansion. The market appears to be maturing, too, which signals the end of more experimental purchases in lower quality products and a shift in the market focus to high quality wines that serve a more luxury-oriented consumer mindset.
With opportunities abundant in Chinese wine markets, many companies are starting to consider not only how to enter China quickly and compliantly as a foreign company, but also how to promote and market their wines once they get there.
In this article, we share strategies and recommendations for making the most of this lucrative market.
Key Market Statistics
It is no secret that the Chinese wine market is booming. But what do the statistics say? According to China Wine Competition:
The wine consumption in China is expected to rise by over one third to $23 billion throughout the following five years when it will reach a volume of 192 million cases.
In 2018, the imported wine in China was valued at approximately EUR 2.5 billion. ISWR has predicted that wine imports in China will increase by 8% in 2019.
As of 2019, the top ten wine-producing countries leading imports into China are:
- France – import value US$1.058 billion
- Australia – import value US$723.25 million
- Chile – import value US$269.7 million
- Italy – import value US$168.4 million
- Spain – import value US$162.1 million
- USA – import value US$75.5 million
- South Africa – import value US$32.9 million
- New Zealand – import value US$28.77 million
- Argentina – import value US$26.18 million
- Germany – import value US$25.8 million
How to Promote and Market Wines in China
Digital Communication and Social Networks
The Chinese population is renowned for its love for new technology. In fact, many could not do without their smartphones and have been using social media networks heavily. Indeed, according to statistics, by 2017 over 772 million people in the People’s Republic of China had access to the internet. The record also shows that in 2014, of the 2.9 billion internet users in the world, 20% were from China. The vast majority of people accessing the internet do so through their smartphones.
What makes this phenomenon even more interesting is the fact that China has banned numerous social media websites, including the most popular ones like Facebook, Twitter, YouTube, and Instagram to name a few. Instead, China developed its own microblogging sites such as:
Statistics showed that as of 2016, there are 889 million users of WeChat. It is now used not only by the Chinese population but even by other nationalities, mostly those communicating with somebody residing in China.
WeChat is currently the 5th leading social network worldwide in terms of active users. This medium allows for a more confidential means to communicate.
Created in 2009, Weibo, which is Chinese for “microblog,” is a hybrid form of both Twitter and Facebook. The company reported that it now has 340 million active users monthly, with 254 million using it daily. Of the total number of users, 91% utilize their mobile phones to access Weibo.
Though social media networks like these, wine brands and products can be effectively promoted and marketed in China. Awareness and education about the wine brand are important. Since the Chinese are avid followers of specialized websites, it will benefit wine companies to introduce their brands to them through microblogging and other social sites.
Weibo, for one, has attracted considerable interest from the French wine industry. With the help of SOPEXA and through each company’s own initiative, French wineries now have their own Weibo pages, which have tens of thousands of Chinese followers. They include, among others, the following:
- Bordeaux winery Château Brane-Cantenac
- Conseil Interprofessionel du Vins de Bordeaux (CIVB)
- Les Huit de Loire
- JX Bordeaux
- Moët & Chandon
- Bergerac group
- wines of Provence
- Rhone Valley wines
In order to amplify the brand’s impact on the web, SOPEXA’s strategy was to engage opinion leaders and experts in wines, spirits, and gastronomy, and organize wine tasting events. These experts typically have millions of followers online, thus allowing for virtually free advertising that generates a snowball effect in other marketing efforts.
What is more, the impact of this networking is showing in tourism. Along with being a popular destination for wine fans, Toulouse is one of the most attractive cities in France for Chinese students. In response, the French Chamber of Commerce and Industry in China has recommended the organization of wine-related events, such as harvest day, wine tasting, etc., to allow for the promotion of wines in Southwest France via Weibo.
Opportunities like this are widespread and boost to bottom lines can be achieved rapidly when Chinese social media is employed effectively by wineries and wine distributors.
Partner with the Right People
To stand out in the Chinese wine markets, you need to position yourself as a true expert in wine.
One effective way to do this is to position key members of the company as thought leaders. In China, 10% of people influence 90% of the population, so it is important both to have your company participate in thought leadership and to partner with influencers, who are able to skyrocket your sales by putting you in front of millions of people online.
If influencers are outside your budget, you can demonstrate your expertise by using a wine expert in your advertising materials. For example, you can hire a French wine expert to appear in your ads.
One way to make the most out of your content marketing efforts is to use video, and make sure to feature a sommelier. The Chinese are more open to multimedia and more responsive to it than many other peoples, so this presents a great opportunity. Use your spokesperson to tell a story about the history of wine since oral history is such a strong part of the Chinese tradition.
Participate in the Best Wine Shows in China
It is easy to get lost in the jungle of wine events in China. Contradictory information and confusion may arise from this. The country holds numerous wine tasting, winery tours, wine shows, and has various wine salons, showrooms, shops, and events. The cities of Shanghai, Beijing, Chengdu, Guanxi and, of course, Hong Kong are renowned for holding these wine events.
To promote your brand most effectively, find the events that are the most popular. The best include:
- Top Wine in Beijing
- SIAL, Prowein, and Vinisud in Shanghai
- Vinexpo Hong Kong
- Tang Jiu Hui in Chengdu
Of the abovementioned wine shows, the Tang Jiu Hui show is a unanimous favorite mainly since it is already well-established in China. It is common for the Chinese importer to invite the foreign wine provider to this event since it is attended by the most prolific wine operators, such as wholesalers, producers, importers, and distributors.
The Tang Jiu Hui show also referred to as the Chengdu Food and Drinks Fair is normally held March of each year in the city of Chengdu, which remains to be unexplored fully by international wine producers. However, the Tang Jiu Hui show serves as a true barometer of the Chinese market for alcoholic beverages. It is attended by operators who prefer not to travel to other events held in other coastal cities as Canton, Shanghai, etc.
This Chengdu Fair is typically held in an area 100,000 sqm in size, allowing 3,000 exhibitors and up to 300,000 visitors. Organizers declared that the revenues acquired from this event amount to about 20 billion RMB (2.5 billion Euros).
Wine Consumers in China – Target Profile and Criteria
Based on a 2013 study conducted by Wine Intelligence, the typical consumer of imported wine in China is male, between 30 and 39 years old, residing in Shanghai, belongs to the middle to upper classes, and earns over 10,000 RMB monthly. He is someone who likes to discover and consume new variants of wine, especially red wine mainly due to its health benefits. He would normally spend 100 and 300 RMB (10 to 35 Euros) per bottle.
Consumption profiles differ enormously according to age. The following age segmentation of wine consumers in China will provide an idea to wine producers in their target market:
- Young people between the ages of 20 and 30 do not hesitate to discover new products. They are the types who seek intoxication provided by the alcohol content in wines while having a festive, informal and friendly consumption on a tight budget that ranges from 60 to 100 RMB per bottle (7 to 12 Euros);
- Chinese consumers between the ages of 30 and 45 have higher purchasing power and prefer to consume red wine on a regular basis, including in restaurants;
- Consumers more than 45 years of age are mostly connoisseurs and wine lovers. They consume wine mainly for the prestige and the image they derive from it. Those in this category do not hesitate to spend a small fortune on a bottle of wine. The budget average for wine consumed at home is 179 RMB (21 Euros) per bottle/Off Trade (wine store), and 219 RMB (26 Euros) per bottle/On-Trade (CHR). This average amount can be greatly distorted by the prices of vintage wines and may exceed considerably during special occasions or business meals.
In 2019, Wine Intelligence’s China Portraits 2019 report identified different groups of consumers, with interesting characteristics that reflect the profiles seen in developed wine markets. Several consumer profiles emerged:
- ‘Health Sippers’ who drink wine for its medicinal benefits.
- ‘Mainstream Casuals’ who drink wine because they have adopted a more casual wine-drinking culture.
- ‘Prestige-seeking Traditionalists’ who used to drink red wine and equate high price with quality, but now who are more equated with ‘Engaged Explorers’, a newly identified profile in the 2019 report, who continue to spend high but explore more often and like to try wines outside of traditional wine categories.
- ‘Status Seekers’ who drink wine to show their social status and spend more on a bottle of wine to increase impressions of that status (some of this group are former ‘Prestige-seeking Traditionalists’).
- ‘Social Newbies’ who drink different wines at various intervals to experiment and help them find the wine they like the most.
- ‘Frugal Occasionals’ who drink infrequently ‘when the price is right’ to purchase.
With regard to purchasing criteria, the origin of the wine and the price of the wine are the main basis. Moreover, depending on the consulting firms, the criteria considered are based on the name, the brand, the label and the shape of the bottle. In descending order importance, the best-known varieties of wine for consumers are as follows:
- Cabernet Sauvignon
- Pinot Noir
At the margin of the profiles presented, it is interesting to report another entirely speculative buying behavior and which concerns only the grands crus. The Liv-ex website now based in London was created a few years ago by two bankers from Hong Kong. The classification of great wines is presented with stock market indices. When a wine is well rated by a renowned critic, the Chinese consumers massively invest in them, which quickly increases the prices of the respective wines. This is a very high-risk market whose prices fluctuate very rapidly.
Different Wine Consumption Habits between North and South China
Despite numerous consumption specificities in different regions of China, China remains – overall – an enthusiastic and prolific consumer of wine. Wine is mostly consumed in big cities located in the North (led by Beijing), East Coast (Shanghai), and South (Canton, Hong Kong) regions of China. This is to be contrasted with other areas, in smaller cities and the west of China, where wine sales struggle to take off.
In Beijing, consumption among the middle class is almost non-existent. This is because the officials and the army are the only the ones who “traditionally” bought wine using the money of the public.
Canton and Shanghai are characteristically more economical and have a large expatriate community. They are home to modern megacities where middle-class individuals consume wine on a regular basis. The climate in these regions is much warmer in the winter, but just as unsustainable during summer, with temperatures close to 40°C. The region is, therefore, more interested in consuming fresh and fruity white wines. The wine market in these regions is still growing. Spirits like Armagnac are more appreciated in South China.
How to Entice the Chinese Consumer
Example of Bordeaux Wine Rebranding for the Chinese Market
As a winemaker or marketer, you have the leverage on what marketing mix to propose in order to adapt to the Chinese market. The study conducted by SOPEXA could be a big help. According to that research, the shape of the bottle was a key element: “Bordeaux” bottles preferably must have high-shoulder, whereas Champagne bottles should be made synonymous with prestige and quality, and are highly appreciated by consumers.
As regards the label, it is advisable to keep them simple, traditional and must show clearly the origin, the signs of quality (AOC) and any awards received. The Chinese appreciate calligraphy-style typography with red and gilded color profiles. The image showed above of the Bordeaux is an example of such labeling. It illustrates a graphical editing made by SOPEXA for a Bordeaux domain. Some producers choose to have their brand translated into Chinese to be more appealing, but this is not, however, a guarantee of success. From the regulatory perspective, labels must be translated into the Chinese language in any case.
Furthermore, given the gift-culture persisting in China, it is advisable to consider the packaging seriously. Wooden crate packaging for a range of wines, particularly premium brands, is an element to consider. It is also wise to consider that Chinese consumers appreciate the sweetness but do not support the bitterness in wines. It is therefore wise to propose fruity red wines. Red wines made by heat treatment seem perfectly adapted to the Chinese target market. An example of a wine that encompasses this sensory profile is the Tarani red wine, which is the most sold in Casal Group stores in China.
To learn more about Asian tastes, check out the book Asian Palate by Jeannie Cho Lee. The author’s website (www.asianpalate.com) includes information on how to choose wine based on Asian cuisine flavors: sweet, sour, salty, bitter and umami.
You may even be interested in reading on how to protect your wine brand from fake wine in China.
The Best-Selling Imported Wines in China
With more than 80% market share, Chinese wines are the leaders in wine sales. Big groups like Changyu and Great Wall-COFCO sell more than 30 million bottles of their entry-level vintage, which is marketed around 60 RMB (7 euros). As far as imported wines are concerned, research carried out by the French Chamber of Commerce and Industry in China (CCIFC) on importers and distributors provided the top 5 best-selling imported wines.
The Top Five Wine in China
No. 1: Roche Mazet – Castel Group (IGP Pays d’Oc). This wine marketed to more than 7 million bottles had a huge success in the Chinese market. It is imported by C & D, who owned the monopoly in the state and civil service market.
No. 2: Legend R – Baron de Rothschild (AOP Bordeaux). This cuvée marketed to more than 5 million bottles is imported exclusively by ASC Fine Wines. Saga and Sheep-Cadet are other brands also represented in the Chinese market. Upon entry of these cuvées on the Chinese market, with the image of Baron de Rothschild, it was strongly penalized for the sales of the Castle Lafitte Rothschild. In 2007, the company Baron of Rothschild SA took 10% stake in the capital of Torres China.
No. 3: Torres – Sangre de Toro (Spain). The Spanish group has sold last year about 6 million bottles of its iconic red wine. Torres has been established in China for many years and completely controls the distribution through a subsidiary, Torres China, which was created in 1997. The group also has sales shops (Everwines) in the big cities of the country.
No. 4: Rawson Retreat – Penfolds – Cabernet Sauvignon (Australia). Following an effective publicity campaign at the national and regional levels, the Australian group met recently a big success in China with more than 3 million bottles marketed from its Cabernet. Strangely, Penfolds, just like Jacob’s Creek, capitalizes on the image of Bordeaux and does not put forward the Shiraz, its flagship grape.
No. 5: Jacob’s Creek – Merlot (Australia). Among the references available on the Chinese market (Merlot, Cabernet Sauvignon, Cabernet-Shiraz), Merlot comes in first with just over 2 million of bottles sold.
Organization of Wine Distribution in an Immature Market
Wine Sales: A Profitable Business without Any Transparency
Like a lot of things in China, the wine market is not transparent, thus rendering it very difficult to acquire accurate and reliable data. The importance of B2B, i.e. wholesale purchases by officials of corporate gifts, remains difficult to evaluate. However, as estimated by SOPEXA, it could represent up to 25% of sales of imported wines, the majority of which are sold in CHR (50%). The remaining part (25%) is marketed in GMS which remains the circuit preferred for distribution of Chinese wines.
The imported wines on the Chinese territory are subject to two taxes applied on the value CIF of goods (value including the cost of purchase, insurance, and transport): the consumption one of 10%; another equivalent to 17% VAT. Following the accession of China to the World Trade Organization (WTO), customs duties applied to wines, especially bottled wines, fell by more than 50 points in four years.
Customs duties for wine are currently 14%. For information purposes, transport from France to China of a 40-foot container could cost about 2,500 Euros plus 2,000 Euros more for customs clearance. As far as margins are concerned, importers generally multiply the starting prices by 3 to 4 times for B2B sales (sale to wholesalers) and by 5 to 10 times in B2C sales (consumer sales).
Margins imposed by the wine merchants and restaurateurs are from 2.5 times to 5 times. A wine that leaves for 2 euros from France is easily found in China at 160 RMB (20 euros). Despite the imported wines in China being widely taxed, the margins are much higher than those in other markets like the USA where the same wine would end up about 9 or 10 US dollars (7 euros).
The distribution in China is also marked by its lack of transparency. Depending on the mode of distribution (e.g. wine store, CHR or e-commerce) and its conditioning (in wooden case or not), the same wine can end up at 100, 200 or even 300 RMB. These tariff issues reflect a profound immaturity of the market. In terms of transparency, e-commerce and some chains of wine shops like Everwines (Torres China), lead the way with margin systems and prices inherited from the European model.
It must be noted that the competence of importers generally leaves something to be desired. Some of them got into the wine business after making a fortune in textiles or in other industries. It is not so rare to find a generic Bordeaux, whether white or red, or of vintages older than 2006, sold at 500 RMB, or close to 60 euros.
Chinese Importers and Their Expectations
Traditionally, the distribution of alcoholic beverages in China rests in the hands of a state-owned company (COFCO), which also imported cereals, oils and food products. Such a monopoly has however relaxed, with many import licenses now allotted to private importer-wholesalers. Currently, the top eight importers in China are as follows:
There is no distributor that can cover the entire territory of China. Therefore, a national approach can only be implemented after a series of agreements with regional distributors, especially regarding exclusivity, is done. While this can give importers confidence and further motivation, acquiring national exclusivity is very difficult. It would be more reasonable and probable to negotiate on the basis of territory.
Most importers are located in areas where there is a strong market, e.g. Beijing, Shanghai, and southern cities. Most of the focus there is on entry-level wines between 1.30 and 1.60 euros (starting price). In this price range, both have been particularly interested in PGIs from Oc, Costières de Nîmes PDOs and all other PDO wines at low prices.
Though not yet fully explored, e-commerce is developing at a fast pace in China and observers expect this to open up new opportunities in China. Organizing wine distribution remains to be an immature market in China. In a visit made by our group of the Everwines (Torres China) in Beijing, it was observed that the wines are presented in a modern way and the prices are high and offered at an international level. Another cellar that was less transparent than the more traditional approach contained French wine without GI and was sold at 458 RMB (55 euros). There were illustrations of flags in the background and the offer is essentially French.
Alibaba broke all online sales records on the occasion of the Singles party. In just 24 hours, the sales figures approached $6 billion. Internet sales now account for only about 5% of wine sales. The main online wine shopping sites are as follows:
- Yes my Wine;
- Fine Wine;
- Fine Wine Pinshang;
- Wine Kee, Taobao; and,
- 360 Buy.
This is certainly very promising. The American giant Amazon, aware of this issue, has launched in September 2013 the sale of wine on its Chinese site. The major reason for this sales boom can be summarized in one word: price. The rates are indeed much more attractive – two to four times cheaper than that at a wine shop.
This can also be explained by the absolute transparency offered by this sales approach. It provides a very competitive distribution method as well as very low delivery costs, which vary from 10 to 15 RMB (around 2 euros). According to Edmond Zhou, an expert at the CCIFC, the next challenge for e-commerce in China will be to ensure ultra-fast delivery to the customer, i.e. less than four hours from the time it was ordered. This revolution may prove risky and detrimental for a large number of importers who have failed to utilize this important digital shift.
The Showrooms of Imported Wines in China
Showrooms are places where the best of the China wine markets are presented. Showrooms of wine imports are widely spread across China. The goal is to promote wines by connecting customers (individuals or wholesalers) with importers. In a visit to Yantai, province of Shandong, our local interlocutors showed us the Yantai Free Port Wine Imported Exhibition and Transaction Center. This immense commercial building, located in the heart of the Yantai Free Zone and composed of several dozen exhibition spaces, aims to become an expert and source across the country.
The transactions carried out involved the stores being directly managed and operated by importers or independent companies, or it could importers a commission. Some of these spaces are from a collective approach, for example, the use of the effigy of wines from New Zealand. The vine-growers who wish to be represented have to make available a hundred samples and adjust their transportation costs to China.
Establishing an Entity for Wine Sales in China
Companies interested in exploiting the opportunities in the China wine markets have a number of options when it comes to the choice of the legal entity.
For most, however, the best approach will be to recruit key staff members at the executive and professional levels and then use a PEO solution to handle all of the administrative aspects of their employment.
A PEO gives winemakers and distributors the opportunity to get staff in place quickly whilst ensuring that all compliance needs are handled. Using a PEO as the Employer of Record in China is more advantageous than using a distributor. For more information about these important services, please get in touch with our consultants who can assist with all aspects and create a bespoke end-to-end employment solution for your needs in China.