Wine in China – how the market looks now

China is the largest market for red wine and is soon to be one of the largest producers of wine in the world despite not even having a real word for “wine” in the language. The craze for what they call “red alcohol” is taking over and China, with all the pitfalls and complications that can only come in a market this size, is finally taking the place wine producers hoped it would.

Here’s a brief summary of what you need to know about the Chinese market:

Consumption:

1)     Size: China is the fifth largest consumer of wine in the world as well as the largest market in the world for red wine. Forecasts predict figures to grow by 34% in the next 5 years. IWSR predicts an increase of 205% in consumption over the period 2008 – 2017. In the Asia Pacific region (in which all markets forecast double digit growth over the next five years), China is the largest market and imported 30.9m cases of wine in 2013. Consumption was 172million 9 litre cases in 2012, a number that is expected to rise to 224million in 2017.

2)     Consumption Pro-capite: China lies in 36th position in terms of pro capita wine consumption with 1.5lt/p.a. whilst France tops the rankings with 50 litres p.a.

3)   Typology of wines: China has seen a rise in consumption of not only red wine, but also white and rose. Sales however increase at the same pace as red and so do not eat into the market share of red wines. 82% of red wine consumed in China is CHINESE wine. (Much of which is blended with bulk wine imported from other countries such as France, Australia, Spain, Chile, Italy and US). Any wine blended with a small proportion of domestic product can then be labeled as Chinese.

4)   Opportunities: There was a slight decrease in consumption in 2013 due to austerity measures imposed by the Chinese government that cut the amount of wine-gifting by government officials. This has lead to a decrease in imports over the first quarter of 2014 as importers look to clear their stocks of wine. Importers claim that although the market has changed, it still presents interesting opportunities for growth as younger consumers turn from beer to wine and consumption in so called ‘second tier’ cities grows.

5)   Technology: Consumers in China are increasingly turning to technology: advertising via mobile phone messaging is very efficient and cost effective, online wine shops are very popular and as recently as 5 years ago, 90% of sales were done in cash whereas nowadays, consumers tend to pay with credit card or wechat.

6)   Thirst for knowledge: In the past, the people who bought wine, weren’t the ones who drank it (they were used as gifts), nowadays, the wine buyers is the wine drinker and is someone who wants to understand more and more about how and where it was produced. However, Wine dinners to be less effective than only a few years ago and producers are now opting for very small private dinners with consumers. In China, the personal aspect is very important and if a person is liked, the products will in turn become popular. During these dinners, guests often use social media to share their experiences thus becoming ambassadors for that brand.

7)   Fake wine: White wines are perceived as being less subject to falsification scams which often hit the headlines and are a worry for prospective buyers. Christies auction house however maintains that false wines are an urban myth and says that out of the tens of thousands of bottles of wines auctioned each year, only a dozen or so present some element of concern. Most of the “fake” wines can be easily spotted and originate from Europe or other Asian countries but not China particularly as China does not have the supply of corks and capsules to be able to make a convincing fake.

Domestic Production:

8)   Economic problems: The numbers of “boutique wineries” in China has grown exponentially over the past decade due to the government’s pro-wine policies. In one region, the government offered tax rebates, preferential bank loans and made it easy to be allocated land. As many took advantage, the government is now bankrupt and the wineries are not able to survive on the market. Wineries that were assisted economically by the government (who was also their main client for wine sales). This is also compounded by the effect of the government’s policy to position Chinese wine in high price brackets before having the quality to match the price tag. The result was that many consumers turned to imported wines and lost their loyalty towards domestic products.

9)   Land laws in China prevent private ownership of land and permission to use the land is only granted for up to 30 years, after this, winery owners are unsure as to what will happen but are ready to take a bet.

10)         Education of enologists in China has increased significantly over the past years and the University of Beijing has a very good programme with many visiting lecturers. However on a like to like basis, at a price range of 50 euro, a bottle of wine from China is unlikely to be of the same standard as wine produced in other countries.

11)         Consumer perceptions of Chinese wines are changing and Simon Tam of Christies auctions hopes to host the first auction dedicated to Chinese wines in the next 5 – 8 years.

12)         The global economic crisis has made the Chinese wine market particularly problematic with the Chinese government imposing austerity measures reducing the amount of hospitality and gift giving by Chinese officials. The result is an enormous amount of containers of wine (predictions range from 10 – 40,000 containers or 50m cases) abandoned at Chinese customs as importers go out of business. No one is quite sure what then happens to this wine, obviously problems of storage affecting quality may come into play but there are also many local distributors that are purchasing some of this wine and then selling it at low prices. This can be an opportunity eliminating the bad importers and leaving the ‘professionals’ to survive.

Complicated? Of course but with this amount of thirsty consumers, there has to be room for everyone…

Wine events – getting the best out of them..

Over the years I’ve been involved in organizing a range of wine events from full on exhibitions with 3 days of milling through the crowds of curious wine drinkers (as opposed to wine lovers) in China to smaller events with strict-ish access for trade only. I’ve seen hundreds of wineries spend thousands of Euros to attend these events, some with great success, others with none. So here’s my list of observations of how to get the best out of an event. It’s just common sense for the most part but you’d be surprised at how many wineries don’t do these things..

1)      Firstly choose your wine event with care. They are the best way to get a foot in the door in new markets giving you the chance to meet trade and press, show your wines and hopefully get a contract. Many of these events produce super glossy materials talking of thousands of visitors when in fact the serious trade contingent in that market totals the number of people standing at the bus stop down the road and not the thousands they’re claiming. Don’t find yourself in an exhibition in a tent without glassware on a lawn with 50 visitors a day. Ask around before you decide where’s best to put your money.

2)      Make sure you know where you’re going and what you need to do. Daft I know but over the years I’ve been asked by people what the weather will be like, what vaccinations they need, if they can drink the water etc.  A bit of background research is easy to do, at least then when you get off the plane you know what’s waiting for you – or at least have a vague idea. I recently had an exhibitor who didn’t realize he needed a visa (by opting to use his own travel agent) to get to India and ended up going to Kathmandu for a day. He  then spent 12 hours in Indian transfer area of an airport and missed the event completely.

3)      Know the local culture. For example there’s not much sense in going to India and talking about how well your wine matches with roast beef when 30% of the population is vegetarian. Rather think of which dishes your wines would pair well with or which spices resound its qualities. It’s common sense but have an idea of who it is your consumers are and how and when they consume your wine…

4)      Get a list of the importers before you go and start a dialogue. Once an exhibitor complained to me that over a 3 day exhibition they’d not met anyone, when asked the question – but did you try to organise any appointments? They were left rather baffled. Times have changed, everyone’s fighting to get noticed so you got to work at it rather than just standing with a bottle in your hand.

5)      Get your materials translated into the local language  – and well. As a English mother tongue speaker, I cringe when I read some of the materials which I see wafted around by my exhibitors. Ok you might be able to speak passable English when selling the wine, but you need to leave your contacts something that they’ll be able to understand and that they’ll then be able to transmit to their customers easily without your hand gestures to help them understand your message.

6)      Take a good range of wines with you (if you have the luxury of choice) and make sure that they appeal to the local market. Find out what sells well in that market and make sure – if you can – that you have it on your table.

7)      Arrive a day early if possible so you can understand where you are and also hopefully avoid unforeseen delays. This’ll give you time to see the city and read a local paper to have an idea as to where the buzz in the place is. It’s all about having an idea about where you are.  Also I recently had a problem with a group of exhibitors who got stuck on a plane due to fog and ended up missing the gala dinner. I had a room with half the exhibitors missing, they didn’t get chance to meet the press and VIPS that were there. Disaster but one that resulted from cutting it too tight. .

8)      Look interesting. Perhaps this is the most obvious of all, but a smile works wonders. I’ve had exhibitors complain that no-one was talking to them but they were sitting with their backs turned, and chatting amongst themselves. Obviously unless someone really wants to taste that wine, they’re going to just walk on by to the next friendly, un-intimidating wine producer who is happy to talk.

9)      Do good follow-up. Many of these new markets are lacking in wine knowledge and for  them to stock new brands they need to know that you’re going to be there not only in terms of pricing but also in service providing materials they may need and even perhaps organizing a visit to the winery for them to see for themselves. A friend tells me that he has never closed a deal with a new client in less a year. Work hard and be prepared to be patient.

10)   Take it for what it is. It’s not a given that at every single event you’re going to make contacts to then sell 3 containers worth of stock. You may not get nothing out of the first trip but don’t necessarily think that it’s money thrown down the drain. All experience in a market is good and will somewhere down the line have a value.

Of course nothing is a given, you may decide to take a leap into the darkness and go to the least publicized wine exhibition in the most far flung reaches of China and find yourself a couple of importers. You never know, but either way, just make sure you’re at least prepared to tackle the event in the right way and have faith that somewhere down the line, it will happen..