The international wine press has, in recent years, represented the mainland Chinese imported wine sector as one giddy rise of percentage increases after another. Reliable data is, of course, notoriously hard to acquire, but it is thought the 16m 9-L cases imported in 2010 rose to 26m in 2011, but only increased to 29m cases last year.
Regardless of the modest 2012 growth, China’s import market is clearly not large by international standards (with “potential” remaining the buzz-word of choice). In 2011, the UK consumed 139m cases, maintaining its position as the largest importer of wine by volume and value – the US being the largest consumer. Importantly, consumption and importation must be differentiated, not least in the People’s Republic of China where imported wine may be gifted multiple times but not necessarily consumed. Thus China’s mainland imported wine market, despite a burgeoning middle class, remains small. Indeed, for most middle-class consumers, wine is not as desirable as a car, washing machine or other obviously practical item. Per capita wine consumption also remains low – around 1.6 L – compared with about 25 L for the UK.
Consolidation and rationalisation
As the 2012 figures suggest, rationalisation is underway, with importers trying to shift unsold stock in a much more competitive marketplace. Consolidation is, apparently, occurring across the board, with increasingly professional importers courting consumers more effectively, leaving behind those trading companies whose lack of wine experience and often unrealistic margins fail to stimulate genuine consumer demand.
But this picture is simplistic. The reality on the ground is much more complex with wine consumers changing or developing habits quickly across multiple regions, from Fujian to Beijing to Chongqing.
Certainly, the cutting-back on official entertainment initiated by Xi Jinping, the General Secretary, has damaged importer-distributor sales of high-end Bordeaux for banqueting and gifting. This has impacted the two main gift-giving seasons of the Mid-Autumn Festival and Chinese New Year, which traditionally account for much of the wine business’s annual revenues. True, only a handful of imported wine brands have achieved consumer recognition – among them, DBR Lafite, Penfolds, Jacob’s Creek and Concha y Toro – and these are less-recognised than imported spirits such as Johnnie Walker, Chivas or Smirnoff. Undoubtedly, the imported wine sector still only accounts for 15% of the overall market, with large Chinese brands such as Changyu, Dynasty and Great Wall being easily recognisable to general consumers, but not necessarily to regular wine drinkers.
But there are other types of Chinese consumers and the notion of ‘consumer recognition’ must be qualified. Affluent wine lovers purchasing Grand Cru Classé, especially the First Growths, may have no knowledge of Australia’s wine offerings at any price level, just as those who recognise Jacob’s Creek may have no knowledge of Château Haut-Brion, even although they may be forking out hundreds of RMB for the Jacob’s Creek Heritage range.
So what kinds of consumers are emerging in mainland China? How does the wine market look beyond the bulk versus super-premium polarity? Are there viable opportunities for countries other than the market leaders France, Australia and Chile? And what consumer behaviour characterises these new, shifting groups?
China’s new consumers
China’s wine consumers tend to be portrayed in one of two ways. One is the affluent, usually older male, who fixates on the First Growths, perhaps occasionally also drinking super-premium Chinese wines such as those produced by Chateau Junding, retailing over 1,000RMB ($163.00). The other is the ‘ordinary’ consumer, of either gender, who purchases wine infrequently and sticks exclusively to inexpensive local Chinese brands, that start around 35RMB ($5.70). Neither drinks for taste-intrinsic reasons: the affluent male chases labels and is obsessed with price/prestige, whilst the ordinary drinker favours the patriotic buy, perceives wine as exclusively red and considers it a healthy option distinct from baijiu (Chinese white spirit) at 50%+ abv. But while consumers of both types exist, consumer categories and behaviour are much more diverse, with young, middle-class women in first- and second-tier cities becoming increasingly involved, and genuine wine lovers of both sexes appearing.
Professional 25 to 35 year-old women - not only in the first-tier cities of Beijing, Shanghai, Guangzhou and Shenzhen, but also in second-tiers from Xian, Dalian, or Chongqing to Zhengzhou - are taking an increasingly adventurous interest in wine. Yang Li, a Beijing-based writer and editor who worked for the Pearson Group for a decade, is typical of the new generation of well-educated young Chinese women inquisitive about wine. Having covered the luxury goods market for The Financial Times’ former FT Rui magazine, she observes how super-premium wines “are harder to popularise among affluent Chinese” whose luxury goods purchases often involve investment in articles of more lasting value. Tired with importer-distributor margins of 50% to 70%, she personally seeks “a better price-quality ratio” from a more diverse range of countries and wine styles, as well as formal wine education from the WSET.
“I buy wine both as gifts and to share with friends,” she explains, underlining the key gift-giving seasons of the Mid-Autumn Festival and Chinese New Year. Whereas gifted wines are often red, she says: “I like to buy white wines to share with my girlfriends. But I think that men in northern China often prefer to buy full-bodied, more alcoholic reds. This suits their palates because of the baijiu culture.” She adds: “I also think young Chinese women are generally more interested in learning about wine than men. They want to learn about what’s in the bottle and they are generally more open to trying wines from different countries and grape varieties; whereas some of my male friends stick to France and are less adventurous.”
As to consumption, Yang reflects that her female friends prefer to drink wine in groups at home. On-trade consumption, meanwhile, is defined less by gender or age group, but rather ‘the purpose of the meeting’. In a business context, premium or super-premium red wines, especially from France, are preferred.
Genuine wine lovers
In this newly adapting market, one might say the ‘real’ wine lovers are starting to appear. Li Wei, managing director of ICBC Credit Suisse Asset Management Co. Ltd., might seem typical of the older, affluent male: someone who drinks and collects Grand Cru Classé. But having “been drinking wine for ten years,” he now looks for diversity, better quality-price ratios, and wines from lesser-known regions. “I buy wine twice a month, but only a few cases each time.” He admits, “I have accumulated so much wine that I can only drink it gradually with family and friends.” Li represents the savvy, value-seeking consumer: “I used to drink mainly wines from Bordeaux, Burgundy and Napa, but my tastes are changing. I’m looking for value: from Spain – especially Rueda and Toro – from Portugal, New Zealand and elsewhere in the US, like Washington.” Contrary to the image of the typical red wine drinker, he is passionate about whites, seeking “Alsace, Rhône, Greek and Austrian whites especially”. Unusual among Chinese consumers, he confesses a liking for Chablis, a tough sell in a market which typically prefers vibrant fruit, lower acidity and residual sugar.
Wine lovers like Li also drink wine at home regularly, often inviting other wine-loving friends. This represents a huge shift in consumption patterns where entertaining and drinking wine domestically have been traditionally eschewed in favour of on-trade, private-room banqueting. Li also reports drinking wine “after a meal”, again unusual in China where alcohol is typically consumed with food, qualifying “that it must be a quality wine because there is no support from food for flavour or texture.”
On the subject of pairing wines with Chinese dishes, Li states, “everyday Chinese food, especially in the north, needs robust wines with plenty of flavour.” But not all convivial consumption occurs at home: “I go to restaurants with friends. We book a private room and each bring a bottle or two. We taste the wines before dinner, then order the food, consuming the wines with a range of dishes. We bring quality wines but they don’t need to be iconic – just interesting.”
The role of social media
But where do such adventurous consumers source their information? Social media plays a crucial role. “We follow knowledgeable wine people on Weibo because reading wine magazines can be too difficult or less convenient,” says Yang. She is also sceptical of the quality of Chinese journalism, noting only a handful of Chinese wine magazines with knowledgeable or “trustworthy authors”. Certainly, for print culture, reliable wine resources are scant.
But social media isn’t used just to disseminate knowledge. “Sharing wine experiences on Weibo is very important,” says Yang, suggesting that while this may involve actual experience, it can sometimes be an aspirational conversation around the lifestyle reflected in wine. This again impacts on consumption because being seen to enjoy wine or discuss wine virtually does not always correlate with frequent consumption. “A diverse range of people is drinking wine, but obviously beer and baijiu consumption outstrips wine and these are products where people are more familiar with pricing. They know what they are getting and what to expect.”
Both Yang and Li acknowledge that trust is also an essential factor. “Chinese people rely hugely on their friends’ suggestions,” says Yang. Li agrees, saying that most people rely on their friends’ recommendations. Word-of-mouth and shared social media experiences thus inform whole networks of actual and aspiring wine lovers.
There is also a lack of trust when it comes to Chinese wine, even though improvements in domestically produced wines, especially from Ningxia, are notable. Yang says many consumers view domestic and imported wines as almost “separate categories”; while international wines thrive in first-tier cities, Chinese wines can be found everywhere, as they benefit from the distribution established by large Chinese drinks companies, which are part or government owned, from COFCO to VATS to C&D.
Of particular note is the rise in demand for WSET education, the leading body recognised in mainland China. In fact, the number of students studying for WSET is set to overtake those in the UK (and also Hong Kong) in 2013-14.
Such qualifications have status for wine lovers and trade alike. Opportunities to learn and taste are also afforded by trade body visits, especially as these connect with consumers. Wine fairs, seminars and competitions pioneered by the Napa Valley Vintners, New Zealand Winegrowers, Wine Australia and Wines of South Africa, among others, are stimulating interest. In fact, the Napa Vintners’ Chinese site crashed in April 2013 because of the sheer number of Chinese users downloading their educational materials, just as the Vintners were hosting 20 events in Beijing, Shanghai, Hangzhou and Xian over a mere nine days.
Thus, however challenging the current climate is, mainland China has genuine and increasingly educated wine lovers in a modest-sized market that is professionalising and experimenting by turns quickly and slowly, depending on what Chinese regions one observes.