Hidden Rules and New Development Orientation of Chinese Wine Market

As the fastest-growing wine market in the world with great potential, China has been drawing wide concern and attention from around the world in recent years. Output and sales volume of Chinese wine has been maintaining double-digit percent growth speed since 2002. Since 2005, in particular, imported wine has participated in the competition, making Chinese wine market increasingly internationalized. On the drinking menu of such core cities as Beijing, Shanghai and Guangzhou, a few or even more than ten varieties of wine from various production areas in the world can be seen and there are more and more varieties of wine in large-scale supermarkets. However, for a long time, most of the imported wine can not be smoothly spread and marketed due to the unique operation pattern of Chinese wine market. Current Chinese wine market is typically characterized by market internationalized and marketing localization.

Hidden rules in market are the traditional marketing theory. Current mainstream marketing pattern in China is somewhat unreasonable. Brand means something but it can not virtually solve problems in the market. Some marketing channel factors become more and more important. Consumers even can not choose consumption process; instead, they have to accept passively. All these can be called hidden rules.
1 Advantages in end-market lead to success.   Restaurants, night clubs and supermarkets are the major end markets in Chinese wine markets. Almost all brands and dealers have gradually begun to lay stress on end market since 2002. All wine dealers share and occupy the limited end market resources one after another, which makes the end cost higher and higher. The business value of end market is continuously magnified too unreasonably to be born by brands and dealers. For example, in restaurants and night clubs, there are entrance fee, corkage, promotion fee and gifts fee etc. That is also the case in shopping malls and supermarkets where there are bar code fee, entrance fee, stack base fee, promotion management fee etc. There is a saying in Chinese wine industry， “ With end market, you will die, without end market ,you will have to wait to die.”

2 Marketing channels are of top priority.  As the whole market is huge, there are a lot of large-scale wine dealers which not only possesses great capital advantage and financing capability but also can carry out market operation in large areas and have strong wholesale capability and downstream network. These dealers often use their own network and strong balance capability as a precondition to underwrite brands and some kinds of wine or even monopolizes some regional markets. They, in fact, assume some or even all market operation functions of wine producers.

This pattern is actually a process in which dealers play a game with producers. One the one hand, with the increase of market expenses, margin becomes less and less, thus accelerating the upgrading of products. In this condition, mature producers keep on changing for new package for their immature and unchanged products due to pressure from the market. In this pattern, producers don’t shoulder marketing risk and don’t need a large marketing team, but products margin and market controlling capability is decreased, making it just a simple processing workshop. Dealers only take brand and products as a profit-making tool, leading to the fall of sustainable developing capability of brand and products.

Above-mentioned two points are the major characteristics of Chinese wine market. To summarize, the current traditional market operation in Chinese wine market is neither brand competition nor products competition. In fact, it’s expense competition. This phenomenon or hidden rule stems from the practical developing situation of Chinese wine market and industry.

First, majority of consumers are not mature enough to understand wine culture, not to say of choosing and judging variety and vintage etc. They even feel at a loss how to reasonably choose and differentiate different products of one brand, making brands and variety unimportant. What’s important is that it is wine.

Secondly, relevant laws and regulations about market are incomplete. In recent years, the complaint and accusation against entrance fee and corkage occasionally happens, but there isn’t strict definition for this market behavior and basis for law enforcement yet. Even wine dealers feel rather tired of this, but they have to keep on doing this, or they will lose the market.

Thirdly, competition situation is determined by developing pattern of Chinese wine enterprises. Without the support from enterprises, any dealers can not independently play the current market game. Chinese wine enterprises pursue sales volume, sales and growth rate, making market competition more and more intense and raising the access requirement for wine.  The first-line enterprises, with their enterprise pattern and capital strength, can effectively control increasingly growing end-markets so as to further consolidate market status of their brands. Therefore, from this point of view, expense competition is virtually brand strength competition.
Development orientation of future new pattern

Great consumption capability and developing potential in Chinese market has drawn great attention from all industries around the world. For many industries, Chinese people are gradually becoming leader of consumption, which I believe is also the case for the future of wine industry. Since 2005, with the speeding up of imported wine entering China, there have emerged a batch of chain wine franchised stores mainly dealing in imported wine. In traditional market operation pattern, imported wine has to make this choice and it is also the inevitable choice for imported wine to develop market in the future.

First，most of the imported wine is not influential in China. There are wine special counters in a lot of shopping malls which sell increasingly greater variety of wine. But Chinese consumers have on way to understand and choose suitable wine, so they don’t have sufficient reason to consume wine.

Secondly, majority of the imported wine enterprises are not large, so they can not face the traditional market operation and offer market supporting expense. Some wine enterprises join hands with governments and associations to constantly launch popularization activities, but no group effect has been achieved.

Thirdly, franchised stores can circumvent expense in end market and effectively decrease intermediate marketing expense to ensure certain sales revenue. Still, some of the current wine franchised stores are regional and some are chain stores. The common disadvantage is that they depend too much on franchised stores and lack authority. What’s more important is that the marketing pattern is still simple popularization of products. In the next step, I will focus on introducing marketing pattern of Chateau Junding in the future.

From the aspect of construction and developing pattern of enterprises, Chateau Junding will take pains to build up the industrial cluster with top-grade wine production as the core, covering development and plantation of quality grapes, popularization of wine culture, exchange of world wine culture, wine theme tourism and operation of clubs and franchised stores, in a bid to innovate development pattern and business pattern of wine enterprises.

Based on its composite innovative wine industry clusters, Junding takes membership clubs and franchised stores as its major marketing channels, innovates marketing pattern and advocates the wine-themed brand-new life style by popularizing oriental wine culture. Supported by Chateau Junding and its industrial cluster and based on its high-end wine and relevant wine, Junding takes specialized popularization of wine as its core and development of group and individual members as its goal. Taking membership clubs and franchised stores as the platform for wine culture popularization and product marketing, Junding closely cooperates with franchisees and provides specialized service and standardized management to all members in a bid to set up brand-new wine membership marketing pattern and forge the marketing network for high-end market. Backed by its resources advantage of composite industrial clusters, Chateau Junding cooperates with franchisees at all levels to establish wine clubs and franchised stores, which are served as a platform directly for high-end wine consumers. Group and individual members of Chateau Junding are provided with high-end wine, its relevant products, unique delicacies and high added-value service. Different from traditional wine franchised stores, Junding takes brand-new wine experience as its design conception and showcases the evolution of world wine, making consumers fully understand the brand-new wine-themed lifestyle and really enjoy the standardized and specialized wine service

Marketing pattern of Chateau Junding is actually a huge marketing service system, in which we build up authority through Club of World Famous Chateau（CWFC）. Directly marketing pattern based on membership system not only circumvents the traditional expense barrier in the marketing end but also makes franchised stores a market service platform through which marketing is achieved with the effective consumption. Activities of members can realize the direct communication and dialogue between wine and members, which facilitates the effective popularization of products and forge of brands. Specialized service is guaranteed with strict franchising management and systematic raining. All marketing of Chateau Junding is not only a product selling behavior but also the popularization process of culture and lifestyle.

Composite industrial clusters of Chateau Junding make its members enjoy a true wine-themed lifestyle. From the point of view of long-term development, I divide development of Chinese wine market into four stages. In the first stage, consumers began to accept wine for the sake of health and fashion. The second one is brand-focused stage in which consumers was relatively loyal to brand. This is also the reason why a lot of Chinese consumers are loyal to first-line brands. The third one is quality-focused stage, in which with the popularization of wine knowledge and standardization of industry, some of the consumers began to understand wine and attached more and more importance to its quality and connotation. The fourth stage hasn’t come yet, but it is foreseeable. I think it should be taste-focused stage, in which consumers’ pursuit of wine has excelled wine itself. Consumers will lay more stress on lifestyle improvement and life taste enjoyment brought about by wine. I think this is the ultimate effect my wine colleagues are anticipating and the goal we are jointly striving for.