China’s Emerging Wine market

The Success of China’s emerging Wine market means Good Luck, Health and Happiness.

Despite a long tradition of enjoying a “cup under the trees in the moonlight”, wine drinkers were rare in China only 10 yrs ago. After China opened to the outside World in 1978 the Chinese began to “learn” about drinking wine.

“In China, drivers of wine consumption growth are different from those we see in more established wine markets,” says Jenny Li, a Chinese wine market analyst for UK-based Wine Intelligence, a strategy consultancy serving the global wine industry. A understanding of Chinese drinkers’ beliefs, tastes and concepts is essential for those who want to penetrate the market and target consumers, Li says.

Wu Jianhua, head of the Shanghai Drinks Association (SDA), points to a preference for Red Wine with its auspicious color as an example of how those traditional beliefs can be advantageous in marketing a product.

“The concept that the color Red signifies Good Luck and Happiness has helped the sales of Red Wine, and now it is served on dinner tables at more wedding ceremonies, even in the countryside,” says Wu.

About 90% of the Wine shelf space in China’s supermarkets is allocated to the “Reds”, says Wu, citing a survey by his association in Shanghai.

The data is roughly in line with a survey by Hong Kong-based Vinexpo, organizer of one of the World’s largest wine and spirits conferences, which found that 88% of Chinese drinkers prefer Red Wines.

The growing thirst for wine in China stems from a strong beliefs that wine is much healthier than baijiu, a distilled white liquor (http://en.wikipedia.org/wiki/Baijiu) and even has some cosmetic benefits.

Li says increasing numbers of middle-aged Chinese have developed a the daily drinking of Red Wime for health reasons. “They are often heard preaching that a glass of Red before bed not only aids a sound night’s sleep, but is good for general health. Women drinkers also talk about the additional benefit of being great for the skin,” says Li.

Experts say that there is no scientific evidence of wine’s benefits, and point to the “French Paradox” as a major factor in the widely held view in China that regular consumption of Red Wine is healthy.

The paradox refers to the relatively low incidence of coronary arteriosclerosis in France compared with other Western countries, despite the generally high intake of saturated fat in the French diet.

The belief has also led more Chinese to choose wine as a gift for relatives and friends, and wine even takes the place of baijiu on official dinner tables as some local governments prohibit baijiu on official occasions.

Wu also blames the different drinking cultures of baijiu and wine for the belief that wine is healthier.

“If Chinese people drink baijiu, they tend to drink excessively in a tradition where men drink baijiu with friends to show personal loyalty, brotherhood or generosity. The more you drink together, the closer the friendship,” says Wu. “So Chinese people often identify baijiu as harmful, but when people drink wine, they don’t easily drink excessively in large part due to the general ambience associated with wine.”

Despite the perceived health benefits and auspicious symbolism of Red Wine, many Chinese still find it unpalatable and tend to mix it with Fruit, Soda or Sweet Juice to soften the taste.

Various surveys show most Chinese drinkers likes wines that are light, not too alcoholic, not acidic, and without heavy tannins, says Wu.

This presents a dilemma to China’s wine drinkers, who generally adapt more easily to the lighter, fresher taste of White Wines, while preferring Reds for their health qualities and symbolism.

“Mastering the Chinese palate, which favors soft tannins, and also their belief that Red Wines are healthier and more sophisticated, is seen as the Key for wines to win in China’s wine market,” says Wu.

This challenge for wineries is gradually fading. Vinexpo forecasts white varieties will account for about 42% of consumption by Y 2013 as more Chinese drinkers become exposed to them.

Wu suggests winemakers craft their products to create an aroma and flavor profile that suits Chinese tastes and cuisine, as about 85% of wine and spirits drunk in China are enjoyed with food at the table.

Educated Chinese appreciate good wine. “It’s a question of education, just like a foreigner would not appreciate a really Top quality Chinese tea at first taste,” Wu says.

He identifies increasing cultural and business exchanges as a driving force in educating Chinese to appreciate wines. Wine drinking can be seen in many Western movies or TV shows, and more people are experiencing wine at dinners with foreign business counterparts, says Wu.

The “Sea Turtles,” or young Chinese who return home after studying abroad, have also played an important role in spreading wine culture, Wu says.

Tian Ming, a 26-year-old software engineer working for a Beijing-based bank after graduating from a university in Melbourne, likes to drink wine when partying with friends, but not because of its health benefits. “A bottle of wine with a beautiful girl, romance, luxury, these are all thoughts that come to me. Wine is really a good way to start an evening,” Tian says. Tian’s girlfriend, Liu Xinxin, agrees. “Wine is about ambience, fashion and sophistication, not like Chinese liquor, which is for people who can drink lots of alcohol.”

In China, wine has become a symbol of a desirable urban lifestyle, which shows sophistication, vitality and high social status, Wu says.

A survey conducted by Vinexpo showed 72% of Chinese women wine drinkers said wine was “elegant” or “the reflection of a lifestyle” while also acknowledging its health benefits.

China’s wine consumption increased from 564.26M bottles (423.2M liters) in Y 2004 to 899.68M bottles in Y 2008, but the market is still in its infancy with a per capita consumption of 0.4 liters a year.

This is in sharp contrast to 50 liters for the French, 25 liters for Australians and 15 liters for Americans, according to research by global management consultants AT Kearney earlier this year.

But now with the rising appreciation for wine and the forces of urbanization and globalization, Vinexpo predicts wine consumption in China will soar by 32% to 1.26B bottles by Y 2013, or about 1 bottle a year per Chinese person of drinking aged.

Wu says China’s rising number of affluent young increasingly prefer more expensive imported wines, which are often perceived as more sophisticated than domestic wines.

Most Chinese wineries put rough descriptions such as “Dry Red” on their labels, unlike the common practice abroad of informing buyers of the specific varieties, such as Cabernet Sauvignon, Merlot or Shiraz, because most consumers have near-Zero wine knowledge, he says.

Imported wines only accounted for 11.8% of China’s consumption in Y 2008, with France being the largest overseas supplier. But the market share for foreign wines could hit 15.8% by 2013, Vinexpo predicts.

The forecast is supported by figures showing that while Chinese purchases of domestic wine increased 67% from Y 2004 to Y 2008, consumption of imported brands grew 400% over the same period.

“In China wine plays a complex role in people’s lives, so winemakers should have a long-term strategy for producing and marketing wine to target the right people,” says Wu

Interesting Note: Domain Lafite Rothchild has invested in China http://www.lafite.com/eng/News/Our-investment-in-China —Paul A. Ebeling, Jnr. www.livetradingnews.com