Despite a slowing economy, China’s imported wine market continues to grow. Our latest China Landscapes report sheds light on this, in the process mapping out the changes affecting the country’s consumption patterns and retail development.
China’s recent economic slowdown and market volatility have been making the headlines along with their impact on individual investors and consumers. Despite the general economic “malaise”, China’s imported wine market made significant headway in 2015, with consumption volume of imported wine reaching 43.7 million 9-litre cases, a 37% increase vs 2014 (source: the IWSR estimate, based on imported bottled wine volume figures released by Chinese Customs).
The latest research by Wine Intelligence confirms the growth of the imported wine market, despite a slowing economy. In our latest comprehensive market calibration study, we found there to be around 48 million urban upper middle class imported wine drinkers in China, up from 38 million in 2014. The continued rise in disposable income, massive growth in e-commerce, and bilateral trade deals (reducing import tariffs and helping imported wine sell at reasonable prices) have made imported wine affordable and accessible to more households across the country.
Amongst imported wine drinkers, the consumption frequency has increased significantly: 35% of consumers in this year’s survey drink imported wine on a weekly basis, compared with 23% the year before. Our survey also shows that a rising proportion of consumers are trading up, but not to the extent prior to the austerity and anti-corruption drive. In the off-trade, the number of consumers spending RMB 200 – 299 on a bottle of wine has significantly increased, while the number of consumers spending less than RMB 100 has sharply dropped.
The younger generation, growing quickly in both number and income, is expected to maintain this upward trend. Those aged 18 to 29, growing up during a time of expanding wealth and without experience of contraction and hardship, are notably less price-conscious than older generations. Over 80% feel “wine is reasonably priced”, compared with 66% among consumers aged 40 to 54. Younger consumers are particularly fond of buying wine from upscale imported food and convenience stores, which reflect their aspirational, modern, convenient city lifestyle.
Hypermarkets that redefined China’s retailing environment over the past decade, are now declining in popularity for wine purchase. This is the second consecutive year in which the hypermarket usage has dropped significantly. E-commerce maintains its strong momentum, with the Internet surpassing hypermarkets and department stores to become the second most popular channel. Specialist wine stores remain the most important outlet, suggesting consumers seek to engage with the category both online and offline.
Our study confirms significant variation in consumer behaviour between the city tiers. Consumers in lower-tier cities (e.g. Wuhan, Shenyang, etc.) are often just starting out on the income ladder, and they are at an earlier stage in wine consumption. Consumers in higher-tier cities – particularly those in Shanghai and Beijing – are more likely to be Adventurous Connoisseurs who enjoy trying new and different styles regularly, while consumers in lower-tier cities are mainly Prestige-seeking Traditionalists whose wine choices are restricted to what they know and like. Consumers in lower-tier cities are also more risk-averse than those in higher-tier cities, as they put more emphasis on traditional-looking labels, opportunities to taste the wine before purchase, and sommeliers’ recommendations. Therefore, engaging consumers in lower-tier cities is less about pushing product information and more about playing a helpful role in consumers’ decision-making process.
In our latest China Landscapes 2016report, we are seeing the normalisation of the market and the modernisation of its consumers. China will remain one of the world’s most important markets for imported wine, but the nature of consumption is changing, and previous winning strategies are falling behind the times. It is now more important than ever for wine businesses to be highly strategic in the way they pick their targets. Even though overall consumption will continue to boom over the medium term, targeting the wrong consumer segment, selling via the wrong retail channel, or being underrepresented in the fast-growing online channels, is a formula for slow growth.
Taking the time to implement the correct strategy will secure continued growth and profitability in the world’s fifth-largest wine market.