As Chinese consumers become more knowledgeable about wine, will the changing drinking culture in the country lead to an on-trade boom?

I recently travelled to Shanghai to research wine in the on-trade environment, with a particular focus on the shift in attitudes and behavior since the anti-corruption measures were introduced by President Xi Jinping. Yes, it was a tough job to go and drink wine at as many restaurants and bars as possible, but someone has to do it! In addition to this, I conducted a number of trade interviews with various people working in food and beverage.

Prior to the anti-corruption measures, wine was very much seen as a status symbol, or a way to embrace Western culture. The education around it, and the actual taste, was not important. There would be mainly government officials doing a lot of ganbei– ing (cheers- ing) and trying to outdo each other with the most expensive bottle they could find. While the traditional ganbei will never disappear from Chinese culture, it is now private wealth driving the consumption in China, rather than government wealth. Because of this, wine is now more accessible to the middle class, and is seen as a way to express your lifestyle, and show you are educated. It’s a sign that you’ve made it, and moved in to the ‘grown-up’ phase of your life.

This increase in accessibility is also an important factor driving the desire to learn more about wine, with more Chinese consumers taking the WSET exams than ever before. Those I talked to in the trade noted that education around wine is slowly changing. Five to 10 years ago, when entertaining, beer would never be chilled—and neither would white wine. It was all about the quality of the food- it was ‘eat more, drink less’. Now the shift is towards ‘drink more, eat less’. Similarly, more Chinese consumers are taking notice of the wine list at restaurants, with one hotel Food and Beverage Director saying, “People now care about the wine list. This has never happened before. It used to be just about the food menu, but now people realise they should have wine to entertain, and to match food”.

However, whilst Chinese consumers are interested in increasing their wine knowledge, don’t expect them to walk up to a shop assistant and just ask for help when choosing a wine. “Saving face” is an extremely important concept, with consumers not wanting to lose their sense of prestige in social settings, and furthermore, wanting to impress their friends, colleagues and even strangers when selecting wine. However, they’re happy to receive recommendations from sommeliers at restaurants, and listen to suggestions from friends. They love accessing as much information as possible, but they’re just not going to be the one to ask for it. This mentality has contributed to the rapid rise in the importance of e-commerce in the wine industry, as by shopping online, consumers are free to research wines, learn about the vineyard and grape varietal, and shop for the best price – all without having to say a thing.

The lack of overall education in the market also has an impact on buying wine in the on trade, with a number of staff in bars and restaurants often not aware of the wine they offer at their establishment, nor able to provide any suggestions. It’s one thing for restaurant-goers ordering the wines to know about wine, but it’s another for those working in hospitality (often not from the city originally, or with any firsthand experience with wine) to be confident in their knowledge of wine.

We hear (and write) a lot about the impact of millennials on the wine industry in China, and no trip to Shanghai would be complete without researching the behavior of this segment in the on-trade. On any given night, almost everyone drinking alcohol was either a Chinese millennial, or an expat. However, one of the most interesting things that I learnt overall in terms of the on-trade market was that it is still so far from being common practice to drink alcohol with a meal when you are out at a restaurant.

I know in Australia, regardless of what day of the week it is, you would see the majority of patrons having at least a wine or beer with dinner, whereas in Shanghai I found that there was an abundance of tea and fruit juice being ordered by the people around me, making me feel slightly like an alcoholic, but all in the name of research!

I asked one restaurateur in China about this, and he confirmed my observation, and added that in his 15 restaurants, they go through 2 tonnes of carrots every day due to the amount of juice they sell. Furthermore, a number of those people drinking alcohol would be having beer or cocktails, rather than wine. From personal experience, cocktails were often the same price as a glass of wine, which is pretty hard to go past when looking at the drinks menu. Especially for Chinese consumers who are faced with cocktails such as ‘cosmopolitan’ and ‘mojito’- drinks they’ve heard of before, versus a glass of wine that is very unfamiliar to them.

So in summary- it was clear that the on-trade environment in Shanghai has definitely changed in the past few years, with all industry professionals believing that we’re really only seeing the start of what’s to come. We know there are a number of logistical considerations for distribution and visibility of wine in the off-trade, however it is important to remember that if you’re wanting to push your product in the on-trade, you also need to plan and research effectively in order to capture the emerging consumer drinking in bars and restaurants.

To find out more about our on-trade research in China, take a look at our China Landscapes 2016 Report, out now.

Author: Liz Lee