Shaken, but not stirred- Wine Intelligence

Volumes might be down in the short term, but our latest China Landscapes 2019 report shows the market for imported wine in China is growing up, which is probably a good thing

At first glance, 2018 may look like a rough year for members of the Chinese wine trade: the imported wine volume in the country has seen its first decline since 2014 (-8%); more players, such as distributors, importers and retailers, than ever have entered the field, perhaps fragmenting an already complicated market; and growth of the wine drinking population has slowed down in addition to consumers drinking less frequently than before. However our latest report shows that China is evolving into the sort of wine market that the world’s producers and exporters recognise: more transparent (though not necessarily transparent enough), more stable, and with a population that is increasingly knowledgeable and able to buy product they trust at a reasonable price.

Exhibit A for market maturity: consumer tastes are broadening, in terms of countries of origin and styles. For example, more wines are available from a wider variety of countries, shown by wine volumes growing for more origin countries between 2014-2019. Although France is still the leader of the market, its share of the market is gradually declining as Australian wines gain popularity alongside other countries, especially Chile and Italy. In addition, we see wine producers exploring different options to reach consumers, such the internet, social media platforms and DTC (direct-to-consumer) channels.

This diversification could mean two things. On the one hand, it means that the market is increasingly fragmented, which makes it even more challenging for players to find their ground. However, it is also a sign that the market is progressing. One of our trade experts noted that the market is perhaps starting to look a lot like other international markets in terms of the range of wines offered and ways distributors reach consumers. While some distributors confirmed that it is becoming difficult to keep their heads above water, others who have been in the market for longer time, said they haven’t really felt the cold winds. In fact, more than ever before, they believe there’s a positive outlook for Chinese wine market as consumers are maturing.

Traditional perceptions of Chinese wine drinkers paint a picture of those who don’t know much about wine, aren’t really into wine and who drink wine mainly for health benefits. The wine they most likely go for is a red Bordeaux. But that picture is due for a revision.

According to our latest China Landscapes 2019 report, the typical wine drinker in China is someone who is drinking wine more for the pleasure and not for medicinal purposes. Thus, they are looking for better quality wine, and it doesn’t matter as much to them if they have to spend more to get that. They also now drink all types of wines, including sparkling. In addition, their country of origin repertoire has expanded both by awareness and consumption, which is evident in both IWSR and Wine Intelligence data. As consumers become more knowledgeable about wine, and more wines become available to them, it’s inevitable that they become more selective about what they are going to drink. This may partly explain why, despite declining volumes of imported wine, value has remained relatively stable, growing by 2.1% in 2018.

E-commerce is another factor contributing to the spread of wine appreciation culture in China. About 46% of consumers said they’ve bought wine from online stores before, and penetration of online shopping is on average around 40%+ across most segments, including the older drinkers aged 40-54 years old. Respondents state they buy online mostly due to the diversity of options available, both in terms of brands and varietals. Interestingly, the fact that online retailers offer better / cheaper wines is now less of a motivation for consumers to buy online. While these behaviours haven’t changed on a frequency level over the years (ie they aren’t buying more wines), they are spending a little bit more than they were before. This is yet another sign that consumers are ‘trading-up’ as they become more sophisticated.

JD.com and Tmall.com are still the two dominant online channels, with 38% and 35% of respondents saying they have bought wine from the two retailers respectively. Although comments and reviews on shopping websites are the most used source of information among Chinese wine drinkers, they are also perceived as the least reliable sources of wine information compared with in-store signage and the wine producers’ websites. Word of mouth remains the most used and trusted source, while traditional media is considered to be a reliable source but is less used. Interestingly, while WeChat and Weibo may have helped with spreading the wine culture, reviews from influencers on these platforms are considered as less reliable source.

For more information, please see the Wine Intelligence China Landscapes 2019 report.