chuan - Who Will Buy “Masstige” Wines in China?

Masstige brands have great potential to create excitement among the new generation of wine drinkers in China

“Masstige” (a slightly awkward portmanteau of the words mass and prestige) has been long utilised as a successful fashion industry strategy: mass-produced, relatively inexpensive goods which are marketed as luxury or prestigious. While China’s economic slowdown and the government’s crackdown on corruption have left many high-end fashion and jewellery brands struggling, at the more affordable end of the market, some accessible luxury brands are seeing the exact opposite phenomenon. American fashion company Coach, which plans several new stores in China, saw its sales in China rise 13 per cent in the first quarter of 2015. Longchamp, one of French’s leading handbag makers, saw a 25 per cent increase in sales in China last year.

Reasons for China’s masstige market heating up include the fact that the ultra-high-end products that were most commonly used for “gifting” purposes are now the focus of the government’s scrutiny, creating opportunities for mass luxury brands when luxury shoppers are most likely paying for themselves now, and more importantly, the continued strong growth in the size and diversity of China’s middle class.

For years, luxury brands have thrived as China’s middle class developed a taste for high-end fashion and jewellery. Knowing that the success of a luxury label in China has much to do with the connection between the brand and the status it confers, marketers and media have always encouraged Chinese consumers to increase consumption of luxury goods by evoking and engaging their emotions and feeding their aspirations for a better life and a higher social status. Meanwhile, the members of the 36 million urban households that constitute the upper middle class (those earning $16,000 to $34,000 in annual disposable income) are broadly educated and well travelled as never before. Crucially, they are less status-obsessed than their forebears. Instead, they are growing more appreciative of goods for their quality and style. Sophisticated and seasoned Chinese shoppers are able and willing to pay premiums for higher levels of quality and taste, rather than high profile status symbols, which, in the new post-austerity China, often fail to impress others. More pragmatically, the vast majority of Chinese middle class still cannot afford truly luxury “designer” prices, so instead they gravitate towards more accessible, “entry luxe” products that deliver a greater number of genuine benefits for a small price increment.

As with fashion, so goes the Chinese wine market. While conspicuous consumption of ’82 Lafite is falling out of fashion, China is gradually moving away from very expensive wines, and will be very likely moving from entry-level, cheap wines to mid-range or “masstige” wines in the near future. A new, more globally minded generation of Chinese will exercise influence in the “masstige” wine segment.

In China’s imported wine market, the price of Penfolds Bin 389 (often referred to as ‘Baby Grange’) places it in the “masstige” segment. At ¥420 (~$70) per bottle offered by a wine –e-tailer, it is well below the ¥5,000-plus (~$800-plus) price of Penfolds Grange on the same website, but it is above the ¥100 (~$16) price of entry-level wines (tax on wine in China makes a typical bottle 50-70% more expensive than it would be in most western markets). Wine Intelligence China Landscapes Report 2015 has shown that Chinese imported wine drinkers are feeling strong affinity for the Penfolds brand, with half of those who have heard of the brand think it is “for people like me” – higher affinity level than all the other imported wine brands tested in Vinitrac China.

The new generation of consumers today are typically people in their 20s, born after mid-1980s and raised in an era of material abundance. This generation already accounts for four out of 10 consumers of imported wine in China, and is the most Westernised to date. Prone to regard expensive products as intrinsically better than less expensive ones, they enjoy trying new things, seek emotional satisfaction through better taste, put great emphasis on personal preferences, and prefer niche over mass brands (for instance, a higher propensity to buy Villa Maria wines than older generations who most likely go for Carlo Rossi and Jacob’s Creek). The new generation of wine drinkers (who have just entered the category) will be ready to trade up when they recognise the value they can get by spending just a little more on a bottle. However, as already said in Wine Intelligence Global Consumer Trends report, the Upgrade trend “relies on consumers having a clear understanding of the value of what they are trading up to, and why it is worth more than the product they are leaving behind”.

Author: Chuan Zhou

Email: chuan@wineintelligence.com