Wine insight company Wine Intelligence sees signs that the market is progressing and starting to look like other developed international markets. But with China leading the drive towards ecommerce, this could open up new opportunities in the country as well.
Quality over quantity
Imported wines account for around 40% of the Chinese wine market. The growth in consumers such wine has slowed: increasing by 7% in 2016-2019 compared to 26% in 2014-2016. Per capita consumption in 2018 was 1.2 litres compared to 1.3 litres in 2017.
But consumers are now willing to spend more for better quality wine, while the low value end of the market is losing traction: similar to the quality over quantity approach seen across the alcohol beverage category in many Western markets.
“Our data suggests that as consumers become more knowledgeable and engaged with this category, they are more selective about what they are going to drink. This partly explains why value remained stable despite declining volumes of imported wine,” reports Wine Intelligence.
In fact, value rose by 2.1% in 2018. And while volumes fell in 2018, the total volume is still above those of 2014-2016.
Another explanation for the dip in volume is that the market is still digesting the large volumes of wine imported prior to 2018.
“The latest insight data is starting to show us what China will look like as a mature market. The imported wine drinking population is still growing, but we are not the rapid growth of a few years ago," says Wine Intelligence.
“The general consensus amongst trade experts is that the market has a positive outlook despite declines of volumes, with the reason being that consumers are now more engaged with the wine category than they were before."
The Chinese market is diversifying and becoming increasingly fragmented.
While France still leads the market of imported wines, its share is declining as consumers turn to wines from Australia, Chile and Italy – as well as becoming more open to other countries and regions. Meanwhile, wine producers exploring different options to reach consumers, such the internet, social media platforms and DTC (direct-to-consumer) channels.
As well as trading up, consumers have been expanding their repertoire to all types of wines, including sparkling, instead of traditionally sticking to red wines.
“Diversification also means that the market is increasingly fragmented, which makes it ever more challenging for players to find their ground,” says Wine Intelligence.
“However, it is also a sign that the market is progressing and is starting to look like a lot other international markets.”
Australian wine success
French wine still leads the market with a 14% market share, but it is seeing its share of the market decline as other countries build their presence in China.
Australia's success story continues: with wines still growing in both value and volume. They now take a 9% market share – up from just 4% in 2016 – driven by strong Australian brands such as Yellow Tail, Penfolds and Rawson’s Retreat.
Chilean wine takes third place in China's imported market with a 6% market share, although the last year saw a 2% decline.
E-commerce has helped spread the wine appreciation culture in China, opening up a huge world of different wines for consumers to try. Online shoppers are less motivated by discounts or bargains than they are by the diversity of brands available, both in terms of brands and varieties, evidence again of consumers trading up.
Some 46% of consumers say they have bought wine from online stores, and penetration of online shopping is on average around 40% across most segments, including older drinkers aged 40-54 years old. And consumers are spending more on wine than they would have before: 28% of those who have shopped online in the past six months spend 400 RMB and above, whereas this number was only 21% in 2016.
While shoppers of JD.com and Tmall.com are likely to be mainstream drinkers, those who buy wine through WeChat stores are likely to be loyal consumers of the WeChat stores who are looking for niche and premium wines. Word of mouth (including posts, discussions from friends and family in WeChat or Weibo) remains the most powerful source of information, says Wine Intelligence.
China's huge population offers a good base for wine to grow from. But while consumers may have become more knowledgable and engaged with wine, there's still a way to go in building the category. Consumers buy, on average, one bottle of imported wine a month - compared to UK consumers which buy a bottle a week.
"For now at least, the marketing challenge will be about building purchase frequency with the 52 million imported wine drinkers," says Wine Intelligence. "Providing more occasions and motivations for wine consumption will be key to increasing the Chinese consumer's engagement with the category."