The Wine Market in China

Introduction

According to the China Wine Market, as of February 2017, there are 48 million “wine lovers” in China. This is mainly due to the significant western influence in the major cities in China and also, due to the developing economy and the growing number of upper-middle class Chinese citizens.

Being the second largest market in the world, no investor or business leader can ignore the increasing influence of its customers. The preferences and common behavior of China’s 1.38 billion people has the potential and ability to sway the demand and shift the trajectory of global consumer spending regardless of the industry or market sector. The wine industry is no exception. Many wine producers from all over the world have been seizing this opportunity and expanding their business in the Middle Kingdom. This article will provide information on the current situation of the wine market in China, the Chinese consumer habits and trends, a competitive analysis, and lastly, discuss possible business opportunities and considerations to keep in mind when entering the Chinese market.

China Wine Market

As mentioned previously, there are 48 million regular wine drinkers in China and these individuals belong to the upper-middle class sector of the population. Naturally, they have more disposable income compared to others. Thus, despite the higher prices, they prefer to purchase and drink imported wines from Europe rather than drinking local Chinese brands. Moreover, in recent years Chinese people in general, regardless of social class, consume alcohol more frequently compared to previous generations. Therefore wine is not a niche market anymore but rather, a widespread product.

As wine is turning into more of a commonly preferred alcoholic beverage, such Chinese wine consumers are more and more careful about the selection process. Since these Chinese wine consumers are relatively young in age ranging from 18 to 54 years-old, it is not the least bit surprising that they conduct thorough research online and purchase wine on online platforms such as Taobao and Tmall.

China Wine Market has conducted market research and they found that the number of Chinese consumers from the urban upper-middle class drink wine at least twice a year, went from 38 million in 2014 to 48 million in 2016. This is 11% of the adult urban population aged 18 to 54 years-old. If a glass of wine is 150ml and if these 48 million Chinese wine lovers drink one glass a week, there is a lot of wine to import in the upcoming years. In fact, it has been predicted that in the year 2020, the number of wine lovers will increase to around 70-80 million (Chinese wine drinkers who consume wine at least twice a year). Out of all the categories, there will be a growing demand for middle-priced wines and this market is expected to increase by roughly 65% over the upcoming five years. Simultaneously, the growth for lower-priced wines will decrease by 7% and higher-priced wines sales will increase by 24% respectively.

The sector of Chinese wine consumers are also gradually becoming younger over the years. Over 40% of imported wine consumers in China are aged 18 to 29 year-old. This trend with great potential has attracted different wine-producing countries to the growing Chinese market, including countries such as France, Argentina, Chile, Australia, Italy and Spain.

Chinese Consumer Habits and Trends

Chinese consumers are without a doubt one of the most complicated to comprehend and hard to satisfy crowds in the world. As previously mentioned, young Chinese wine consumers are likely to conduct thorough research online and on winery websites before purchasing wine online. Justin Cohen from Ehrenberg-Bass Institute has said that, “most Chinese consumers prefer to choose a brand they know, they’ve tried before or has been recommended by friends and family.” Out of the 38 million urban aged 18-54 year-old upper-middle class imported wine drinkers, 88% actively use the internet. Moreover, 69% of them search for wine information online and 49% purchase wine online. Thus, it can be concluded that roughly one out of two wine consumers in China purchase their wine online.

Just like many Asian consumers, Chinese consumers are easily influenced by high-end foreign brands. Thus they tend to “play it safe” by purchasing only from brands and companies they have heard of before, which makes it hard to earn Chinese consumer’s trust.  However, the bright side is that after you gain their trust once, it is easy to maintain customer loyalty.

Furthermore, when it comes to the younger generations in China, there are two things to consider; the packaging and lower alcohol content. When it comes to packaging, Chinese consumers prefer classy expensive looking designs. It gives them a sense of class and luxury. Moreover, young people in China are also moving away from the high alcohol drinking habits of their parents. Instead of traditional Chinese alcohol with high alcohol content such as Baijiu and Mijiu, the younger generations are preferring to consume alcohol with lower content such as beer and wine.

Other trends of the young Chinese wine consumers to consider are social media and the ubiquitous use of WeChat and Weibo. The digital media in China moves at such a rate, that it is baffling even to many in the region, let alone winemakers trying to keep up with WeChat and Weibo from their rolling vineyards thousands of miles away. However, if a winery really wants to succeed in China, they must put significant effort in the social media sectors since this is the source where Chinese consumers discover and discuss products.

Competitive Analysis

When entering the Chinese market, the unique consumer behaviors of the Chinese are not the only issues to consider. You must also take into account the competitors and hurdles regarding China’s complicated legal system.

First of all, the fragmented market. Online platforms such as Taobao and Tmall are China’s main e-commerce channels but as online trends continue to grow, the usage of such platforms are also diversifying. Niche platforms such as Pinshanghongjiu and Jiubaowang which also conduct B2C business are gaining more and more market share in China. This is mainly due to the fact that they specialize only in alcohol/wine and provide a more extensive description and customer review section. The main competitors in the wine market are online, however many are also doing a combination of online and offline retail allowing a wider range of availability to their consumers. Another increasingly seen marketing trend is for retailers to offer education for new wine drinkers as well as hosting wine tastings. This allows Chinese customers to meet with wine retailers and distributors, which can play a significant role in building customer loyalty and “guanxi” (an important word in Mandarin indicating human relationships and personal/business networks).

Business Opportunities

The number of business opportunities are infinitive in China, especially when it comes to the wine market. As mentioned above, when entering the Chinese wine market, you ought to strategically establish a clear business plan before doing anything. First, target the upper-middle class Chinese consumers between 25-45 years-old. Chinese younger consumers have more disposable income, are more educated, have a global perspective, and will be the driving force of the Chinese market’s future.

Out of these young upper-middle class consumers, there are four target market groups:

  1. Young and Affluent
  2. Connoisseur
  3. Business Men/Women and Government Officials
  4. Developing drinkers

You must carefully establish which target group to focus your product on.

Another factor to keep in mind that could easily be the key to success is the Chinese consumer’s motivation to drink wine. The number one reason for drinking wine in China is for its health benefits. According to Wine Intelligence, only 32% of Chinese wine consumers drink wine because they actually enjoy the taste. Most of them, especially the young female consumers, drink wine for health and beauty purposes.

Drinking wine contributes to a good night’s sleep, helps digest heavy meals, and also provides benefits for the skin and gives it a natural glow. All these health and beauty benefits are exactly what Chinese women are looking for. Weight loss, better skin, and beauty sleep. However, these health and beauty benefits are not the only motives of Chinese wine consumers. Chinese people also drink wine to attain a sense of high-class and luxury. They also love flaunting off the fact that they can afford such “luxurious goods.” This is a concept that may be hard to comprehend from a western point of view, but for the Chinese, showing that they can afford and drink wine, allows them to let the world know that they belong to a “certain social class.”

All in all, considering these motivations of the Chinese wine consumers, when expanding your wine business in China, it may be wise to emphasize the health and beauty benefits, or find a local partner in China who knows the motives for Chinese consumers to collaborate with.

Conclusion

In conclusion, there is an extremely bright future ahead for wine in China. While taking these opportunities and information mentioned previously into account, taking an in-depth view of the market to decide upon entry options and finding the right partners are key.

In addition, it is imperative to always keep in mind that the Chinese consumers’ differ greatly from western consumers. Their common lack of trust, less experience with consumerism and a general culture of conducting thorough investigations before making a purchase may hinder you from succeeding in the Middle Kingdom.

With that being said, how to market your wine in China? The answer is to go digital. The wine market in China is growing. Wines that have a good reputation are sold at a good price and in short, Chinese consumers want the lifestyle, and lifestyle that comes with it from overseas.

The best decision would then be to:

Brand your wine — invest in marketing.

  1. Organize wine tastings—allow opportunities for Chinese people to become acquainted with your product. Have them try it!
  2. Product placement may work—it did for French producer Laffite. A product placement campaign has improved its image. Laffite wine is now considered as the best wine for celebrations in China.
  3. Communicate—make the press write about your product on social media sites like WeChat and Weibo. Invite them to assist in some events related to your business, such as wine tasting sessions.
  4. Think digital—China’s social media platforms are the key. Your customers will need content. They want to know about the history of your company and advice to choose their wine. Putting QR codes on your products would be a very good idea.
  5. Find a good local partner or a PEO in China” to assist you with all the difficulties you will encounter when doing business in China, such as HR, legal and administrative procedures. INS Global Consulting handles winery clients from around the world and can assist you on your journey to success in the Chinese market.

Here is a review from one of INS’s winery client’s:

Asia Export Manager Jonathan Dahan from Borie Manoux stated, “I am very pleased with both INS’s level of service and responsiveness.The paperwork is greatly facilitated and the solutions are adapted and tailored to different needs. In addition, the involvement of Mr. Hsu and his attention to detail contribute to INS’s impeccable service. INS keeps its promises and I have not hesitated to recommend them to my partners and friends in France.”

Interview Consultant

Pierre-Olivier Rives

This week, INS sat down to interview a consultant working in the Wine and Spirit industry in China.

We asked him about his experience in the Middle Kingdom and to give some advice to anyone who is willing to try his or her luck in the east!

  • Presentation

– Hello Pierre-Olivier, thank you for allowing us to interview you. 


Could you introduce yourself in a few words for those who do not know you yet?

My name is Pierre-Olivier Rives, I am 28 years old; I began in the management business which specialized in wines and spirits (2011/2013 Kedge Bordeaux via Mastere, Specialized in partnership with the Bordeaux Faculty of Oenology).

I have been working at “La Cave de Monsegur” (Bordeaux) for almost 5 years and I am currently in charge of the development activities in China, and will be based in Shanghai for 2 and a half years.

-I heard you are practicing Chinese? Tell us more about how you are learning this language.

There is a gap between being in fluent Chinese and practicing in everyday life. Preparing HSK3 (reading/listening/speaking on an average of 600 characters) and learning this language I spend an average of 6 hours a week studying. I strive to study regularly despite periods of work, which can sometimes very hectic or require extensive travel.

  • Your company

– Tell us about your company, its location, its business in China?

The « Cave coopérative de Monsegur » winery was founded in 1935. Since its creation, with the alliance of several winegrowers in the region of Bordeaux, it continues to modernize and produce fruitier wines with more structure, in AOC Bordeaux.

Historically a producer of wine in bulk for all the great merchants of Bordeaux, using the AOC consultancy services and by hiring Valérie Gosselin Conche as Commercial Director, over the past 5 years the bottles sales and direct export has expanded. This change in growth was also the basis for my own hiring.

Our 8 castles and many custom brands give us more and more opportunities to find partners in China. We opened a representative office in Shanghai two and a half years ago and I have been placed here to gain a better understanding of the culture and develop our presence in this high potential market.

Our business here is to find partners so we are able to import our products, but also for distribution. Supporting growth of our brand requires prospecting, coaching for sales with existing customers, and many meetings, tours, and tastings.

  • Working in China

– Why did you choose China? Please tell us about the attraction of this country, its seductive power, its location, etc …

China is a huge market, presently booming with prosperity. This country (whose GDP is about to double) has been prone to a gradual rise of classes. Meanwhile culture is ready for consumption thanks to the strong development of coastal cities over the past 20 years, which is now moving to secondary cities in central/west. The “success stories” of new fortunes give inspiration to the 1.4 billion potential buyers/consumers.

The attraction of this country is clearly in its size and its current and future economic power. The policy decisions of the moment are set to reduce too much hard liquor consumption (Baijiu), which affects our business. But it seems the consumer in China is not able to simply imitate the trends of European companies, they are multiplying; currently with no limit.

In the short and long term growth aspect, the geographical position of China may be strategic; it can afford to grow or spread more widely in South Asia. We are investing in a promising market.

– How did your company managed to send you to China, considering the administrative and legal difficulties foreigners encounter when trying to work in the Middle Kingdom?

It is now very simple and inexpensive to set up a company providing to choose the right partners. Companies that are established locally specialize in facilitation processes and Visa procedures. Our company started through the VIE Business France formula – regarding the type of initial contract – and is now located in the INS Consulting office via a local “consultant” contract, here in center of Shanghai.

– Can you mention the main issues you faced upon your arrival in this country?

Problems always seem big on arrival but are reduced – or not – over time.

Initially the main barriers lie in the culture, communication (local or upstream with France), or the different approaches taken in the business world. Political decisions also have an impact regularly and cause radical changes on various sectors. The main challenge is then to be present, to understand and monitor changes in demand, keep a strategic watch, and try to grow sustainably while remaining flexible.

– What advice would you give to all the young entrepreneurs eager to try their luck in the Middle Kingdom?

The first advice would be to come here; business is made through networking and meeting people already in business here.

Then, I would recommend staying near a Chinese structure/or being legally well established. This can take different forms in different projects: partners, employees, consultants, etc.

Moreover it seems to me crucial to always keep local interest (or individual countries) in mind in trade relations.

– Would you like to share with us about your experience in working with Chinese people; any details about the way of doing business with them.

One big detail would be obviously the “Gambei” of alcohol during business meals or karaoke: a common experience for most commercial relations here.

Also their sense of indirect communication: Do not say, “I do not like” rather, “I would find more products” or, “China is a complicated market” to address the price negotiations; and knowing whether to implement an example.

  • The future

– How do you see your future in China? Any projects (going in another country, expanding in other cities, etc…)?

Projects are – of course – to continue development and partnerships that have been commenced in China, not to give up on primary cities and expand the development of the secondary zones or those under development.

Although I am anxious to satisfy the work and see final results, I think that we should not bet everything in the Chinese market. Indeed the market has the ability to turn around again, which is not a stable situation for long-term activity. It is an opportunity to use the investment in China to gradually expand and reduce costs of operations in Asia, and we must take advantage of this now.

– Do you think China will continue to attract many entrepreneurs?

Locally entrepreneurship is embedded in the culture; the size of China and its current growth are not deceiving. Hopefully the government decides to continue opening up to foreign investors and allowing these opportunities.

Thank you for your answers!

Interview Consultant

Aymeric Dehont

This week, INS decided to interview a consultant working within the Wine and Spirit industry, in China.
We asked him to share his experience within the Middle Kingdom and to give some advices to anyone willing to try his luck down here!

  • Presentation

– Hello Aymeric, thank you for receiving us.
Could you introduce yourself in a few words for those who do not know you yet?
My name is Aymeric, I am French and have been living in Shanghai since 1 year and half.
I was born in the north of France, but studied in Rouen for 4 years, and 1 year of specialization in Wine Business in Dijon. During those 5 years I also lived in Chile, Vancouver Canada and Vietnam.

-I heard you are practicing Chinese? Tell us more about the practice of this language.

I started 1 year ago to learn Chinese, starting from 0! I am practicing 3 to 4 hours per week with a Chinese teacher and try to practice a lot by myself during my free time.
I am also training to pass HSK level 3 within 1 or 2 months.

  • Your company

– Tell us about your company, its location, its business in China?

I am here working for a French family company owner of 5 estates in Armagnac, Chateau de Laubade, and wines, Chateau Haut Selve, Chateau Loumelat, Chateau Le Bonnat and Chateau Peyros.

It a small company (PME) based in Bordeaux, with 2 area manager in New York and Shanghai.
We have been working in China since many years now selling our Armagnac and wines to sole importers that distribute in all provinces in China.

  • Working in China

– Why did you choose China? Please tell us about the attraction of this country, its seductive power, its location, etc …

I chose China because of the business opportunity I had and the excitement of discovering a country totally unfamiliar to me.
Also I wanted to challenge myself by going in a country with high difference of culture and standards.
I know China is a gateway to a good international business career.

– How did your company managed to send you to China, considering the administrative and legal difficulties foreigners encounter when trying to work in the Middle Kingdom?

By INS Global Consulting that was found by my previous colleague here in Shanghai. They took care of everything for my visa, my office in Shanghai and all administrative procedures that were mandatory due to my arrival.

– Can you mention the main issues you faced upon your arrival in this country?I experienced many actually: the difference of language, the difference of culture, the difficulty to find a great and cheap place to live. Also understanding this huge city is a tough challenge at some points.

– What advice would you give to all the young entrepreneurs eager to try their luck in the Middle Kingdom?

Go for it if you want a real challenge in your personal life and in your career.

Be relax, be strong, always think that here any people you meet can bring you strong opportunities.

– Would you like to share with us about your experience in working with Chinese people; any details about the way of doing business with them.

You have sometimes some difficulties to get information, and to understand how to act with them.

I saw you were interviewed by a Chinese Newspaper!

yes it was a great Honor for me to be approached by this newspaper and to be able to represent the Brand I am working for!
Awesome experience as you can see!

  • The future

– How do you see your future in China? Any projects (going in another country, expanding in other cities, etc…)?

At the moment I really want to go further in learning Mandarin.
My main goal now is to perform my mission in the enterprise I work for.

Do you think China will continue to attract many entrepreneurs?Yes, expansion is still under way with GO WEST policy and the new big hub project Jin Jin Ji (Beijing-Tianjin-Hebei provinces to join together).

-Thank you for your answers!

Green Card for Chinese

The demand of the green card for Chinese in the US has been increasing drastically in the last years. The Green card is the name for the United States Permanent Resident Card, it was formerly called Alien Registration Card. Its name comes from the fact that it used to be green between 1946 and 1964. Since 2010, the United States Permanent Resident Card reverted back to its original colour. China is becoming the world’s biggest exporter of people, and the Chinese are targeting the US in priority. The US is the currently the most popular destination, 80 per cent of the 7,641 investor immigrant visas approved in the U.S. in fiscal 2012 are taken up by Chinese according to The Wall Street Journal. The number of international migrants worldwide reached 232 million in 2013 according the Department of Economic and Social Affairs of the United Nations. This represents an increase of 33 per cent compared to 2000. The international migrants mainly reside in developed regions and Europe hosts the largest number of international migrants reaching 72 million.  However it is closely followed by Asia with 71 million where China represents more than a third.

As a result many Chinese have to go through the immigration process to become a permanent resident.

Types of green cards for Chinese residents

The green card is used as a proof for its holder, and enables a lawful permanent resident (LPR), permission to reside and take employment in the United States. It can nevertheless be removed in the case of unmet status or requirements.

A lawful permanent resident can apply for United States citizenship, or naturalization, after five years of residency. This period is shortened to three years if married to a U.S. citizen. It is stipulated in the U.S. immigration legislation in the Immigration and Nationality Act that resident status can be obtained though various channels. The immigration process can be undertaken through a family member, employment, investment, diversity lottery, refugee status and though the director of Central Intelligence decision.

Each visa is classified into different categories with different eligibility requirements and quotas. The family-sponsored is one of the fastest channels, but the presence of a relative on the American land isn’t frequent. Subsequently, employment based visas are most popular for Chinese migrants. It requires an employer to sponsor the visa and must result to a future job in the US. A subcategory of Visa called the EB-5 visa targets immigrant investors. This green card is obtainable way faster and requires an investment of $1,000,000. Other statuses such as the Diversity Immigrant (DV), Political Asylum and Refugee may be undertaken in more specific cases.

“The hardest visa to get in the world”

The Chinese media often describe the US green card as the hardest to get in the world. Online survey in China also showed that while the US is the favourite destination for migrant, it is also seen as the most difficult to reach for Chinese people.

Getting the US green card is particularly costly, despite its reasonable purchase price for the wealthy Chinese. It is often not realized that the US citizenship brings the US taxes to be practiced. All citizens must pay the income tax, all gains are at a rate of up to 39.6 per cent and long-term capital gains are taxed at 20 per cent for the wealthier taxpayers. Also the length of the whole application and approval process due to the quotas of green cards increases the difficulty of getting the permanent residence. Generally priority members are generally delivered in 6 months.  For non-immediate family members, the process may take up to 10 years since paperwork is processed on a first-come, first-serve basis. Getting no news for the first several months is habitual. As matter of security, once in the US, the owner must always carry permanent resident document.

Solutions to keep your Chinese employees

The labor market in China is changing. Companies are facing a high turnover. Solutions exist to protect yourself against a high turnover and keep your Chinese employees.

Upstream, recruit motivated employees

Some of the work keeping employees is done upstream during the recruitment. Indeed, the recruitment period should not be taken lightly, it is important to ensure that candidates fit the position. A good resume is not enough, you have to understand the candidates and verify that they are really motivated to work in your company or in your industry.

One of the main questions that companies are asking themselves, including foreign companies in China is: whether or not to outsource recruitment? This choice must be done individually by each manager, keeping in mind that hiring a Chinese candidate is very different to recruiting a Western candidate.

It is also very important to clarify and clearly define the tasks of the future candidate. An employee who has well-defined tasks and is really motivated will probably easily stay in business.
Finally, be very clear about how you want to hire employees legally, especially if you do not have a structure in China. Do not let quality candidates slip through your hands because the paperwork for hiring takes longer than expected.

Offer attractive conditions

The period prior employment is crucial in order to keep your employees, the conditions of the position should be too. Chinese employees, especially in large cities, are increasingly demanding. It is important to offer them attractive terms, this is why you should learn about the market wages. Wage conditions in China vary depending on many factors, including cities, skills and qualifications, type of structure etc.

One of the first criteria that will encourage Chinese employees to change from one company to another is of course the salary, you must ensure that the proposed wage correspond to the expectations and qualifications of the employee.

Another solution has been implemented by different companies and seems to be a good remedy to turnover: offer flexible schedules. With this solution, employees can manage their time by themselves, then they are evaluated on their results. This solution involves regular monitoring by managers.

Offer individualized monitoring

Finally, to keep your employees, they must feel supported and confident in their work. For this, it is also important to initially offer an excellent training, so that they can be very familiar with the products or services offered. With this confidence in their work, they will have all the cards in hand to succeed. When employees are paid on commission, it is in their interest to maximize their results, so they should have a very good knowledge of the products but also regular training to improve for example their sales techniques.

Finally, the manager must be in constant contact with his team, by, for example, offering monthly meetings. During those meetings, he can listen to their suggestions and complaints and provide solid answers to their questions and needs. These appointments must be fairly frequent; decisions are made quickly in China, so it is important to frequently follow the evolution of employees. However, be careful not to raise only issues and areas for improvement during these appointments, the concept of “face” is very important, they should not feel accused and can sometimes misinterpret the “feedback” as criticism. This solution allows to individually follow each employee, to verify whether his work is satisfying and if he will stay in your company.