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2019 : Is the Chinese wine market hungover?

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It’s 2019 and the wine market in China still remains mysterious. We constantly hear contradictory news as a growing yet declining market, meaning that it’s still difficult to enter the wine market in China.  Wine is finally in the FMCG (Fast Moving Consumer Goods) category yet is impacted by economic turmoil as luxury goods would be. So, what is really happening in the Chinese wine world? And what kind of future can we predict given the current economic situation? To find out, here are four questions that need to be answered:

China wine market: Did 2000 bottled wine importers really go bankrupt in 2019? 

Short answer: No. 
Long answer: In trade news, we’ve seen that 2000 out of 6411 wine importers went bankrupt in China. This data was actually reinterpreted from the WBO (Wine Business Organisation) which quoted that 2000 importers did not import any wine in 2019. Whilst logic dictates that if an importer doesn’t import anything for six months it may indeed be heading for failure, the situation is not that simple. The fact of the matter is that consumption has slowed down and thus warehouses have filled up. It’s true that some wine importers have indeed failed and by doing so have flooded the market with more wine than it can digest. Many are therefore putting new imports on standby so that they can shift the extra stock available on the market.
On a brighter note, some experts insist that wine consumption is stable and that the market is becoming more structured and concentrated.

What’s with the wine in 2019?

As it has been established, China is a red wine market (which represents 90% of consumption in the country) and has seen a rising thirst for imported wine, making up 40% of the market. There has been a tremendous increase over the last decade with a few bumps in the road, notably in 2013. On a yearly basis, Chinese consumers are now drinking 1.3L of wine per capita, a much lower figure compared to their Asian neighbours (2.94L in Japan). Nevertheless, this is still somewhat impressive when considering that 20 years ago, at the beginning of the 2000’s, it was thought that the Chinese would never drink grape wine.

2018 and 2019 reshuffled the whole wine market: value increased but volume dropped. France lost its top place in the Chinese market to Australia. According to Australian newspapers, Australian wine explosion could be just the beginning.
Chile still remains in the top 3. Whilst a free-trade agreement, and to some extent Australia immigration policy play a role in this change in rankings, this shift signifies that Chinese consumers are becoming more knowledgeable and more willing to expand their horizons.

On a more general note, we can see that wine is increasing in popularity due to current trends: you can see it consumed in bars, clubs and restaurants but also as a result of political will: it’s seen as healthier than traditional rice wine (Bai Jiu). The official alcohol for large political events in China is now wine.

Which wines are working in China, and which are not? 

French wine imports in China undeniably suffered in 2018 and still continue to suffer in 2019, especially those from Bordeaux. However, other French wine from less popular regions such as Languedoc, Rhône Valley and Burgundy have managed to somewhat keep their stability.

Australia is definitely the strong winner over the last few years, not only thanks to the free trade agreement between the two countries, but also to the one strong brand which is almost a household name: Penfolds.
Chile has and is still strong especially on the more entry level segment as well as its bulk export (2/3) and also enjoy a free trade agreement with China for wine.
Other countries such as Italy, Spain, Argentina, South Africa and New Zealand are fighting for the remaining crumbs, so to speak. Yet, with a population of 1.4 billion people, even the crumbs are significant.

Where opportunities exist in the China wine market?

China is a fragmented market and Chinese importers are looking for their special gems: they could very well be from Bordeaux with distinctive packaging or entry level wine from the South of France. The point is, while market data explains the overall trends, individual importers are looking to diversify and fill gaps in the market: some specialising in Chile may decide to expand to France. There is no one recipe to success, but many:

  • Channels: Focusing on online channels such as JD.com or Tmall may do the trick.
  • Outlook & Branding: Distinctive packaging and a strong brand story will help importers to market wine that consumers can remember and identify with.
  • Marketing & Service: Including a marketing budget to organise promotional events such as wine tasting events and giveaways may give you a boost in the market. Or even bring your distributors to visit the vineyards!
  • Awards: A gold medal is very prized by distributors, introducing your wine to many competitions may improve your odds.
  • Wine quality: Constant quality is important, oak flavours are favoured, and in many regions in China high alcohol wine is a preferred choice.
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