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Wine - China - November 2014

“The abrupt shift in the wine market - with volume and average prices going down - seemed unimaginable when premium wines were seeing their retail values sky rocket. However, the sharp decline in importing and domestic production shows that the bubble is finally bursting. However, this is far from a disaster for the wine market with mass market returning as the key driver of the market. ”
– David Zhang, Research Analyst

This report discusses the following key topics:

  • How to revitalise the premium segment in the wine market
  • How can wine brands expand into lower tier city market?
  • Lack of drinking occasions becomes the most pronounced barrier
The penetration of wine amongst tier one-to-tier three city consumers is on a par with some developed markets, but drinking frequency remains very low. As such, the growth in the wine market is more to do with nurturing the existing drinkers to improve their level of knowledge about wine and further encourage them to consume more.
 
Brands also face the challenge of expanding the currently limited drinking occasions of wine and integrating the online and offline information channels to offer consumers a holistic experience.

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Table of contents

  1. Introduction

      • Methodology
        • Limitation
          • Definition
          • Executive Summary

              • The market is still undergoing a restructuring process
                • Figure 1: Best and worst-case forecast of China retail value sales of wine, by value, 2009-19
              • High penetration means increasing drinking frequency has become key
                • Figure 2: Wine drinking habits, August 2014
              • Culture and knowledge barriers deter consumers from drinking wine
                • Figure 3: Reasons for not drinking wine, August 2014
              • There is a lack of regular drinkers in the market
                • Figure 4: Penetration of different types of wines, August 2014
                • Figure 5: Drinking frequency of different types of wines, August 2014
              • Word of mouth is the main information channel
                • Figure 6: Attitudes towards advertising channels, August 2014
              • Small pack wine shows potential
                • Figure 7: General attitudes towards wine, August 2014
              • What we think
              • Issues and Insights

                • How to revitalise the premium segment in the wine market
                  • The facts
                    • The implications
                      • How can wine brands expand into lower tier city market?
                        • The facts
                          • The implications
                            • Lack of drinking occasions becomes the most pronounced barrier
                              • The facts
                                • The implications
                                • Trend Application

                                    • Collective Intelligence
                                      • Minimize Me
                                        • Return to the Experts
                                        • Market Drivers

                                          • Key points
                                            • The growing number of millionaires brings hope to the premium segment
                                              • Shanghai Free Trade Zone and its impact on wine category
                                                • The deal between China and EU ends disputes
                                                  • New government scheme attracting investment on vineyards and wineries in the Western China
                                                    • Growing number of consumers going online
                                                    • Market Size and Forecast

                                                      • Key points
                                                        • The market is still undergoing a restructuring process
                                                          • Figure 8: Value and volume retail sales for wine in China, 2009-19
                                                        • The performance of imported wine from different regions varies
                                                          • Wine from France
                                                            • Wine from Italy
                                                              • Wine from South Africa
                                                                • Wine from Chile
                                                                  • Figure 9: Best and worst-case forecast of China retail value sales of wine, by value, 2009-19
                                                                  • Figure 10: Best- and worst-case forecast of China retail sales of wine, by volume, 2009-19
                                                                • Forecast methodology
                                                                • Market Share

                                                                  • Key points
                                                                    • The share of domestic wine is decreasing
                                                                      • Figure 11: Market share of leading brands in the wine retail market, by value and volume, 2012-13
                                                                    • The market is shifting towards entry level wine with accessible prices
                                                                    • Who’s Innovating?

                                                                      • Key points
                                                                        • The blurring product origins
                                                                          • French wine, made in China
                                                                            • New look of imported wine – made in France owned by Chinese
                                                                              • Downscale with quality at heart – the future of domestic vineyards
                                                                                • New taste of domestic wine – not too sweet anymore
                                                                                  • New types of endorsement: president wine and expert signature wine
                                                                                    • Food pairing helps wine to expand into new occasions
                                                                                    • Companies and Brands

                                                                                      • Key points
                                                                                        • Changyu Pioneer Wine Company Ltd
                                                                                          • Great Wall (China Foods)
                                                                                            • Dynasty Fine Wine Group Ltd
                                                                                            • The Consumer – Wine Drinking Habits

                                                                                              • Key points
                                                                                                • High penetration means increasing drinking frequency becomes the key
                                                                                                  • Figure 12: Wine drinking habits, August 2014
                                                                                                • Older, richer consumers living in tier one cities tend to be wine drinkers
                                                                                                  • Figure 13: Drinkers of wine, by demographics, August 2014
                                                                                                • Imported wine tends to attract more sophisticated consumers
                                                                                                  • Figure 14: Imported wine drinkers, by selected demographics, August 2014
                                                                                              • The Consumer – Reasons for not Drinking Wine

                                                                                                • Key points
                                                                                                  • Culture and knowledge barriers deter consumers from drinking wine
                                                                                                    • Figure 15: Reasons for not drinking wine, August 2014
                                                                                                  • Peer pressure deters consumers from drinking wine
                                                                                                    • Lack of knowledge remain as a key barrier
                                                                                                      • Wine is considered as good value for money
                                                                                                        • The steep learning curve stops business owners from trying wine
                                                                                                          • Figure 16: Agreement with the statement “There are too many wine brands to choose from”, by profession, August 2014
                                                                                                      • The Consumer – Drinking Frequency

                                                                                                        • Key points
                                                                                                          • There is a lack of regular drinkers in the market
                                                                                                            • Figure 17: Penetration of different types of wines, August 2014
                                                                                                            • Figure 18: Drinking frequency of different types of wines, August 2014
                                                                                                          • Drinkers and drinking habits of red wine
                                                                                                            • Figure 19: Drinkers of red wine, by types of red wine drunk, August 2014
                                                                                                          • Young consumers with high level of personal income tend to drink red wine on a weekly basis
                                                                                                            • Figure 20: Drinkers of red wine, by age and personal income, August 2014
                                                                                                          • Non-drinkers of red wine are likely to be women and high earners
                                                                                                            • Figure 21: Non-drinkers of red wine, by household income and gender, August 2014
                                                                                                          • White wine drinkers and their drinking habits
                                                                                                            • Figure 22: Drinkers of white wine, by selected demographics, August 2014
                                                                                                          • Female wine drinkers with high income are more likely to drink white wine every month
                                                                                                            • Figure 23: Wine drinkers who have drunk white wine several times a week, by gender and income, August 2014
                                                                                                          • Drinkers of sparkling wine
                                                                                                            • Figure 24: Sparkling wine drinkers, by city tier and personal income, August 2014
                                                                                                        • The Consumer – Attitudes towards Advertising Channels

                                                                                                          • Key points
                                                                                                            • Word of mouth is the main information channel
                                                                                                              • Figure 25: Attitudes towards advertising channels, August 2014
                                                                                                            • Online becomes a key channel to obtain relevant information…
                                                                                                              • …but physical stores still play a vital role
                                                                                                                • Lower tier city consumers are more likely to be exposed under wine adverts
                                                                                                                  • Figure 26: Agreement with the statement ‘I have seen wine advertisements in the past six months’, by city tiers, August 2014
                                                                                                                • High earners pay more attention to researching before making a decision
                                                                                                                  • Figure 27: Online information searching behaviour, by income, August 2014
                                                                                                                • Brand ambassadors work better to attract the young consumers with higher income
                                                                                                                  • Figure 28: Agreement with the statement ‘a brand spokesperson is important to me when deciding which wine over the other ’, by income, August 2014
                                                                                                                • Female drinkers in their twenties frustrated by lack of wine-related information
                                                                                                                  • Figure 29: Agreement with the statement ‘There is a lack of information about wine in the media ’, by income, August 2014
                                                                                                              • The Consumer – Typical Spend on Wine

                                                                                                                • Key points
                                                                                                                  • RMB100-299 is the pricing spot for drinking at home
                                                                                                                    • Figure 30: typical spending on wine, August 2014
                                                                                                                  • The gifting market has seen the biggest spending decline
                                                                                                                    • Wine drinkers from lower tier cities are more likely to drink cheap wines
                                                                                                                      • Figure 31: Consumers who drank wine costing less than RMB50 per bottle at home, by city tier August 2014
                                                                                                                    • Premium products are more likely to be embraced by female wine drinkers with high income
                                                                                                                      • Figure 32: Selected consumer spending patterns on wine, by gender and income, August 2014
                                                                                                                    • Shanghainese are less likely to drink ultra-expensive wines
                                                                                                                      • Figure 33: Selected consumer spending patterns on wine, by regions, August 2014
                                                                                                                    • Young elites show potential in the high-end segment
                                                                                                                      • Figure 34: Selected consumer spending patterns on wine, by age and personal income, August 2014
                                                                                                                    • Experience with imported wine encourages consumers to trade up
                                                                                                                      • Figure 35: Price of wine consumed, by type of wine drunk in the last six months, August 2014
                                                                                                                  • The Consumer – Purchase Decision Making Process

                                                                                                                    • Key points
                                                                                                                      • Penetration of online shopping in wine category is still relatively low
                                                                                                                        • Figure 36: Purchase decision making when buying wine online, August 2014
                                                                                                                      • The lack of trust hampers the online retail channel for wine
                                                                                                                        • Lack of detailed information makes online channels less appealing
                                                                                                                          • The quality of service determines consumers’ willingness to buy
                                                                                                                            • Figure 37: Purchase decision making process when buying wine from offline channels, August 2014
                                                                                                                          • Buying from overseas: a challenge to the domestic market
                                                                                                                            • Figure 38: Purchase decision making process when buying wine from overseas channels, August 2014
                                                                                                                          • Offline channels play a vital role in the premium wine segment
                                                                                                                            • Figure 39: Selected attitudes towards offline channels, by monthly personal income, August 2014
                                                                                                                        • The Consumer – General Attitudes towards Wine

                                                                                                                          • Key points
                                                                                                                            • Small pack wine shows potential
                                                                                                                              • Figure 40: General attitudes towards wine, August 2014
                                                                                                                            • Highlighting suitable drinking occasions could help brands to stand out
                                                                                                                              • Imported wines and trusted channels enjoy price premium
                                                                                                                                • Young women are more interested in small packs
                                                                                                                                  • Figure 41: Agreement with the statement ’I would be interested in wine products in small packs’, by gender and age, August 2014
                                                                                                                                • Highlighting suitable occasions provides another way to appeal affluent female consumers…
                                                                                                                                  • Figure 42: Agreement with the statement ‘there is a lack of wine products designed for specific occasions’, by gender and income, August 2014
                                                                                                                                • …and women in their forties think wine can reflect their social status
                                                                                                                                  • Figure 43: Agreement with the statement ‘Drinking wine can better reflect one’s taste unlike other types of alcoholic drinks, by gender and income, August 2014
                                                                                                                                • Lower tier cities remain as price sensitive
                                                                                                                                  • Figure 44: Agreement with the statement ‘The wine products available are mostly overpriced’, by city tier, August 2014
                                                                                                                                • Product origin is not important to young consumers in their twenties
                                                                                                                                  • Figure 45: The disagreement with the statement ‘The origin of wine is a key factor in determining its quality’, by city tier, August 2014
                                                                                                                              • Appendix – Wine Drinking Habits

                                                                                                                                  • Figure 46: Wine drinking habits, August 2014
                                                                                                                                  • Figure 47: Wine drinking habits, by demographics, August 2014
                                                                                                                                  • Figure 48: Typical spending on wine, by wine drinking habits, August 2014
                                                                                                                                  • Figure 49: Typical spending on wine, by wine drinking habits, August 2014
                                                                                                                              • Appendix – Reasons for not Drinking Wine

                                                                                                                                  • Figure 50: Reasons for not drinking wine, August 2014
                                                                                                                                  • Figure 51: Most popular reasons for not drinking wine, by demographics, August 2014
                                                                                                                                  • Figure 52: Next most popular reasons for not drinking wine, by demographics, August 2014
                                                                                                                              • Appendix – Drinking Frequency

                                                                                                                                  • Figure 53: Drinking frequency of different types of wines, August 2014
                                                                                                                                  • Figure 54: Most popular drinking frequency of different types of wines – Red wine, by demographics, August 2014
                                                                                                                                  • Figure 55: Next most popular drinking frequency of different types of wines – Red wine, by demographics, August 2014
                                                                                                                                  • Figure 56: Most popular drinking frequency of different types of wines – White wine, by demographics, August 2014
                                                                                                                                  • Figure 57: Next most popular drinking frequency of different types of wines – White wine, by demographics, August 2014
                                                                                                                                  • Figure 58: Most popular drinking frequency of different types of wines – Champagne/sparkling wine, by demographics, August 2014
                                                                                                                                  • Figure 59: Next most popular drinking frequency of different types of wines – Champagne/sparkling wine, by demographics, August 2014
                                                                                                                                  • Figure 60: Most popular drinking frequency of different types of wines – rosé wine, by demographics, August 2014
                                                                                                                                  • Figure 61: Next most popular drinking frequency of different types of wines – rosé wine, by demographics, August 2014
                                                                                                                                  • Figure 62: Attitudes towards advertising channels, by most popular drinking frequency of different types of wines – Red wine , August 2014
                                                                                                                                  • Figure 63: Attitudes towards advertising channels, by next most popular drinking frequency of different types of wines – Red wine , August 2014
                                                                                                                                  • Figure 64: Attitudes towards advertising channels, by drinking frequency of different types of wines – White wine, August 2014
                                                                                                                                  • Figure 65: Attitudes towards advertising channels, by drinking frequency of different types of wines – Champagne/sparkling wine, August 2014
                                                                                                                                  • Figure 66: Attitudes towards advertising channels, by drinking frequency of different types of wines – rosé wine, August 2014
                                                                                                                                  • Figure 67: Typical spending on wine, by drinking frequency of different types of wines – Red wine, August 2014
                                                                                                                                  • Figure 68: Typical spending on wine, by drinking frequency of different types of wines – White wine, August 2014
                                                                                                                                  • Figure 69: Typical spending on wine, by drinking frequency of different types of wines – Champagne/sparkling wine, August 2014
                                                                                                                                  • Figure 70: Typical spending on wine, by drinking frequency of different types of wines – rosé wine, August 2014
                                                                                                                                  • Figure 71: Typical spending on wine, by drinking frequency of different types of wines – Red wine, August 2014
                                                                                                                                  • Figure 72: Typical spending on wine, by drinking frequency of different types of wines – White wine, August 2014
                                                                                                                                  • Figure 73: Typical spending on wine, by drinking frequency of different types of wines – Champagne/sparkling wine, August 2014
                                                                                                                                  • Figure 74: Typical spending on wine, by drinking frequency of different types of wines – rosé wine, August 2014
                                                                                                                                  • Figure 75: Channels used to obtain information on wine, by most popular drinking frequency of different types of wines – Red wine, August 2014
                                                                                                                                  • Figure 76: Channels used to obtain information on wine, by next most popular drinking frequency of different types of wines – Red wine, August 2014
                                                                                                                                  • Figure 77: Channels used to obtain information on wine, by drinking frequency of different types of wines – White wine, August 2014
                                                                                                                                  • Figure 78: Channels used to obtain information on wine, by drinking frequency of different types of wines – Champagne/sparkling wine, August 2014
                                                                                                                                  • Figure 79: Channels used to obtain information on wine, by drinking frequency of different types of wines – rosé wine, August 2014
                                                                                                                                  • Figure 80: General attitudes towards wine, by most popular drinking frequency of different types of wines – Red wine, August 2014
                                                                                                                                  • Figure 81: General attitudes towards wine, by next most popular drinking frequency of different types of wines – Red wine, August 2014
                                                                                                                                  • Figure 82: General attitudes towards wine, by drinking frequency of different types of wines – White wine, August 2014
                                                                                                                                  • Figure 83: General attitudes towards wine, by drinking frequency of different types of wines – Champagne/sparkling wine, August 2014
                                                                                                                                  • Figure 84: General attitudes towards wine, by drinking frequency of different types of wines – rosé wine, August 2014
                                                                                                                              • Appendix – Attitudes towards Advertising Channels

                                                                                                                                  • Figure 85: Attitudes towards advertising channels, August 2014
                                                                                                                                  • Figure 86: Most popular attitudes towards advertising channels, by demographics, August 2014
                                                                                                                                  • Figure 87: Next most popular attitudes towards advertising channels, by demographics, August 2014
                                                                                                                              • Appendix – Typical Spending on Wine

                                                                                                                                  • Figure 88: Typical spending on wine, August 2014
                                                                                                                                  • Figure 89: Most popular typical spending on wine – Drinking at home, by demographics, August 2014
                                                                                                                                  • Figure 90: Next most popular typical spending on wine – Drinking at home, by demographics, August 2014
                                                                                                                                  • Figure 91: Most popular typical spending on wine – Drinking out of home, by demographics, August 2014
                                                                                                                                  • Figure 92: Next most popular typical spending on wine – Drinking out of home, by demographics, August 2014
                                                                                                                                  • Figure 93: Most popular typical spending on wine – As a gift, by demographics, August 2014
                                                                                                                                  • Figure 94: Next most popular typical spending on wine – As a gift, by demographics, August 2014
                                                                                                                              • Appendix – Channels Used to Obtain Information on Wine

                                                                                                                                  • Figure 95: Channels used to obtain information on wine, August 2014
                                                                                                                                  • Figure 96: Channels used to obtain information on wine – Online, by demographics, August 2014
                                                                                                                                  • Figure 97: Channels used to obtain information on wine – In-store, by demographics, August 2014
                                                                                                                                  • Figure 98: Channels used to obtain information on wine – Overseas, by demographics, August 2014
                                                                                                                              • Appendix – General Attitudes towards Wine

                                                                                                                                  • Figure 99: General attitudes towards wine, August 2014
                                                                                                                                  • Figure 100: Agreement with the statement ‘I would be interested in wine products in small packs (eg 100ml) for wine tasting’ by demographics, August 2014
                                                                                                                                  • Figure 101: Agreement with the statement ‘There is a lack of wine products designed for specific drinking occasions’, by demographics, August 2014
                                                                                                                                  • Figure 102: Agreement with the statement ‘The wine products available are mostly overpriced’, by demographics, August 2014
                                                                                                                                  • Figure 103: Agreement with the statement ‘Very frequent promotions of a wine product will put me off from buying it’, by demographics, August 2014
                                                                                                                                  • Figure 104: Agreement with the statement ‘Imported wine products are not as good value for money as domestic ones’, by demographics, August 2014
                                                                                                                                  • Figure 105: Agreement with the statement ‘I am willing to stick to the reliable wine purchase channel even if it doesn’t offer the lowest price’, by demographics, August 2014
                                                                                                                                  • Figure 106: Agreement with the statement ‘The origin of wine is a key factor in determining its quality’, by demographics, August 2014
                                                                                                                                  • Figure 107: Agreement with the statement ‘The quality of imported wine products are better than domestic ones’, by demographics, August 2014
                                                                                                                                  • Figure 108: Agreement with the statement ‘It is worth paying more for wine from vineyards with a long history’, by demographics, August 2014
                                                                                                                                  • Figure 109: Agreement with the statement ‘Drinking wine can better reflect one’s taste unlike other types of alcoholic drinks’, by demographics, August 2014
                                                                                                                                  • Figure 110: Agreement with the statement ‘When deciding which wine product to buy, it is better to refer to both online and offline information’, by demographics, August 2014
                                                                                                                                  • Figure 111: Agreement with the statement ‘It is difficult to choose among so many wine brands’, by demographics, August 2014

                                                                                                                              Companies Covered

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                                                                                                                              Wine - China - November 2014

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