Dissertation: Rise of the Dragon - the Chinese wine market
21 May 2012 by Raymond Noppé, CWM
Producers in the wine industry are competing in an increasingly global
marketplace. The phenomenal growth of the Chinese economy over the past
decade has encouraged international suppliers to enter the Chinese
Simultaneously, there has also been a significant growth of production and marketing of wines by Chinese-owned wineries.
This report will provide details about China’s potential to become the biggest export market for international wine producers and –traders, both in volume and value sales in Asia, along with China’s ability to infiltrate foreign markets through strategic marketing of its own domestically produced wines.
The Chinese local wine-producing industry has rapidly improved the quality of its wines since the introduction of Vinifera varieties and the many partnerships formed with foreign companies. The strategy of cooperation with large international wine groups not only enhances their competitiveness in the fast-growing local market, but also helps them to gain footholds in export markets for future global expansion. A number of domestic giants control the industry, and imported bulk wine is considered an economical and practical way to import quality wine and supply the market with competitively priced wine, in order to make up for what the Chinese can not produce themselves.
The Chinese market is extremely price sensitive, but despite this factor, there is massive sales potential for higher-priced, brand driven products as well as entry into the mid-priced bracket. France remains the number one supplier of bottled wine in terms of both volume and value and dominates the premium category.
Western culture fascinates the Chinese. Red wine sales account for 80% of all wine consumed. This can be contributed to the similarities found in the tannins of tea (still the number one beverage in China), the health benefits associated with it, and the fact that the colour red symbolises happiness, celebration, good luck, prosperity and success in Chinese culture.
Hong Kong, one of two Special Administrative Regions of the People’s Republic of China (the other region being Macau), is striving to become a regional wine trading and distribution centre in Asia due to the many advantages it possesses, similar to that of London.
Distribution remains the key obstacle preventing successful penetration into the Chinese market. The duty of exporters is to find trustworthy partners who specialises in the wine industry. The market is geographically fragmented. First tier cities, where disposable incomes are high, are the focus of wine consumption.
South African producers who wish to enter the Chinese market should research their individual target markets thoroughly and must not think of China or Asia for that matter, as a homogenous entity. The key to success is the establishment of long-lasting business relationships with importers, getting to grips with the cultural differences and pro-active marketing in the targeted areas.
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