China makes way for smaller producers and brands

With growth and diversification of China’s wine market, a panel of industry experts at a Vinexpo China conference noted a growth of smaller wine brands carving out a bigger share in the market, much like the trends seen in the fashion and beauty industries.

The panelists at the Vinexpo China conference: panel of industry experts including moderator Don St Pierre, CEO of Vinfolio; Sarah Heller MW; Alberto Fernandez, managing partner of Torres China; Mike Hu president of the FMCG Business Unit of Alibaba’s TMall; and Tommy Keeling, head of Asia Pacific research at IWSR.

China currently ranks as the world’s seventh biggest wine producer, and is soon predicted to become the world’s second largest wine consumer by 2021 after the US, according to Vinexpo.

This was an observation shared by a panel of industry experts including moderator Don St Pierre, CEO of Vinfolio; Sarah Heller MW; Alberto Fernandez, managing partner of Torres China; Mike Hu president of the FMCG Business Unit of Alibaba’s TMall; and Tommy Keeling, head of Asia Pacific research at IWSR.

Changes in the structure of the wine industry in China have seen the previous dominance of a handful of large and established brands such as Margaux, Concha y Torro, Penfolds and Torres gradually making way for smaller brands, the panelists noted.

Alberto Fernandez of Torres said that while wine producers previously relied heavily on a single importer to represent them, now wholesalers were often going to wine producers directly, changing the nature of the market significantly. However, some concerns were expressed that this has made it harder to build brand equity in China’s wine market.

“There is definitely interest among Chinese consumers to explore new brands that fit with their lifestyle, but wine producers need to invest in providing more content and engaging with wine influencers and key opinion leaders to create interest in their brands,” said Tmall’s Mike Hu.

He noted that 80% of the wines sold on Tmall are for home consumption, and that of these sales, two thirds are to consumers born after 1980. Hu believes that there is a huge opportunity for wine producers to create “flagship stores” online, which with the right content, interesting stories, conversations with winemakers and so on, will build interest, awareness and market share.

It was also noted by the panelists that ‘bring your own (BYO)’ wine culture in mainland China is particularly strong, as it’s protected by legislation for consumers to bring their own wines to restaurants and hotels.

Sarah Heller MW noted that consumers were being influenced much more by the tastes and opinions of their peer groups through social media platforms, such as WeChat groups, than by official resources or wine experts – one finding Heller reached when doing her Master of Wine research into online wine sales on different e-commerce platforms.

“Expert opinion such as Robert Parker scoring is much less influential in China than in other markets in determining wine choice,” she explained.

The importance of wine tourism was also cited, as Chinese consumers are much more likely to buy wines that they have encountered while travelling and can therefore show their friends.

Chinese wine tourism to Australia is a particularly strong trend. China has already become the biggest source of tourists for Australia, surpassing New Zealand for the first time last year.

In terms of the types of wine, China is still an overwhelmingly red wine market, with white, rosé and sparkling wines barely accounting for 20% of the market. All panelists agreed this is due to a market resistance to chilled drinks, which are traditionally not seen as very healthy by Chinese consumers. However, Tmall’s Hu believes that with the increase of online sales of wine, much of which is to younger consumers, this can be overcome.

Additionally, the issue of fake wine including copycats and lookalikes was discussed, a challenge in China’s market. Fernandez of Torres China reiterated the need to trademark brands, and also recommended that whole wine regions could also collectively trademark the area’s name to protect their regional brand.