mardi 9 décembre 2014

The market condition for domestic wine makers

The market condition for domestic wine makers

Wine culture in China

wine culture in China

While wine consuming demand is declining in Europe, growth in the United States is dragging down, there is only 1 growth area where the market potential for wine is still up swinging: Asia. And China is the most distinctively performing wine market in Asia in terms of both volume and value growth. Now China is the fifth largest wine consumer in the world, with an emerging and growing middle class and constantly increasing demand for premium lifestyle. They are typically located in cities, holding more disposable income and are willing to spend on high quality products and have fun, and wine, especially imported wine has becomes one of pastimes that satisfy them just fine. Without a doubt, wine occupies an important place in the culture and life of Chinese people. Ordinary Chinese people have always use alcohol to celebrate the happy moments in their lives, if a baby was born for 100 days, parents would people in for a drink; when someone builds a new house, marries, starts a business, makes a fortune or lives a long life, he surely will invite people in for a drinking session. It seems also true that friendship only depends on the volume I'd drink being consumed, "if we are good friends, then bottom up; if not, then just take a "sip" "is a common phrase cited when making a toast in gatherings.
A promising domestic wine market
Even though Chinese government launched a crackdown campaign on extravagance and corruption which leads to its officials cutting back on lavish spending on premium wine either during lunch with visitors or meeting important superiors, for general public, they still enjoy the accompany of friends and wine; besides, Chinese people's drinking pattern has gone through a major change from rice or grain made wine to red or white wine due to the health benefit associated with red wine. But China's wine market seems predominated by red wine over white one. This predicts a upcoming continuous booming of wine industry. Chinese wine consumption has experienced a sharp increase in total in the past decade from 246.9 mhl to 964 mhl according to data source generated by Anderson and Nelgen In 2010. Current consumption per capital in China was 1.2 liters in 2012 and still has room for increase. The imported wine accounts for 25% of volume sales in China in 2012, with a soaring growth of wine imports from 12.5 mhl to 162mhl including bottled wine, bulk wine and sparkling wine, which confirms that China is rapidly emerging as an appealing market for foreign wine makers.

Major players in domestic wine market
Despite the thriving wine imports, China's domestic wine market remains at an early stage of development both in light of domestic wine makers and consumers. The annual consumption of wine per capita is still low compared to that in other countries. Also consumers treat wine in the very beginning as a symbol of social status, a fashion. Wines are consumed one shots after another with the objective of getting drunk rather than enjoying it slowly, even it is for luxury imported wine, more often than not, imported wine is served to impress a guest or a business partner or use as a gift. In addition, Chinese consumers are prone to separate eating with drinking, which is a simplistic mentality that requires more wine information and education.

As for domestic wine makers, it is quite obvious that Chinese wine production still has a long way to go compared with the profound historical heritage in Europe and the favorable natural conditions granted in United States, Australia and New Zealand. And it is not ready to compete with famous international brands not only in high-end wine market. Yet China's highly potentially consumer wine market gives market participants an opportunity to shape it to their advantage. There are estimated 500 wine production sites nationwide, but only 10 of them has the capability to produce more than 10,000 tons of wine annually. Moreover, only an estimated 50 wineries are able to produce wine in conformity with international quality standards. The major players in domestic wine market includes Changyu, the biggest winery in China, headquartered in Yantai, Shandong Province, which according to International Journal of Wine Research 2009 is among the main grape and wine producing areas lying in the northern part together with Shanxi, Beijing, Henan, Hebei, Tianjin, Jilin, providing around 87% of entire domestic wine supply. The company owns the oldest wine cellar in China, builds Chateau Changyu-Castel in Yantai as well as in New Zealand and operates an integrated business with their own vineyard, harvesting, crushing grapes, making it to wine and bottling it. Changyu also needs to source grapes and grape juice from independent growers for producing lower-priced products. 



Another domestic wine maker is China Great Wall, based in Hebei Province. This company not only established Vineyards in Shandong Province, but also bought vineyards in France and Chili to improve wine quality, enhance its international competitiveness, therefore to expand its business to overseas market. And its product ranges from budget-end wines to high-end ones. While Dynasty, another top brand in China's wine market, is a joint venture founded by Tianjin City Grape Garden and Remy Martin(a French winery) and presents itself as a premium wine producer. Dynasty is especially strong in coastal cities like Shanghai, Hangzhou and Suzhou. All the top local brands enjoy high brand loyalty, in the meantime, they import vine cutting technology from overseas and still focus on low-end wine market. 

By Daxue Consulting
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