Case Study: Wine exports to China rise in value before the mid-1990s, the wine market in Asia was non-existent and many wine producers did not see potential in the Asian markets. But during the late 1990s and early 2000s, the markets started to change, and, almost overnight, wine became a symbol of wealth and class. The only problem was that very few producers were serving the market.
As more producers became aware of the new potential markets, they started to enter China, Thailand, Singapore, Korea, and Japan. China posed specific problems for producers and importers as distribution channels and marketing strategies were virtually non-existent because the market was too new.
The wine market maintained double-digit growth from 2005 - 2010, and it should grow faster than any other alcoholic beverage sector in the coming five years. With consumption rising at 10% - 15% per year it can be tempting for producers, whose traditional markets are stagnant, to consider China as a possible solution to their problems. Though there is little doubt that the market will continue to expand, the challenges are numerous:
1. A lack of transparency, counterfeit products, and unreliable information.
2. Dominance of the domestic giants.
3. Consumer and cultural challenges.
4. Distribution and logistics.
The rewards are great for any foreign winery that can crack the market but the challenges are also great. The first step a winery must take before they carve out their niche, is to understand the reasons behind Chinese consumers buying habits, and how consumers purchase wine in China.
WHY CHINESE CONSUMERS BUY WINE
The majority of wine purchases are made during the major holidays: Chinese New Year, Spring Festival, and the mid-Autumn Festival. Most of these purchases are destined as gifts for people.
This is an interesting insight because gift-giving in China is important to the concept of face.
The Chinese wine consumer is typically a market follower, not a leader. He needs to feel safe about his purchase and does not want to lose face by choosing the wrong wine or admit that his knowledge of wine is limited.
Chinese consumers buy wine to impress or gain face (the Chinese word guanxi or the concept of face is somewhat analogous to influence or opportunities) within their social groups. Buying the right bottle of wine for a boss during the holidays could mean a promotion.
In contrast to America or Europe, wine is also used as a social lubricant in place of spirits or beer. European consumers will often pair wine with food but Chinese are more likely to use wine as a social lubricant at parties or events.
HOW CHINESE CONSUMERS BUY WINE
A survey conducted by the research company Wine Intelligence, which surveyed more than 1,000 Chinese upper middle-class drinkers of imported wine found that 75% of them said they often go online to look for wine information, and 62% said they frequently use social media as a source.
New wine consumers were increasingly reliant on the digital world to learn about wine, with an estimated 13 million Chinese adults frequently accessing information online. This is a significant percentage of consumers searching for information online.
Wineries that are looking to make an impact in China must create a strong digital strategy.
(Source: http://www.digitalintheround.com/chinese-wine-market-digital-strategy/)
Question 7a:
Which is the main macro-environment factor that provides an opportunity for wine products in China? Justify your answer.
(5 marks)
Question 7b:
Which is the macro-environment factor that leads Chinese consumers to purchase wine? Justify your answer.
(5 marks)
