Amid growing wine consumption in China, shifting trends in the market will impact how brands engage with the country's newly affluent consumers, industry experts said during a panel discussion May 29 at the Hong Kong edition of the Vinexpo wine and spirits trade show.
Guillaume Deglise, CEO of Vinexpo, outlined China's significance in the wine industry to the panel audience. "China, including Hong Kong, is now the fifth-largest wine-consuming market in the world," he said, citing a report by Vinexpo and the International Wine and Spirit Research Group, or IWSR.
The report also predicted that sales of wines in China will surge at an annual growth rate of nearly 40% to reach US$23 billion by 2021, which would set the country up to overtake the U.K. that year as the world's second-most-valuable wine market behind the U.S.
Within that growth, more Chinese consumers are chasing Western lifestyles and developing a taste for imported brands, according to Mike Hu, president of fast-moving consumer goods at Alibaba Group Holding Ltd.'s business-to-consumer marketplace Tmall. As a result, people are upgrading from domestic wines such as Great Wall, produced by a unit of China Foods Ltd., and Yantai Changyu Pioneer Wine Co. Ltd.'s label Changyu.
"Just like other categories, domestic brands are losing [market] share in recent years," Hu said. "Also, based on the consumption upgrade, consumers are looking for good-quality products, and especially imported brands. ... This is why we believe the imported brands will do better in the future."
Meanwhile, boutique wine producers are seeing a brighter future as consumer demographics skew younger, according to Hong Kong-based wine expert and commentator Sarah Heller. "There has been a big shift from an older generation who saw scale as evidence of quality," she said. "With the younger generation, there is an appreciation that small can be beautiful — there is much more interest in boutique brands."
In the e-commerce sector, for instance, about two-thirds of shoppers looking for wines in China were born after 1980, Heller said, adding that the figure has significant implications on branding efforts. "People are consuming wine information in the way that they are consuming all kinds of information — they want rich media [and] visuals; they don't want to sit down and read books."
Heller also said brands need to tell stories in an easier-to-digest way that evokes "a feeling" rather than focusing on technical information. "A lot of us in the wine industry spend so much time thinking about specific descriptors — 'Does our wine taste like cranberry or raspberry?' — and people didn't care. It's much more of these evocative and general terms such as malo, smooth and round [that generate interest]."
Despite all its potential, the Chinese market still poses challenges for certain types of wine. Rosé, which is typically served chilled, is a tough sell on the mainland due to Chinese people's aversion to cold beverages, according to Alberto Fernandez, managing director of wine importer and distributor Torres China, which was established by Miguel Torres SA.
"Even sparkling wine has been having two years of stagnation. ... then Champagne. The year before, the Hong Kong market imported more Champagne than the whole of China," Fernandez said. "Chinese cannot tolerate too much acidity like in sparkling wine or Champagne, and they are not eager about cold beverages."
From an import perspective, red wine still dominates about 80% of the Chinese market, according to Tommy Keeling, head of Asia-Pacific research for IWSR.
"The share of white wine and rosé has grown a little bit in recent years and might grow a little further, but they still face many challenges in China," Keeling said. "And there are other [perceived] health benefits that help with driving wine sales in China, which are associated with red wine mainly."
