Driving Online Growth in the China Wine Market
Shandong province isn’t likely the first wine producing region that comes to mind when thinking about the world’s most fertile terroirs. But although it may lack the famous history of France, Italy and even Australia’s vineyards, two-thirds of China’s domestic wine comes from Shandong. And while Chinese citizens have begun developing a ravenous thirst for local wines, they’ve also increasingly turned to imported wines from the world’s most reputable vineyards. This presents, and will continue to present ,opportunities for global and Western brands looking to enter the China wine market.
Lay of the Land
China produced upwards of 930 million liters of wine in 2018 and had the second largest vineyard area in the world behind Spain. While it trails wine-making powerhouses like Italy, France and the United States, its production comes close to rivalling other prominent countries like Argentina, Chile and South Africa. However, where China best displays its economic heft and taste for grapes is in wine imports. It is among the five largest importers of wine in the world, along with Germany, the UK, the US and France—the five of which account for more than half of global wine imports in 2018.
Imported wines account for 40% of the China wine market, with consumer growth of imported wines increasing by 16.5% from 2014-2019. The average Chinese citizen consumed a little over two bottles of wine (1.2 liters) in 2018, and 1.3 liters in 2017. Wine-lovers in China have also shown a proclivity and willingness to spend money on quality wine and slowly turn away from value-wines— a trajectory similar to that seen in Western markets as their wine pallets became increasingly more sophisticated.
Wine and E-commerce
The facility with which Chinese consumers pursue and procure products from the internet extends to wine as well. According to Wine Intelligence, 46% of wine drinkers in China have purchased bottles from an online store, with online shopping penetration averaging out to 40% across most demographics. Chinese consumers’ developing taste for more expensive wine can also be seen in their online shopping habits. In 2016, 21% of online wine shoppers had spent 400 RMB or above on wine in the previous six months. In 2019, that number jumped to 28%. JD.com and Tmall are where most mainstream wine drinkers will turn for their online shopping, but WeChat stores often offer niche and premium wines as well.
COVID’s Impact on China’s Wine Market
While wine sales increased across North America and Western Europe amid the novel coronavirus pandemic, China’s wine consumption has not followed suit. As nations put their citizens on lockdown, resulting in much more time at home, Westerners seemed to gravitate towards wine and spirits as their drink of choice. But China’s wine culture differs from other nations. Wine is much more commonly paired with food and served during meals as part of a gathering of people—gatherings rendered impossible by social distancing measures. The closure of restaurants and a ban on foreign travellers has also put a damper on wine sales in China overall. However, for wine brands in the West looking to sell online via e-commerce, this change in behaviour presents a massive opportunity. Moreover, as opposed to many North American jurisdictions where liquor stores remained open, China’s were closed, thereby eliminating the opportunity to purchase wine from brick and mortar locations.
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While the details on how COVID-19 will impact consumer behaviours in the PRC, there are several reasons to be optimistic about the China wine market.
The 50 million upper middle class Chinese citizens located in Tier 1, 2 and 3 cities have actually modestly increased their consumption of wine over the course of the lockdown. There are also some suggestions that Chinese drinkers are beginning to purchase wine for informal and non-food occasions. With affluent, modern and internationally-minded Chinese millennials coming of age, attitudes towards wine are changing and gradually falling more in-line with those of Western cultures.
COVID-19 has also begun to shape and accelerate trends in e-commerce for Chinese consumers—a consumer base that was already ahead of the West when it comes to online shopping.
With consumers already showing a willingness to purchase wine online, and a younger generation of tech-savvy, mobile-first wine-lovers shaping the culture of wine drinkers in China, there is an opportunity for Western brands to make sure that their wine is properly marketed and supported in places where the next generation of wine drinkers shop online.
China might not come to mind just yet as a wine-drinking, wine-producing, and wine-loving nation, but it should be.
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