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The New Chinese Wine Consumer

Chinese crackdown on corporate excess forces North American exporters to get creative

by Kate Lavin
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U.S. wine represents just a small percent of the total wine imported into China. Source: DPI State Government of Victoria report.
Napa, Calif.—After years of targeting Chinese government officials and businessmen known to buy cases of imported wine for banquets and gifts, speakers at the Exporting Wine to China conference hosted Oct. 16 by The Seminar Group said it’s time for executives in the North American wine industry to consider marketing to affluent women in China’s urban centers.

Linsey Gallagher, vice president of international marketing for the San Francisco, Calif.-based Wine Institute (WI), said the Chinese government has made an effort to crack down on corporate excess and gifting, and WI has seen a slowdown in growth during the past six months as a result.

“Right now 19 million people can afford a bottle of imported wine in China,” Gallagher reports, and 45% of these consumers live in Shanghai.

Brady Ni of The Nielsen Co. flew in from Shanghai for the export seminar and reported that consumer confidence among Chinese is nearing a historic peak. “People are willing to spend,” he said, and the places they spend their money are changing. Ni told the audience that consumers in the city of 19 million do much of their shopping at nearby convenience stores, a shift from the popular hypermarkets.

As far as the female segment of the market, Ni said Diageo has spent a lot of money marketing its Bailey’s Irish Cream liqueur to attract urban women consumers, “And it has worked.” And while the tale of businessmen combining expensive red wine with Sprite seems to have gone by the wayside, Ni said the practice is alive and well with young, urban consumers, for whom it is common to down drinks quickly. Diluting the wine makes it last longer, and, he said, “They like the sparkles.”

Forced culture
Michael Parr, vice president of international sales for Wente Vineyards of Livermore, Calif., said that Chinese consumers’ interest in wine has grown significantly in recent years, “but their understanding of wine and wine’s role in western culture has not.

“It might be a long-term goal to have Chinese drink wine like we do in the western culture, but for now we should understand how/when they drink,” he said. Rather than encouraging the idea of drinking wine every night with dinner, Parr encourages marketing bottles to be opened for special occasions.

That said, it is not uncommon for women in China to drink a glass of red wine before bed for its perceived health benefits.

Raising awareness
Around 83% of the wine consumed in China is domestically produced, and of the wine that is imported, nearly 50% comes from France. It’s not that Chinese wine drinkers are biased against U.S. wines, Gallagher said, rather, many Chinese consumers have no idea that California produces wine at all. In 2012 the U.S. was the No. 6 producer of wine imports in China, but it represented less than 5% of the total wine imports by volume.

“Australia has made a real push in China recently. … We still find ourselves in a pack with the rest of the folks.” As far as regional awareness among serious wine consumers in China, Napa Valley and Sonoma are on the radar, but at nowhere near the same level as French winemaking regions.

Visiting the U.S.
According to Gallagher, Chinese tourists are expected to be the No. 1 international group visiting California by 2015. Until then, Michael T. McCune of Iconoculture said it is important to align your wine company with the image you are projecting. “What if someone came to the U.S. and tried to find your winery, and found out it was in a corporate office and tweeted that via their own micro blog?” McCune asked.

Weibo, the Chinese equivalent of Twitter, surpassed 400,000 users in 2012. The reach could be huge, McCune said, and executives in the United States could see the effects on profits and have no idea why it happened.

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Wine Industry Metrics
Off-Premise Sales » Month   12 Months  
August 2015 $608 million
$8,178 million
August 2014 $568 million $7,729 million
Direct-to-Consumer Shipments » Month   12 Months  
August 2015 $80 million
$1,908 million
August 2014 $78 million $1,686 million
Winery Job Index » Month   12 Months  
August 2015 261
August 2014 218 224
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