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11.07.2013  
 

Attendees at Hong Kong Wine Fair Scout Opportunities

Sellers turn to middle class as government spending tapers off in China

 
by Peter Mitham
 
 
hong kong wine & spirits fair
 
Attendees circulate at a reception during the Hong Kong International Wine & Spirits Fair on Thursday evening.

Hong Kong, China—More than 1,000 exhibitors registered for this year’s Hong Kong International Wine and Spirits Fair, which kicked off Nov. 7 overlooking Victoria Harbor.

Many of the exhibitors, including several U.S. wineries, came seeking inroads to China, where a growing middle class continues to hold appeal despite the Chinese leadership’s austerity measures cutting into sales of high-end wines.

A pre-fair conference organized by Debra Meiburg of Hong Kong-based Meiburg Wine Media highlighted both the opportunities and the challenges facing new entrants to the Asian market.

The conference, designed as an orientation for members of the trade prior to the fair, presented statistics and commentary from Wine Intelligence of London, England, indicating that the number of Chinese wine consumers drinking imported wines is projected to grow 350% during the next seven to 10 years.

Wine consumer levels
The leading groups driving the growing consumption include “prestige-seeking traditionalists,” the drinkers who have embraced French wines, especially those of Bordeaux; “adventurous connoisseurs” who are open to exploring less-prestigious Old World wines and New World wines, and so-called “social newbies” who are incorporating wine as part of their social experiences. The groups account for 44%, 21% and 18% of spending, respectively, on China’s wine imports.

But commentary from Wine Intelligence noted the Chinese political leadership radically simplified the menu for Lunar New Year celebrations earlier this year, eliminating wine as part of a message that the leadership wanted to present a more responsible face in the wake of criticisms that spending had been too lavish during the boom years. With the country’s economic growth slowing—albeit still projected to be an enviable 7% this year—those wishing to respect the Central Government’s policies have followed the message of austerity.

Wine merchants such as Marcus Ford, general manager of Pudao Wines, which operates two shops in Shanghai and Beijing, said that major orders for wine as gifts during the 2014 new year celebrations had vaporized. The orders, worth millions of dollars, represent a significant hit to the trade, and effects could last into 2015 as buyers seek to be less ostentatious in their purchasing and consumption.

This is where the hopes of the trade have shifted to the middle class—and the more affordable wines that fit their budgets.

China’s middle-class
Jeremy Stockman, trading director at Watson’s Wine Wholesalers, one of Hong Kong’s key distribution channels for on-premise and retail outlets, said individual consumers have helped cushion the effects of government austerity. Consumers’ interest continues to grow as they explore the growing selection of wines becoming available across China.

More important for wineries seeking to engage with these consumers, such consumers are also the key influencers when it comes to enticing others to try new wines, according to Lucy Anderson, formerly of Wines of Australia and now a Hong Kong-based consultant with Wine Hero. http://www.winehero.com/

Rob Andersen, marketing director with the Washington State Wine Commission, told Wines & Vines during the first day of the Hong Kong wine fair that these middle-class consumers are an appealing segment of the market to target. With the maturing the Chinese wine market, the budgets of keen middle-class consumers fit the price point Washington state wines can deliver—ideally, between $20 and $40, or about HK$140 to HK$280.

Elected officials and wealthy consumers may have set the pace with their purchases of prestigious Bordeaux vintages and sparking interest in other European wines, but middle-class consumers can’t afford these. Still, they aspire to purchase good wines—just more affordable ones.

The big question for Andersen and others at the Hong Kong show is whether Hong Kong will remain the key point of entry. Chinese consumers, aware of the risk of counterfeiting and fraudulent claims regarding the provenance of wines, want assurances that the wines they are buying are genuine.

While the decision five years ago to eliminate duties on wine has made Hong Kong an attractive point of entry to the Chinese market, many members of the trade that Wines & Vines encountered this week noted that it has also become a hub for less desirable activities.

To get around this, Shanghai may be emerging as a direct point of entry to the Chinese market. A vibrant market in its own right, Andersen and others are watching to see where the opportunities appear as the trade kick-started by Hong Kong matures into a truly national business for China as a whole.

 

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