Despite this history, the wine industry in China has only recently begun to develop into a significant market. Twenty years ago Chinese consumers tended to drink beer and grain spirits, but in 1987 the Chinese Government began to focus on reducing alcohol related illnesses and encouraged consumers to drink less grain-based spirits, and more beer and grape wine.
Wines have gradually attained consumer acceptance, not least due to Chinese Premier Li Peng, who in 1996 decreed that state banquets should be enjoyed with wine instead of spirits. The influence of western eating and drinking habits has been key in this development, as have rising average incomes in China. Indeed, wine is now becoming a fashionable drink for the wealthy younger generations of urban Chinese, and the favoured drink of China’s elite.
Getting your product into market
As with most imported food and beverage products, an importer and distributor or wholesaler are typically involved in the distribution of foreign wine before it reaches retail or hotel, restaurant and institution users. In some cases, the importer will also perform the role of distributor.
Traditionally, there are two sales channels for wine – retail and Horeca (hotels, restaurants and cafes). Anecdotal evidence suggests that 70 to 80 percent of wine sales occur in the Horeca channel. The leading wine distributors of imported premium wine are still foreign companies, many of which have been in the wine business in China for a decade or more. These companies traditionally started serving premium foreign hotels and have grown into the Horeca channels and many now have retail affiliations and are aggressively pursuing the gift market.
Retail mark-ups are comparatively less than in the Horeca sector, where the ‘meal occasion’ is still a key driver. Grabbing a share of the Horeca channel requires the highest levels of distributor support. Distributors in China tend to mark-up imported bottled wine as much as 100 to 200 percent and restaurants and hotels typically add 250 to 300 percent to the distributor price.
Multiple parts of the value chain can be controlled in relatively new product categories, like New Zealand wine, which are not strongly competed over and where volumes are not high to have yet brought discipline. High retail prices for New Zealand wine do reflect higher buying prices but are also due to New Zealand wine still being a little known and low volume product.
Regulations
Importation of wine is a relatively straight forward procedure, though compliance and full declaration of import values is demanded.
Opportunities
Grape wine consumption is growing in contrast to a declining market for traditional grain-based alcohol – a trend that is linked to health awareness and changes in lifestyle.
Challenges
- Competition is high and good distributors and outlets are limited.
- Distributors are reluctant to take on additional labels unless they are a “sure bet” and are supported by significant market support (including financial) from wineries.
