Analysis: What impact Covid-19 has had on the Chinese wine market and demand for imported wine
Analysis: What impact Covid-19 has had on the Chinese wine market and demand for imported wine
By Jessica Broadbent
The market for imported bottle wine is expected to roughly double in size over the next 10 years, according to data released by Nimbility at Vinexpo Shanghai last week.
In a market with less than 1% per-capita consumption there is still huge potential for growth, said Ian Ford, co-founder and director of Nimbility, the specialist Asia business development consultancy.
Ford was joined by Dan Seiners, global sales and marketing director of Sarment, the premium Chinese wine and spirits distributor, and Alexander Caillard, head of Pudao Wines for a webinar on the ‘shifts and restructuring of distribution channels in the Chinese wine market post Covid-19’.
The debate was part of Vinexpo’s new online seminar and event division, Vinexposium, that was launched at Vinexpo Shanghai to allow people not able to attend in person to still be able to take part and follow the debates.
Ford warned producers looking to export and work in China that “there is no singular wine market and there is no singular wine consumer in China”.
Strong recovery
Despite the continuing global pandemic the market in China has generally been in a strong trajectory of recovery, stressed Ford. The total imports of bottled wine into China have been growing steadily since 2006, from 2.25m nine-litre cases in 2006 to 50.5m nine-litre cases in 2019.
This sustained trend of growth is still quite rapid despite a decline in the actual number of imports over the past two years. Nimbility’s prediction that the market is set to double in size over the next decade is based on 2018 import figures, and will mean the 56.57m nine-litre cases imported into China in 2018 could increase to around 113.14m nine-litre cases by 2028.
While the import trend is positive, the number of importers has decreased from 12,841 in 2018 to an estimated 9,000 in 2019. Feelings across the industry suggest that this is due to a consolidation of importers, meaning less small, opportunistic ‘one-hit-wonder’ importers taking trade from larger importers, he added.
Trade infrastructure and distribution in China is still lagging behind with room for growth, and for new importers building a distribution network and taking ownership of that network where possible is important.
Lockdown saw a surge in at-home wine consumption across China and demand for direct-delivery suppliers, but the panel was split on whether this was a trend that would continue in the long term.
Caillard also saw at-home consumption increase but price spent per bottle at home decreased during lockdown, due to a lack of need for the “glitz and face” gained from a bottle of top Bordeaux when drinking with close family.
With lockdown long behind them, Ford said Shanghai is now operating on a “very normal basis”. Other cities, such as Beijing, are under stricter rules.
Despite this the overall Chinese restaurant sector continues to be “very fertile ground,” claimed Ford. An increase in domestic travel following the international travel ban has vastly increased opportunities for on-trade consumption. He stressed that the dining and celebratory culture is still strong and not in danger of disappearing.
With the borders closed, Caillard has seen the average spend per bottle increase overall as those who can afford to travel internationally are now holidaying within China. Pudao Wines has had to source more of its top SKUs and, at times, is even struggling to find the volumes required.
The power and potential of domestic travel was seen during the Golden Week holiday (October 1-8) when the Chinese travel network saw over 62 million passengers travelling per day.
The total aggregate sales revenue for the restaurant, retail and hospitality sectors during the week of the holiday was up by 4.9% on the same period last year, and the total transaction value through Union Pay (one of China’s biggest payment platforms) was also up by 6.3%.
Brand strength is key
The ultimate singular long-term goal of anyone that wants to grow a market in China is to build their brand, argued Ford, but it is hard for new importers without “feet on the street” to enter the market with the borders closed.
For Sarment, Seiners has found that the lack of travel options has opened up opportunities.
Whereas before they would wait for supply partners to visit the market and do internal and external training, now they are using Zoom to do training across all of their offices and wondering why they never made use of the technology before.
Another key for growth is in marketing, Ford added, where “content is King”. In China the digital space is very dynamic and it’s vital any marketing or communications created for European or American audiences must be carefully repurposed for the Chinese market, and not simply be a mirror of what you’re doing in another market.
Some distributors have gone down the route of using influencers to help build their brands, but this often comes at a huge cost.
Ford put the success of brands such as Casillero del Diablo, Lafite and Penfolds down to real consumer interest and demand.
“Creating real consumer demand must be the single long-term goal,” he concluded.