Re­tail sales to shrink, only to swell from 2017

China Daily (Canada) - - BUSINESS - ByWANG ZHUOQIONG

Price cuts that kept China’s wine mar­ket low in re­cent years will con­tinue this year, and the re­tail mar­ket value will shrink, only to re­bound from next year, ac­cord­ing to an in­dus­try sur­vey.

Ac­cord­ing to the lat­est is­sue of the China Wine Re­port by Min­tel Group Ltd, prices will rise from next year, so too will re­tail sales value, with the mar­ket grow­ing at a healthy 5 per­cent or more till 2020.

Till 2012, vol­ume growth was in dou­ble dig­its, but the gov­ern­ment’s anti-ex­trav­a­gance cam­paign hit sales and im­ports of wines hard. Vol­ume growth turned neg­a­tive, ne­ces­si­tat­ing in­dus­try re­struc­tur­ing and price cuts.

Three years on, the mar­ket is show­ing signs of re­cov­ery, suggest­ing cuts helped prices to reach a sus­tain­able level amid rel­a­tively strong de­mand from the mass mar­ket.

The na­ture of de­mand is also chang­ing. Al­though red wine has dom­i­nated the China wine mar­ket for long, other types like white wine and sparkling wine are eat­ing into its share.

In the past five years, red wine has lost 4.9 per­cent­age points, a drop con­sid­ered nor­mal in a de­vel­op­ing mar­ket.

Still, in terms of pen­e­tra­tion, red wine tops other types of al­co­holic drinks with 75 per­cent of the mar­ket share. Ac­cord­ing to the re­port, some 95 per­cent of wine con­sumers drank red wine in the 12 months to June 2015, suggest­ing red wine is of­ten the start­ing point for many wine drinkers.

This also shows the wine mar­ket in China re­mains in its in­fancy stage. So, niche and un­der-de­vel­oped seg­ments like white wine have greater op­por­tu­ni­ties re­port said.

In global mar­kets, white wine ac­counts for 40 per­cent of the dry wine mar­ket and it is likely that the trend will con­tinue in the fu­ture.

Sparkling wine and cham­pagne are seen as the most fash­ion­able drinks among dif­fer­ent

to

grow,

the types of wines. But win­ning con­sumers over has not been easy, as sales vol­umes over the years tes­tify.

In 2011, the top 10 brands in China were all do­mes­tic ones, ac­count­ing for al­most 26 per­cent of the wine mar­ket vol­umes. But in 2014, their share by vol­ume plum­meted to 14.3 per­cent, hurt by the anti-ex­trav­a­gance cam­paign that ap­peared to help smaller brands, which are more likely to be im­ported, to gain a foothold in China, said the re­port.

Chi­nese wine pro­duc­ers have been in­creas­ing their im­ports too by way of ac­qui­si­tion of as­sets over­seas. For in­stance, loss-making Yan­tai Changyu Pioneer Wine Co Ltd, one of China’s lead­ing wine pro­duc­ers, went ahead and bought a 90 per­cent stake in the Bordeaux-based Chateau Mire­fleurs for 3.33 mil­lion eu­ros ($3.54 mil­lion).

Sun Jian, Changyu’s deputy gen­eral man­ager, expects the com­pany to re­turn to the black once more of its high-qual­ity bot­tles are sold in China. “This is only the lat­est step in our ex­pan­sion. We’re look­ing at more chateaux of this qual­ity and char­ac­ter in Bordeaux and other ar­eas of France.”

Changyu’s search is be­ing ex­tended to wine-pro­duc­ing coun­tries like Aus­tralia and Chile, he said.

Ac­cord­ing to the Min­tel re­port, Chi­nese drinkers are ea­ger to learn about the nu­aces of wine, like its con­sti­tu­tion, age, prove­nance, whether it is full-bod­ied, crisp or fruity. They want to try out new types of fla­vors. So, wine pro­duc­ers are making sure to in­clude as­many de­tails as pos­si­ble on bot­tle la­bels.

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