Case Study for Wine
market in China
This case study is
divided into 3 parts. The first part focuses on the overall wine market size in
China. Closely followed is the part 2 which analyses the development of
customer behavior and consumer composition. Part 3 mainly deals with the
comparison between domestic wines and imported wines.
Introduction of the overall
market size:
As the gradual
release of consumption capability of Chinese people, wine market in China has been greatly expanded in the past 30 years. However,
it currently enters the downturn due to a number of objective and subjective factors,
such as the slowdown of China’s economic growth, the intensified and unordered
competition in wine market and the policy limiting public consumption enacted
by Chinese government. In 2014, industry data shows that the total wine market
has reached RMB 30-50 billion, which is nearly equally shared by domestic and
imported wines. Although compared with liquor market, which totals RMB hundreds
of billions, wine market in China at present has a lot to explore, however, the
popularization of wine knowledge and wine promotions through new media will
help China's wine market rapidly grow over the next three to five years, as
experts predict.
Analysis of Customer Behavior and Consumer Composition:
At the very early stage of
wine market development, wine was mainly imported from abroad. For a long time,
Chinese consumers has lacked professional knowledge about imported wine and
always held the view “expensive is good”. Many speculators took scrambled up
the high-end imported wine, which gradually blew up the market bubble. At the
same time, fakes appeared unavoidably. Chinese government’s constant fight
against fakes pricked this big bubble in wine market. Later, as medium-grade
wines have enter Chinese market, early-days’ crazy irrational consumption has
grown mature and rational. Chinese customers now no longer blindly chase after
high-end imported wine. Instead, they pay more attention to cost performance
and take actual situation into consideration when purchasing wine.
In a sense, wine entered
China as one luxury industry in the very beginning. Wine consumers at that time
were mainly made up of the rich. However, with the gradual market change, the
composition of wine customer appears new trend. New consumer group has emerged.
Particularly due to the consumption limit policy posed by government, personal
consumption, replacingpublic consumption, highlights itself in wine market.
Accordingly, young people, as the main force of personal consumption,have
become and will be the major consumer group in wine market for a very long
period in future.
Comparison between Domestic and Imported Wines:
At present, domestic wine
products are leading by Changyu, the Great Wall, Dynasty ---the three major
brands, or the so-called first camp of wine industry. The second camp includesWeilong,
Huadong and so on. The third camp mainly consists of such local brands as
Hansen, Tongtian, Huangxuan, Grace Moga, etc. Actually, China's
wine industry is facing three development difficulties:
1. Just like liquor market, state-run system exerts great impact on
the development of wine market.
2. Wine has a relatively short history in China, say, slightly over
30 years. Therefore, domestic wine industry lack cultural base to increase its
brand added value.
3. Due to the limitation of terrior and weather condition, the
production cost is relatively high, which raises its market price and shortens
its market advantage at both home and abroad.
On the other hand, imported
wines comparatively have the following 4 advantages:
1.
The
diversity of products:
a.
With the
maturation of Chinese market, wines are imported not only from France, Spain
and Italy, but also from the New World like Australia, New Zealand, America and
Chilly.
b.
The product
range is expanded by white wine, rose wine, sweet wine, sparking and etc.
2. The
optimized marketing mode:
In the past 10 years, five marketing patterns
of imported wine have gradually taken shape in China, namely, 1) selling
imported wines through domestic wine companies 2)group purchase 3)chain-store
operation 4) branding operation and 5) new media marketing.
3. The
deep cultural base:
Wine has developed more
than thousands of years in European countries, which forms a complete and
classic system of tasting culture. Imported wines enter Chinese market with
their brilliant traditions and sophisticated technology.
4. The
quick corresponsive ability for market change which is indicated by:
a. The
developmental market structure: When imported wine saturated the market in
first-tier cities, foreign wine marketers have now been ready to expand the
market into smaller cities across China.
b. During
the downturn in wine market, foreign wine industries have strengthened the promotion
of low and medium-grade products.
