The South African wine industry is in the process of developing a new strategic framework aimed at improving competitiveness and coherence through, inter alia, more focused communication and an industry-wide governance structure.
As one of the most attractive markets for South African wine, China presents increased opportunities for our wines.
Business intelligence has been a key theme of the Wine Industry Strategic Exercise (Wise). This has resulted in global market and consumer research being one of the mainstream projects. The latest report, ‘Opportunities for South African Wine in China’, revealed some interesting facts. By analysing trade and consumer perceptions of South African wines, barriers to buying our wines and opportunities for South African wines, seven key take-home messages were highlighted.
1. Economic wobbles today, but longterm transformation underway
While online sales are on the rise, direct sales are in decline, as a result of austerity measures and an anti-corruption campaign. The distribution system in China is complex and lacks transparency, with fierce competition for listings. But while there are problems, Chinese wine drinkers are becoming more individualistic, value-seeking and savvy in wine purchasing, which brings opportunity for growth.
2. Wine-drinking population will grow threefold in next decade
China is a High Growth Emerging market of 38 million drinkers of imported wines.
It has a huge potential to grow in terms of the wine-drinking population, per capita consumption and import volume.
3. Imported wine volumes will probably move up in lockstep
Although the growth of imported wine has slowed down since 2013, China’s wine trade believes it has started to rebound. There are increasing numbers of female and younger drinkers, with Beijing and Shanghai having the largest wine-drinking population. The Chinese consumption of imported still light wine, for instance, has showed year-on-year growth in volumes.
4. Opportunities for imported wines in mainstream retail (sub-¥100 RMB)
Retail prices in off-trade channels are expected to grow strongly in the “below ¥100 RMB” price points. Wine is becoming more affordable and prices more transparent. Wines priced around ¥100 RMB (¥70-80) are easy to sell.
5. Demand for easy-drinking, sparkling and rosé wines
The market is changing from group purchasing to personal purchasing, from gifting-dominated to own consumption. There has been a decreased demand for high-end wines, due to the crackdown on lavish gift giving and extravagant banquets. On the other hand, there is an increased demand for entry-level or mid-range wines, offering better value for money, as buyers now have to pay for wine themselves. Fruity, easy-drinking wines with some sweetness are becoming more popular, thanks to the increased numbers of new drinkers and female consumers. Over half of Chinese wine drinkers prefer “soft”, “fruity”, “easy-drinking” wine and dislike “astringent”, “bitter” wines with high tannin.
6. South Africa growing from a small base
When consumers want to choose a bottle of wine, country of origin is one of the most important considerations in both off-trade and on-trade. France is by far the main wine supplier to China, followed by Australia and Chile. South Africa is in the seventh spot. Our price per litre is currently better than Chile, Italy and Argentina. SA exports are growing strongly from a small base; in 2014 South Africa saw double-digit growth. Imported wine is consolidating its presence, with Spain and Chile seeing strong growth.
7. SA needs more visibility in mainstream retail channels
Low awareness and visibility in China are the main issues for South African wine, compared with Old World and other New World countries. Top channels for wine are specialist shops, hypermarkets, department stores, the internet and duty-free shops. High awareness, active promotion and competitive pricing are the critical success factors. Online wine sales are on the rise in tier 2 & 3 cities (Shenyang, Dalian, Xi’an, Wuxi, Hefei, Hangzhou, Chengdu, Wuhan, Chongqing, Kunming, Fuzhou, Nanning).
In a nutshell
Building up a good reputation and increasing familiarity and affinity with consumers are critical to driving the purchase of South African wines. Trade feedback suggests that easy-drinking reds and sparkling wines are currently in demand. Wine tourism, diversity and terroir, and winemaking history are relatively more important to SA in promoting its image in China. In the premium wine category, professional sources, led by international awards or wine critic ratings, are more influential than consumer comments.
The full report is available on the SAWIS website, click here. The report contains detailed baseline information of China’s wine market and its structure. It analyses the opportunities for South African wine in China and how we should tackle these opportunities in detail. Do take note that due to the strategic nature of the document it is access controlled.
As published in the November issue of WineLand magazine.