China wines marketing and distributionstrategy 2011-2014
Here todayXiaonan YAN Frank Meijer Henk TerolCEO, Manager Business Marketing &China Entrance Group Sales Director Director
Roadmap for today Selected Wine Suppliers and Top Wine Products Who’s who Q&A Introducing Sharing China knowledge Entrance Wine leadership philosophy
Introduction of China EntranceThe privately – owned premises of the company are located in The Netherlands. China Entrancecombines the knowledge about the needs of the Chinese citizens and the passion of Top wines from theGlobe.
China Entrance China Entrance was founded in 2006 and is owned by Xiaonan Yan Dynamic management and reliable services to its suppliers and customers Nowadays: 14 partners and 6 employees, and 3 independent advisers for growth One of the surprising and new wine traders in China Co-operations with great wine brands merchandizing and standardizing companies in the local as well as international market
China Entrance China Entrance competitive advantage Quality in services Effective networking Extremely high quality products In numbers Annual turnover: > 3 million Euro Capacity Export: 3.000 tones of top wines per year
Philosophy of China Entrance Offering high quality products Creating collaborations with strictly selected suppliers As a result of the above Providing qualitative service for its customers Enhancing wine brand name a powerful synonym of prestige and quality of its products and of its market in general
China Entrance Service MapProactive model for regional & local strategy Understanding consumers Understanding Integrated brand equity marketing skills OK GOOD OUTSTANDING Return on Innovation & investment creativity Collaboration Where are we now? Where do we want to be in 6 months?
China Entrance ServicesQuality support for retailers, wholesalers and agents Support areas Shop and management training for brand understanding, up and cross sell and support in year planning, POP, POS and shelve communication, Category Management Online and convenience delivering support to end users Dbase management tool kit, b.e. data storage for dbase marketing strategies, consumer profiling, buyers profiles, Support in communication, promotions and advertising Shelves support Editorial support Events and exhibitions Newsletters, Direct Marketing, Research, one to one marketing, interactive strategies, mobile marketing, web services and online retailing, etc.
International strategy Current position Business Goal: To grow further with new International customers: wine (inter)national collaborations merchants who want to bottle and To achieve our goals we are confident standardize wine from every where on about the high quality services, the globe product development and the mature Our international wine suppliers: experienced management team of China Entrance Most important wines producers in the top wine countries We deliver a continual updating our products, targeting in a high level of China Entrance has in a short period of activities and aiming at improving time, in a competitive environment, a competitiveness important position in the wine market in China.
International strategy Backed up and supported by our expert regional/international teamFull service teams available in local/regional market Credibility - Reliability From the local area Technology Experience Quality To international market New collaborations establishing Win-Win strategies
Summary wine market China The wine market is a fast paced market. As every market in China, it attracts investors from all over the world. 90% of the wine consumed in China is produced locally. But Chinese wines have still a long way to go to catch up with French, Australian, American, Italian or Chilean wines in terms of quality. Chinese wine is marketed as a few added value product. Therefore, it is impossible for imported wines to compete with Chinese wines on the price. Importers actually do not want to enter in a fight over price. They have to find their differentiation. Among main producers of Chinese wines, you find these 3 brands that trust most of the market: Dynasty, Great Wall and Changyu. 10% of the market is reserved for imported wines. And we know what 10% of the market in China represents. This is huge. And actually, this part is due to grow, Chinese producers leaving more place to imported wines because of the evolution of the market.
Why China? China, being the most populous country in the world has huge potential as a growth market for wine. In 2009, China was the second-largest economy in the world after the United States of America (on purchasing power parity basis) although in per capita terms the country is still lower middle-income (CIA 2010). It is estimated that by 2025, there will be 221 Chinese cities with a population greater than one million, compared to only 35 cities in Europe (McKinsey & Co 2009). Rapid economic growth has produced a middle class with the capacity to pay for imported foods and premium products of all types including wine. Reflecting this, now the worlds fastest growing wine consumption market. Wine drinking is considered a healthier alternative to spirits and somewhat trendy, with still red wine being particularly popular. Young urban professionals and business people account for most wine consumed in bars and hotels, in the main cities of Shanghai, Beijing and Guangzhou (NZTE 2009). The retail sector is experiencing growth, stocking a range of imported wines. In many cases the purchase of imported wine is for special occasion gifts or to at a restaurant banquet to impress guests. China and Japan together accounting for 80 percent of the total Asian market . China only began importing bottled wines in the last 15 years or so, and only in recent years, have consumers begun to develop a taste and preference for particular wine types that compliment food.
China wine facts & figures• China is the world fastest growing wine consumption market• Sales imported wine from 2004 from 25 into 377 Million USD in 2009• Volume grown from 7 million to 91 million litres (same period)• 2009 for the first time bottle wine imports exceed bulk wine import volumes• Yearly wine consumption growing per annum 7%, (1% traditional wine countries)
Important influences in the wine businessNew countries are entrance the market (Chilli – Romania)Consumer pattern are rapidly changingPrefers taste flavours: fruity, berry and vanilla wines with a touch of sweetness50% preferring lighter styles and 20% choosing strong flavoured winesPeople believe that wine can help relieve stress and pressure95% of consumers have limited knowledge about wine but are willing to learn60% of consumers prefer to buy imported wine if the imported wine and domestic wine ate the same pricePeople believe the quality of imported wine be better at the same priceWine is fashionable alternative to traditional Chinese rice wines and alcoholWine is a very popular gift for relatives and friends (very important is the packaging)
Most important Trends in ChinaTRENDS IN WINES and LUXURY products Chinese wines consumption yearly increasingly Because Chinese mid class wants to try and they like it Consumers switched from ½ litres in 1 litresTRENDS IN Wines: A dynamic market… Wine still a niche market in China, although sales have been booming from a very small sales base since 2003 Wine is now available in most developed cities (through international hypermarkets) The rising living standards, the expansion of modern retailing and the increasing consumer likeability awareness will lead to a booming in Chinese Wine market the next few years.
IMPORTING WINE IN CHINAAn Oligopoly?“An oligopoly is a market form in which a market or industry isdominated by a small number of sellers (oligopolists)”
We consider a market is an oligopoly from a market share of 50% held by the market leaders.So the question, we have to ask ourselves is either the business of importing wine in China looks more like this:
Today, we can easily say that more than 50%of the wine imported to China is imported byone of these 8 companies
Brand is the key in China. The market will grow thanks to big brands nationally and internationally recognized. Therefore, these are two strategies to develop your market share when you are importing wine in China. Either you build your own brand designed for the Chinese market (national recognition). It is the strategy chosen by 9519 wines with Camons and by FWP with French Paradox. or you import internationally recognized brands of wines. In both cases, early movers importers control the wine industry value chain. They have the possibility to develop their own brand because they control distribution channels. On the contrary, developing its own brand for a newcomer importer is difficult because it will be hard to find customers to promote an unknown brand even if it is designed specifically for the Chinese market.
How to sell wines in China?To retail SELL WINES IN CHINA?HOW TORETAILTo consumersCONSUMERSTo explore the wine experiencesMEDIATo close the lack of knowlede
Who’s the wine distribution channels build up?
Major wine distributors/retailers and sellers in Shanghai A pioneer of China wine imports, ASC is reputedly the biggest wine importer and distributor in China. Sells a high proportion of premium level wine including some of the biggest brands inASC Fine Wine www.asc-wines.com France and Australia. In 2009, ASC imported 12 new styles of wine, seven of those being from New Zealand. Key customers are high end restaurant and hotels. A leading distributor/importer of fine wines was established in 1995. Targets medium to high-end market, stocks more than 1000 wines from 200 wineries selected from 12 countries. The companyAussino www.aussino.net owns their own retail outlets, wine club and undertakes wine appreciation courses. Aim to have 100 retail outlets and 50,000 wine club members by 2012. Leading importers of international wine brands in China established the 1990s with regional offices in Hong Kong, Macau, Guangzhou, Shanghai and Beijing, together with wholesalers in various second or third tier cities. Clients include major 5 star hotels, top-end westernJointek Fine Wines www.jointekfinewines.com restaurants, leading Chinese restaurants, private clubs, night-clubs, supermarkets and retail stores. Jointek imported two types of Australian wine in July 2009. Over sixty of their own retail shops throughout China. Focus on Italian wine import and distribution. Price of wines imported range from less thanSino Drink www.channelvino.com AU$16.00 to over $AU80.00. Distribution to Shanghai and Northern China. Head quarters in Xiamen. Belongs to top 500 Chinese company, Jian Fa Group. One of the leading distributors of white spirits. Starting importing wine in 2006. They distribute French, German,Jian Fa Wine www.cndwine.com Chile and Australian wine. Have retail outlets in 40 cities and distribute to 100 cities. Deal with Castel from France and Constellation from America. Small distributor and online seller based in Shanghai. Retail store in Shanghai. Focus on premiumGlobal Wine Shop www.global-finewines.com wines. Wine Mall is a wine retail shop set up by Global Beverages Asia. They sell over 800 types of wineWine Mall from 14 countries. Foreign owned distributor established by Miguel Torress in 1997. Now has the backing of Baron Philippe de Rothschild. Focus on selling premium wines to major hotels and fine restaurants.Shanghai Torres www.torreschina.com Offer wines from 14 countries including Australia. Regional offices in Shanghai, Beijing, Guangzhou and Shenzhen. Online sales and offer free delivery within 36 hours in the centre of those four cities. Foreign owned distributor that commenced operations in Shanghai in 1999 and now have offices in Shanghai, Beijing, Guangzhou, Shenzhen, Macau and Hong Kong distributing to hotelsSummergate Wine www.summergate.com restaurants and retail outlets. Import from 60 wineries in 12 countries including a strong portfolio of Australian wine. Owned by Australians. Wine importer with offices in Shanghai and Beijing. Import wineThe Wine Republic from 30 wineries in six countries. Strong focus on Australian wine. Importer based in Shanghai selling Italian wines to a network across China. StrongSino Drinkwww.sino-drink.com program of promotional events. Set up in 2002. Small wine importer. Import wine from many countries includingShanghai Vinna www.vinna-finewine.cn/ Australia. Supply to wine distributors and clubs.
Professional buyers target groups Wine Purchasers in (inter)national retail, agents and importers (b2c) Decision makers for gifts and relationship marketing Professional buyers for hotels, restaurants and other channels (b2b) Owners TV channels with local cooking program with (inter)national chefs and wines Editorial suppliers for wine and dinner, (magazines, dailies, etc) PR offices Wine clubs/bars Online retail chains
Retail Shanghai Market Additional Year BusinessRetailer Segmentation Information StartedASC Fine Wines Import/Distribute/Retail* www.asc-wines.com 1996Aussino Fine Wines Import/Retail/Wholesale/ Distribution www.aussino.net 1996 (1st retail shop in June 2006).Aux Millesimes Import/Retail Shop address 415 Shan Xi Bei Rd 2006 Has 3 shops in Shanghai, can taste cheeseCheese & Fizz Import/Retail 2002 and wine.Enoteca Wine Lounge Import/Retail/Wholesale www.enoteca.com.cn 2007Globus Wine Direct Import, Wholesale/Retail http://www.globuswine.com/ 2006Golden Gate Wines Import/Wholesale/Retail www.goldengatewine.com 2006Jointek Import/Retail/Wholesale www.jointekfinewines.com 1997Just Grapes Retail www.justgrapes.cn 2007Napa Reserve Retail/Wholesale www.napareservewines.com 2007Summergate Direct Import, Wholesale* www.summergate.com 1999 Direct Import/On & Off Trade/Torres China www.torreschina.com 1997 Retail/Wholesale*Vins Descombe Import/Retail/Wholesale www.vinsdescombe.cn 2007Ruby Red Import/Retail/Wholesale www.rubyred.com.cnWine Red Import/Retail A wine bar. 2007
Target groups end users Thanks to the change of Chinese people’s likeability consciousness about the consumption of wine and the improvement of Chinese people’s standard of living, more and more people start to learn about wine and buy it since it is healthier than most other cooking oils The target group of wine consumption can be described as follows: I. Expats living in China (Beijing, Shanghai, Guangzhou, Shenzhen, bigger cities in the East of China) II. Chinese people with overseas living experience III. High and middle class income young discover consumers IV. People who seriously want to discover the experiences with wine and their personal goal to express their wellness V. Chinese cooking programs, VI. Chinese schools with culinary experiences and want to integrate wines in preparing meals
Main sales regions and channels wine Over 90% of imported wine is sold in large and developed cities, where people’s consumption power is high and most large distributors are located In the retail sector wine is mainly sold in foreign retail chains and domestic supermarkets which have helped the penetration of imported products in the most expensive and trendy urban shopping areas Online stores are becoming a growing distribution channel nowadays
The China wine market opportunities The Chinese wine market, likes as an “egg timer” market. means that you have 2 distinct markets for wine trading in China: a low bracket one, on which Chinese producers are unbeatable. Chinese producers cannot beat them on price. The second market is a very high bracket led by French Bordeaux and expensive wines sold out before production. Between these two markets, medium priced wines are to find their place. And in this market, imported wine has a very good card to play. This is the challenge of the coming years. To import these wines, more and more trade companies are created or add the wine business import to their portfolio. They then sell wines to wholesalers, wine bars, hotels, restaurants, wine stores, supermarkets. Even if the market is still very spotted, major actors make the market. Among them ASC Fine Wines, Summergate, French Wine Paradox, Torres, Mercuris, Aussino, H&L Fine Wines.
Current Questions Chinese Wine Market • Lack of the knowledge of use and experiences with wine in general • Do not know about how to taste and the differences in grapes • Lack of training the application of wine in cuisine and to serve in dinner rooms • Preferences in the current port folio of the leading importers and agents in China
Consumer profile Mass consumers Newly rich peopleMale 66.2 Male 60.1Female 33.8 Female 39.915-24 years old 17.1 18-24 years old 7.425-34 years old 28.2 25-29 years old 27.435-44 years old 28.8 30-34 years old 32.645-54 years old 17.1 35-39 years old 23.555-64 years old 8.9 40-45 years old 9.1Government officials 3.9 Government officials 4.3Technicians 12.7 Technicians 7.1Managers 16.1 Managers 9.5Common employees 17.5 Common employees 1.3Employees in business, 22.7 Employees in business, 0.4service and manufacturing service and manufacturingsector sectorSelf-employed laborers and 10 Self-employed laborers and 7owners of individual owners of individualenterprises enterprisesFreelance 1.6 Freelance 1.2<1499yuan 41.2 <60,000 yuan 37.61500yuan -2999 yuan 30.2 60,000 yuan (including)- 35.2 100,000 yuan3000yuan -4999 yuan 11.1 100,000 yuan(including)- 15.7 160,000 yuan5000yuan -6999 yuan 2.5 160,000 yuan(including)- 4.3 200,000 yuan>7000 yuan 1.1 200,000 yuan(including)- 4.3 300,000 yuan >300,000 yuan 2.9
Change wine consumption Chinese urban resident
Expectations about wine consumption China wine consumption rise to 31.58% by 2013 2013 approximately 1.26 billion bottles per year Increasingly
Reports and researches Consumers in China say they enjoy the sophistication and feelings associated with drinking a good bottle of imported wine, and are finding more room for it in their every day lives, according to the Wine Intelligence China Landscape report. The report predicts that the number of Chinese consumers who could afford to buy imported wine regularly will rise from around 23 million in 2010 to 80 million in 2025. However international brands may miss out on this growth opportunity because consumers still find the process of buying imported wine very difficult. While international hypermarkets such as Carrefour and Tesco now carry a large range of imported wines, there is very little user-friendly information on the shelf or on the bottle to help guide to the right choice. As a result many Chinese consumers still stick to domestic wines, which they acknowledge are often lower quality than imported wines, but at least tell them, in their own language, what the product is and how it might taste. "I think most of the wine industry round the world would agree that Asia in general, and China in particular, represent a colossal opportunity for sales growth over the next 20-30 years," said Richard Halstead, COO of Wine Intelligence and project manager for the China Landscape report. "Yet the closer you get to the market, the more you see that global brand owners have a lot of work still to do, both in terms of distribution and product positioning, to really engage with Chinese consumers." He added: "We can be pretty certain that demand for wine will grow exponentially in the next decade with the increasing wealth among Chinese urban professionals. The question is: whose wine will they be drinking?"
Market Entrance China strategy first ½ 2011 till June 2011 Entrance our wine port folio on two fairs (Sial 2011 en Top Wine Collection Beijing) Product presentation in our hotels with the Dutch connenceur and the wine owners Personal invitation for company/purchaser e-mail with introduction for the Taste Experience Meeting from China Entrance (Chinese and English language) Meetings with the press included press releases and picture manual Press materials included invitation for tastings Chinese website for company and product support Special import /agent environment for knowledge and market research sharing Marketing into the retail (Retail floor support) Press and video materials for TV and other direct selling channels Promotion material for retail and special shops dBase marketing concept for consumer experiences centre and sharing buyers profiles Sales strategy to importers and agents above retail approach
Market Entrance China strategy second ½ 2011 tillDecember 2011 Entrance our wine port folio on local wine fairs Product presentation in our hotels with the Dutch connenceur and the wine owners Personal invitation for company/purchaser e-mail with introduction for the Taste Experience Meeting from China Entrance (Chinese and English language) Meetings with the local press included press releases and picture manual Press materials included invitation for tastings Chinese website for company and product support Special import /agent environment for knowledge and market research sharing Marketing into the retail (Retail floor support) Press and video materials for TV and other direct selling channels Promotion material for retail and special shops dBase marketing concept for consumer experiences centre and sharing buyers profiles Sales strategy to importers and agents above retail approach
Synopsis We can offer: High quality products High quality services Credibility We want to expand in Chinese market You know your market
We can address each of your criteria Network scale and resources Creativity and innovation Strategic leadership Collaboration Integration and brand knowledge Technology and solutions Competitiveness and Controls Relevant experiences
Why should you choose for China Entrance?1. We are already a trusted partner working with different Wine Traders, /2. We have global strength and an international superior products’ concept3. Backed up with solid strategic marketing skills and brand experience4. Our background gives us a head start in Wine trade & consumer marketing5. We develop global, regional and local capabilities and expertise6. We are creative and thought entrepreneurs7. We have a philosophy and structure that delivers value8. May be your company would be one of the top clients for the China Entrance network