1. 68 www.winebiz.com.au WINE & VITICULTURE JOURNAL MARCH/APRIL 2015 V30N2
T
he signing of a free trade agreement between Australia
and China sparked a flurry of interest among Australian
business and consumers, which was not surprising given
the country is one of the last untapped markets for Western
brands.
For Australian businesses, including the wine industry,
selling into China presents an opportunity and a risk, with many
businesses wasting significant investments on ill-conceived
marketing strategies that fail to understand the market and the
unique challenges the country presents.
We have researched the most populated online Chinese
market spaces to understand the consumer demographics,
their tastes, potential markets and the key learnings for
Australian businesses.
CURRENT WINE MARKET
The growth in the Chinese economy over the past 20
years has ultimately led to a rise in income and consumer
preferences. In 2013, China (including Hong Kong) confirmed its
position as the largest red wine-consuming nation in the world.
This has been driven by a broadening middle class, who are
beginning to change the consumer landscape as they demand
brands of luxury and sophistication. For this market, the
concept of drinking wine is as much a symbol of lifestyle as a
taste preference, which is demonstrated by the popularity of
imported wines into the country.
There is a significant gap between the value of French
imports and other producers, as measured in US dollars, but
Australia remains well-placed. Not only is it consistently the
second largest Chinese wine import, it is also the highest
value wine. The brand recognition of ‘Australia’ as a byword for
quality, particularly among agricultural products, is gradually
being recognised.
Chinese consumers have typically favoured wines from
Old World suppliers such as France and Italy, because of
perceptions these are higher quality products. The known lack
of product and varietal awareness among consumers, outlined
in previous research, suggests this preference is more likely
linked to brand awareness than quality.
MARKETING MISSTEPS: WHAT NOT TO DO
Larger producers have previously focussed on retail and
the government consumption markets. This was a considered,
strategic approach, given the scale of both of these markets and
the fewer marketing contact points required.
But for producers now trying to gain a foothold in China,
there are three common mistakes we observe.
Failing to see the importance of the consumer side to the
Chinese market
Many wine companies tended to focus their market towards
government consumption, however, with new government
austerity measures in place and a crackdown on gifts to
government officials, the consumer environment has shifted.
This change has resulted in lower sales for foreign wine
companies, with bottled wine exports decreasing by 7 percent
BUSINESS & MARKETING C H I N A
Navigatingthelucrative
Chinesewinemarket
By Benjamin Sun and John Wong, ThinkChina, Sydney, New South Wales
Many wine brands seeking to expand into China make
the common mistake of marketing their culture, heritage
and wine tasting. What they fail to realise is that Chinese
consumers lack interest in wine due to their premature
knowledge. What they desire is simply a good time with
friends and to enjoy nice tasting wine.
Benjamin Sun John Wong
Prices Standard Earlybird
WGCSA members $125 $110
Others $190 $165
The most up-to-date, relevant information to support
decision-making for SA grapegrowers
€ Global economic outlook and trends
€ Expected demand by variety
€ Analysis of grape prices, wine sales figures and vineyard
land values
€ Seasonal conditions forecast for 2016
€ Issues and opportunities for sustainable vineyards
More information:
wgcsa.com.au or phone 8351 4378
@winegrapessa
PLUS showcase of local vineyard innovations and
presentation of inaugural WGCSA “Vinnovation Award”

2. BUSINESS & MARKETING
V30N2 WINE & VITICULTURE JOURNAL MARCH/APRIL 2015 www.winebiz.com.au 69
in 2013, and individual brands seeing double digit percentage
reductions.
Several Australian brands last year warned of this drop in
sales and the reasons behind it. In March, Pernod Ricard, the
world’s second-biggest drinks group and the owner of Jacob’s
Creek, cited the upcoming crackdown on luxury gift giving.1
In October, Treasury Wine Estates, owner of Penfolds and
Wolf Blass, followed suit and warned shareholders of the
decreased demand of wine in China.
By focussing on government and failing to capitalise on a
shift to consumers, one that is advantageous for small and
medium producers, companies have already missed potential
markets and sales.
This change not only impacts on the volume of sales, but the
price-point as well. The high-end wine market in China is in
decline and mass-market consumption growth is expected to be
in the low to mid price range.
Recommendation: For small to medium wineries wishing to
develop long-term relationships in China, there are market gaps
in targeting middle class consumers. This market can only be
expected to grow as China’s economy builds a more prosperous
middle class and a consumption-based economy.
With China’s business-to-consumer e-commerce sales
set to surpass US$180 billion, many brands have begun to
rethink their retail strategy. ASC Fine Wines has reported an
opportunity in focussing on the ‘real market’. In rethinking its
retail strategy to focus more on online marketing, it has reached
an additional 30,000 consumers.
Overestimation of knowledge of wine
Due to the relatively new exposure to the wine market, many
Chinese are not knowledgeable in this area. Many wine brands
seeking to expand in China make the common mistake of
marketing their culture, heritage and wine tasting.
What they fail to realise is that Chinese consumers lack
interest in this area due to their premature knowledge. What
they desire is simply a good time with friends and to enjoy nice
tasting wine.
Singaporean Chinese wine journalist Ch’ng Pho Tiong
recommends the average consumer values the right label
above the right taste. He notes there is ‘no such thing as a
typical Chinese palate’ due to China’s vast area and existing
preferences for a diverse array of cuisines. Therefore,
attempting to create a wine to suit all those different palates is
unfeasible.
There are opportunities for producers to focus on younger
consumers who are interested in drinking with friends and
family. This requires marketing more focussed around the
packaging, attracting ‘buzz’ and leveraging word of mouth
between friends and family.
Recommendations: Lifestyle factors, including the status
attached to imported brands, are the predominant factor
in driving customer choice and should, therefore, be the
predominant factor in marketing.
Once an initial market is established, educating consumers
about the wine’s ‘back-story’ can support repurchasing. There
is an appetite for further information, in particular the unique
stories behind smaller and medium-sized wine companies. But
this must support, not lead, lifestyle factors.
By subsequent promotion of the story behind the production
of wine in Australia and offering educational masterclasses,
the smaller and medium-sized brands are likely to increase
in popularity, build repurchasing and widen the interest and
appetite for Australian wine as a viable alternative purchase.
Digital approaches
Our research identified wine as the second most popular
alcoholic beverage to be sold online in China. This represents
a large potential market that can be effectively tapped by
Australian wine exporters.
About 75% of Australian businesses attempt online
marketing strategies in China before establishing a physical
presence. It’s an approach that requires a lower investment
than a mainland physical presence, but one not without risks.
C H I N A BUSINESS & MARKETING
Table 1. Best selling alcohol on Tmall&Taobao in 2014 (type).
Categories Share of overall alcohol sales (%)
Chinese spirits 64.66%
Wine 21.47%
Beer 3.25%
Yellow rice wine 2.67%
Whisky 2.16%
Alcopop 2.03%
Brandy 1.07%
Vodka 0.69%
Liquer 0.64%
Rum 0.34%
Others 1.02%
____________________________________________________________________________________________________________________
1
http://www.smh.com.au/business/australian-wine-sales-hit-hard-by-chinese-
austerity-drive-20140330-35rst.html (Greenblat, E. (2014), Sydney Morning Herald)
▶

3. BUSINESS & MARKETING
70 www.winebiz.com.au WINE & VITICULTURE JOURNAL MARCH/APRIL 2015 V30N2
BUSINESS & MARKETING C H I N A
Our research shows Chinese internet
shoppers will not consider buying from a
Chinese website without an ICP licence
(a government issued permit for China-
based websites to operate in the country)
because of the risk of fake websites
selling counterfeit products.
A further 79% will abandon a website
if it takes more than 10 seconds to load
and 49% of consumers expect it to load
within three seconds.
Businesses that host their website
outside of China are missing out
on customers because the Chinese
Government’s filtering software can
dramatically increase loading times.
Recommendations: We examined
alcoholic beverage sales on the popular
Alibaba platform (Table 1). The most
popular choice of alcohol remains
Chinese spirits, making up 64.66% share
of alcohol sales.
This reflects the broader market,
however, given 21.47% of online alcohol
sales are wine, there are significant
opportunities open in the online
marketplace. While behind the learning
curve of Western online shoppers, many
Chinese residents are beginning to trust
in online shopping to complete their
transactions.
This is particularly the case for internet
users who are in the target demographic
for Australian wine producers. Currently,
Chinese internet users between the
ages of 20-29 account for 30.7% of the
market. According to CNNIC’s latest
survey results, more than 55% of Chinese
internet users are 20-40 years old.
It is also relevant for small to medium
exporters who wish to expand their
businesses. As the digital market is set to
develop and improve, it presents cost-
effective opportunities for businesses to
expand and grow.
It is also important to note that not
only should brands be selling their
wine online, but also selling their brand
online. Advertising is expanding online
in China, with one of the most popular
social networking sites, WeChat, expected
to offer advertising space this year.
Advertising should naturally support the
marketing efforts by focussing on the
lifestyle benefits of the brand.
To ensure maximum benefits,
Australian businesses should ensure their
online presence is accessible to Chinese
consumers, is hosted on the mainland and
has the government’s ‘tick of approval’, in
order to build confidence among users.
SO, WHERE TO FROM HERE?
The Chinese marketplace has unique
challenges and potentially limitless
opportunities. But those companies that
benefit from this new frontier will be
those that understand there are as many
differences in the markets as there are
similarities.
Online sales represent a credible
first step for those seeking to gain a
greater presence in the market, as long
as companies that choose this path take
the required digital steps to establish a
trusted, locally hosted presence.
Ultimately, wine producers that will
succeed in China will be those with
a clear understanding of the market
they are approaching, are aware of the
unique challenges they will face, and
have a solid plan that is flexible enough
to overcome those challenges.
ThinkChina specialises in digital
marketing and analysis, working
across e-commerce, data research
and analysis to help customers
seeking to access the Chinese
market build brands and develop
deeper relationships with mainland
consumers.
Figure 2. Percentage of the number of bottles sold in November on Alibaba
e-commerce platform by country of origin.
Figure 1. Age structure of Chinese internet users. Source: CNNIC – Statistical
Survey (June 2014)
Onlinesalesrepresentacrediblefirststepforthose
seekingtogainagreaterpresenceinthemarket,aslongas
companiesthatchoosethispathtaketherequireddigital
stepstoestablishatrusted,locallyhostedpresence.
WVJ