International wine manufacturers should look to cultural preferences for niche and premium red wines to be successful in China, according to an industry analyst.
Jose Luis Hermoso, senior analyst at International Wine and Spirit Research (IWSR) and author of the IWSR China wine market report published in August, told FoodNavigator-Asia: “Western companies are desperate to enter into such a huge market…for new entry wine to be successful, it will have to target the niche and premium market.”
Hermoso said that manufacturers not only needed to focus on the premium market but specifically the red wine market.
“Red wine has been driving growth in China and is still very strong in the market…at the moment over 90 per cent of the wine market in China is red,” he said.
Hermoso said there are several cultural factors why red wine is the colour of choice in China.
Traditionally Chinese consumers don’t like drinking cold drinks, they drink teas and local spirits and red tastes better at room temperature. Many Chinese consumers are also aware of the alleged health benefits of red wine but most profoundly and culturally specific to China, is that the colour red symbolises joy and strength and white is the colour of death, he said.
Hermoso said that this may seem an odd concept to the Western world but these beliefs are strongly engrained in China and influence choices and habits.
“Ironically, Chinese soil is better suited to producing white wine,” he said.
Labelling also needs to be traditional, appealing to roots, tradition and heritage.
“Manufacturers also need to be very careful about the name, specifically the phonetic translation in Chinese and also Chinese symbols, it needs to be easily translated,” he said.
A growing market, complex to enter
ResearchInChina’s June 2011 report on China’s wine industry said that it is a growing industry in both consumption and production, with output growing 13.4 per cent year on year, totalling 1.089m kilolitres in 2010.
Imports also increased, up from 15.1 per cent in 2009 to 20.6 per cent in 2010.
It has huge potential with a robust demand for the high-end grape wine market, the report said.
Hermoso said: “Opportunity does exist but it’s just about finding the right balance between the opportunity to access such a vast market and the price needed to do so…bringing a new brand into China is a huge and costly investment.”
Jenny Li, senior research analyst at Wine Intelligence said: “The tax structure means that most imported wine brands can only compete at more premium price points, and to succeed they need to understand their positioning in the market and communicate to the consumer why this wine is worth the higher investment.”
Wine Intelligence’s 2011 report said that the retail price of imported wines can sometimes reach three to five times that of the ex-cellar price after taxes and expenses.
Hermoso said that entering the wine market of China is no easy task for international companies due to regulations that preference local wineries.