Yihaodian: A wine gateway to China?

International wines set to splash into China's lucrative market online, according to market expert
International wines set to splash into China's lucrative market online, according to market expert

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Chinese online supermarket giant, Yihaodian, is set to launch wines from New Zealand, France and the US on its site – offering a complete business solution for new international entrants, according to a market expert.

The online retailer has been working alongside Shanghai-based market analysts, Data Driven Marketing Asia (DDMA), to launch a dedicated wine section on its site.

DDMA noted it is in “advanced negotiations”​ with brands from New Zealand, France and the US – expected to comprise the first batch launched in August 2012.

Yihaodian has developed its wine section based on DDMA’s three year research project that has profiled consumer preferences in the market.

Sam Mulligan, director of DDMA, told FoodNavigator-Asia the section “will offer a complete business solution for international wine firms looking to enter China – covering all steps from importing to warehousing, marketing, promotion, distribution and sales.”

China’s wine market is difficult to enter, he said, “as the retail sector for wines is not that well developed at present.”

Complex distribution issues

“Import and distribution structures are complex and the retail sector is unique and very different to Western markets,”​ Mulligan added.

A new Rabobank report on China’s Wine Market – Mind the Gap​ – also details the difficulties global brands face in entering the market’s traditional distribution channels and cautioned suppliers to be mindful of a number of gaps.

“The gap between the expectations of foreign brand owners and the reality they face in the market is a result of a highly idiosyncratic and early-stage market,”​ Rabobank said.

It found that many international brands are choosing to enter the market through contacts or ‘guanxi’ and distribute on a more regional, ad hoc basis. Rabobank said that while this “obscure”​ channel will deliver opportunities, it has little corresponding value to the long-term prospects of the brand.

“Positioning a brand for long-term success in the China wine market is likely to require a hefty investment of time and resources,”​ it said.

Virtual swigs

Mulligan said that an online platform is an ideal entry-point to China’s wine market for internationals, as “it is far more efficient in terms of costs and it is also clearly focused in terms of markets and marketing.”

He added that consumers shopping online are also willing to trial new products for the first time, ensuring increased opportunities for international new entrants.

Wine in China is increasingly being consumed at home, as opposed to restaurants, he added – marking another reason why delving into this sector online will work.

International appeal

DDMA research shows that domestic wines gobble up the lion’s share of the market (90%), leaving evident room for growth on imported wines. The findings indicated that Chinese consumers are looking for new types of wine.

Although Rabobank research suggests that Chinese consumers have “some way to go before exploring the imported wine category with any great purpose.”

International wine holds strong opportunities in China, Mulligan said, but firms need to be “very focused on consumer understanding, marketing, distribution and positioning.”

Rabobank said that China Customs data showed that in 2011 there were 3,863 importers, up 73% from the year earlier and up 200% in five years.

Most firms have entered the market through partnerships, for example, in January this year, Australian wine firm Ferngrove partnered up with Chinese food company Pegasus to drive distribution in the key Asian market. Similarly, South-Australian wine producer Accolade Wines bought a majority stake in a Shanghai-based wine distribution business.

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