Li Demei：China’s Wine Market Outlook in 2019
The year of 2018 was definitely not peaceful. Although there has been no major change in the international political landscape, significant events loomed in the economic sector even. All sectors of society are generally not optimistic about the economic situation in 2019, and the wine industry will inevitably be affected. In the Chinese wine market, both imported wines and domestic wines suffered a decrease in sales in 2018. There are many reasons for this. Setting aside the macroeconomic background, the underlying reason is that the expectation for the development of the wine market in previous years was too high and the investment in this industry was aggressive, while the consumption and development efforts were inadequate. Since 2012, the whole wine industry has been resting on past achievements, and failed to expand its relative proportion in the alcohol market during the adjustment period. In contrast, the liquor industry has already completed the adjustment and started a new round of development. What is the future of the wine industry?
By looking back over the past year and looking forward to the future, we predict that the Chinese wine market will show the following characteristics in 2019:
Based on the overall performance of the wine market in 2018, we predict that the market will experience an adjustment this year. On the surface, the market will be stable, especially in terms of quantity that will not change significantly. However, following a change at the end of 2012, the consumption pattern of the market changed again at the end of 2018 with the shrinking business group purchase (which probably caused the sluggish Mid-Autumn Festival season). Relatively speaking, considering the increasing proportion of the direct consumption of consumers, we, based on a detailed analysis of the wine market, found that the competition will become fierce and the market share between countries and wine-producing regions will fluctuate, which will inevitably lead to a trade-off. In response to the adjustment of such a consumption pattern, it is necessary for both wine-producing regions and wine brands to adjust their development strategies.
Like other emerging wine markets, the Chinese wine market will feature increasingly higher concentration in 2019 and beyond. It is reflected in: The shares of wine markets will be concentrated on high-quality products, well-known wine-producing regions and strong brands. Such a concentration trend will be more apparent if the statistics are based on group brands rather than by independent sub-brands. For wine-producing regions featuring small scale and low profile, it may be effective to develop in concert with large groups that have settled in these producing regions. With a large proportion of market shares held by leading brands, it is their responsibility to lead the industry development and popularize consumption.
As an emerging wine consuming country, China has shown a constantly changing “new” trend in the aspect of consumer composition, sales channels, sales methods, consumption scenarios, etc. In this market, it is not always useful to replicate the success experience of others. Practitioners must continuously study, explore and innovate. In order to cope with the “new” situation, companies need to focus on the future, gain an insight into the changes in the consumption trends of the Chinese wine market, and proactively make the corresponding changes and appropriate adjustments to their business strategies.
Taking “new” changes of consumer composition as an example, in 2019, the youngest “Millennials” will be of legal age to drink. Millennials will become the main driving force for the new round of development of this wine market. Millennials have yet to replace the consumers born in the 1960s and 1970s (their perception of wine has stabilized, which made the consumer development targeting these people difficult), and their overall affordability is not as good as these generations. However, under the pressure of buying commodities such as houses or cars, Millennials’ consumption desire will promote their pursuit of new high-quality lifestyle products such as wines. Millennials advocate self-assertion and individuality. Unlike those born in the 1960s and 1970s and obsessed with famous wine brands, they generally prefer unique and niche wines.
In 2019, the consumer marketplace will tend to be stable, and consumers will be more demanding for quality and services – even if they may not be able to describe wine quality. When consumers start to buy wines, their bargaining power is weak, so they are easy to be guided by the merchant. After several purchases, they begin to try to know the wine and then put forward a variety of requirements, even for "996" wines (paying 99 yuan for 6 bottles). Therefore, severe competition will occur among low-end products with weak brand influence, low quality and insufficient promotion.
In the face of increasing demands of consumers for “professionalization”, operators must have various "professional" skills to walk in front of consumers.
Key word"Chinese Wines"
Since the end of 2012, the restriction on governmental group purchase and the rapid growth of imported wine have dealt a heavy blow to China’s local wine producers, whose sales has fallen sharply. Greatwall, Changyu and other leaders of China’s wine industry seized the opportunity that the sales of imported wines has declined, and began to develop and promote the localization of the wine culture by combining Chinese consumers’ consumption habits, dietary characteristics and drinking culture characteristics. In addition, a number of boutique wineries have been completed and put into operation in recent years. In 2019, China’s wine industry will see a new turning point.
Key word"Being Alive"
In the face of sluggish market development, the solution of companies is to cautiously expand, shrink business and ensure cash flow. As long as you are alive, there will always be an opportunity. However, a cruel thing is that a certain number of operators will be eliminated.
China's huge consumer groups cover first-tier to fourth-tier cities and even counties, where all grades of products can find business opportunities. Although the overall situation in the industry is not optimistic in the near future, companies still can find various opportunities.
Wine has existed for thousands of years despite changes in the world. What has changed are brands, while the habit of drinking wine remains the same. Business opportunities exist all the time, depending on how we seize them.