Great Wall or Red Carpet? Challenges and Opportuni6es for Australian Wines in China

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Susan Cox
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1 Great Wall or Red Carpet? Challenges and Opportuni6es for Australian Wines in China Prof Piyush Pi Sharma Cur6n University, Australia Food, Wine and China: A Tourism Perspec6ve 4-5 February, 2016 Cur6n Margaret River Campus

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3 Global Wine Market & China Global trade in wine has doubled in last 15 years 25 billion euros with 40% of all wine now exported up from 25% in early 2000s (World Wine Ins6tute 2015). New markets like China are fuelling this growth Domes6c wine industry worth US$ 7.3 billion p.a. (2014) 2nd largest vineyard area in the world (1.97 million acres) 8th largest wine producer (1.12 billion litres) 5th largest wine consumer (1.58 billion litres) No.1 red wine consumer (1.40 billion litres) No.1 importer of wine in the world 3

4 Australian Wine in China Chinese domes6c wine market Dominated by local players - Great Wall, Changyu, Dynasty France is the biggest exporter followed by Australia. Australian wine exports to China Increased by 8% to 40 million litres worth about A$224 million in 2014 (Wine Australia 2015). Market share of bo_led wine imports remained strong at about 18% by value and 12.6% by volume in 2014 Average value of bo_led imports (US$6.83/litre) also the highest among the top ﬁve impor6ng countries 4

5 Consumer Awareness 5

6 Country- of- Origin Source: China Wine Barometer (2015) 6

7 Region of Origin Source: China Wine Barometer (2015) 7

8 Australia Regions Source: China Wine Barometer (2015) 8

9 Penetra6on & Repeat Purchase 9

10 Country of Origin Source: China Wine Barometer (2015) 10

11 Region of Origin Source: China Wine Barometer (2015) 11

12 Grape Variety Source: China Wine Barometer (2015) 12

13 Distribu6on Channels 13

14 Distribu6on Channels Source: Daxue Consul?ng (2013) 14

15 Channel Penetra6on % Source: China Wine Barometer (2015) 15

16 Chinese Wine Consumers - A Closer Look - 16

17 Mo6va6on (Qing & Hu 2015) Self- consump6on Giking Young, well- educated, middle to upper income Execu6ves, Professionals Spend 67 per month on average Consume at home or with family in restaurants Buy at supermarkets followed by specialty stores For enjoyment, health beneﬁts and cosme6c Rela6vely older and higher income levels Senior Execu6ves, Businesspeople Spend 127 per month on average Buy from store and treat others in restaurants Buy at special stores followed by supermarkets To enhance business and social rela6onships 17

18 Super Premium Segment Mostly rich business families and social elite 100 richest Chinese hold USD 376 billion USD (2014), which has more than doubled (121%) since 2009 (Forbes 2014) 2.4 millionaires (2014) up +189% since 2009 (Forbes 2014) Ultra- High Net Worth Investors put 15-20% of wealth into collec6bles e.g. jewellery, art and fine wine (Barclays, 2012) High expecta6ons from fine wine (Masset et al. 2015) Ability to improve in bo_le, show aging poten6al Should emanate from a well- known wine- growing region Have a long standing history and reputa6on Should have been awarded high scores by experts Should be high- standing in an official classifica6on 18

19 Chinese Outbound Tourism Rapid rise in Chinese Outbound tourism* Crossed 100 million in 2014 (+19% over 2013) Compared to 20 million Inbound (excl. HK, Macau, Taiwan) 68 million Outbound from USA (55% to Canada & Mexico) Top 10 Des6na6ons - Chinese Outbound (2015) South Korea, Taiwan, Japan, Hong Kong, Thailand France, Italy, Switzerland, Macau, Germany Main objec6ves for overseas tourism Sightseeing, Leisure, Shopping (WTCF 2014) Attude towards Wine tourism Low awareness, enthusiasm or interest (Hussain et al. 2015) * Source: China Na6onal Tourism Administra6on 19

20 Challenges Wine is less than 5% of total alcohol consump6on, hence very low per capita consump6on - about 1 litre per annum (Qing and Hu 2015) Low brand awareness for foreign wines and price- sensi6ve consumers outside major ci6es High concentra6on in top 11 ci6es - 76% of imported wine sales and 60% of domes6c wine sales by volume (Bouzdine- Chameeva and Zhang 2012) Wine distribu6on dominated by big wholesalers, hotels, restaurants and bars (80%) although retail sector and online players are also growing 20

21 Challenges Highly seasonal demand - about 60% of the sales during the two main holidays (Chinese New Year and Mid- Autumn Fes6val), mostly for giking which is an integral part of Chinese culture Wine is s6ll mainly an aspira6onal drink to be consumed on special occasions rather than an integral part of everyday dining experience Despite high country- of- origin recall (66%), Australian wines s6ll have very low penetra6on (4%) and repeat demand (16%) (Cohen, Corsi and Lockshin 2015) Lack of awareness and popularity of Wine tourism 21

22 Opportuni6es High poten6al for growth in demand Increase in per capita consump6on Switch from other alcoholic drinks Market expansion to Tier 2 ci6es and upcountry towns Dis6nct value segments in the wine market Brand- conscious premium segment in major ci6es Price- sensi6ve mass segment outside the major ci6es Growing importance of oﬄine and online retailers Scope to expand distribu6on reach in mass segment High country- of- origin recall for Australian wines Posi6ve image in terms of quality and ﬂavour 22

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24 Way Forward Con6nue trade educa6on by par6cipa6ng in trade events, trade journals and promo6ons. Increase penetra6on in retail and online channels to reach Tier 2 ci6es and upcountry markets Promote Australian wine at Airports & Duty- free Shops Leverage weaker Australian Dollar to boost exports Leverage China Australia Free Trade Agreement (ChAFTA) with tariﬀs eliminated over four years Reposi6on Australian wine as Fun and Good Time to dominate the mass segment as Chinese consumers move towards less formal wine consump6on 24

25 Final Words Product Development Match Australian Wine with Chinese food flavours from different regions of China and other parts of Asia Market Development Do not forget your local Australian tourists; they are likely to visit more than once and could give repeat business Bridge cultural gap with Chinese tourists hire local Chinese staff (e.g. students), offer Tea, Red Packets, Chinese snacks Look beyond East coast; seek strategic alliances with regional tourism des6na6ons e.g. Indonesia, Singapore, Thailand etc. Leverage the huge Chinese domes6c wine business invest in local wineries, distribu6on channels, brands etc. 25

26 Upcoming Special Issues Journal of Business Research (Challenges & Opportuni6es for Marketers in Emerging Markets) Journal of Services Marke6ng (Services Marke6ng in a Culturally Diverse Global Marketplace) Thank You! Comments or Ques6ons? 26

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