ABSTRACT
Global trade in wine has doubled in the last 15 years to about 28.3 billion Euros in 2015, with about 40% of all wine now exported, up from 25% in early 2000s (OIV, 2016). New markets like China are at the forefront of this growth. Beginning from negligible wine consumption in the 1970s, the Chinese domestic wine industry is now worth US$ 7.3 billion, with the second largest vineyard area in the world (1.97 million acres), making it the 8th largest wine producer (1.12 billion litres), the 5th largest wine consumer (1.58 billion litres) and the largest red wine consumer (1.40 billion litres) in 2014 (REF?). With a huge gap between local production and consumption, it is not surprising that China is also the world’s largest importer of wine.
The Chinese domestic wine market is dominated by players such as Great Wall, Changyu and Dynasty, whereas France is the biggest exporter of wines to China closely followed by Australia. In fact, Australian wine exports to China increased by 8% to 40 million litres, worth about A$224 million in 2014 (Wine Australia, 2016). As a result, Australia’s market share of the bottled wine imports in China remained strong at about 18% by value and 12.6% by volume in 2014 and Australia’s average value of bottled imports (US$6.83/litre) is also the highest among the top five importing countries. To sustain their performance, Australian wine exporters use a range of activities including consumer fairs and roadshows, social media and online activities, trade shows and promotions and industry awards, to raise the profile of Australian wine in the market (Wine Australia, 2016).
Australian wine exporters face many challenges and opportunities in China. First, wine constitutes less than 5% of total alcohol consumption in China and hence, per capita wine consumption is still very low at only about 1 litre per annum (Qing, Xi and Hu, 2015). Second, brand awareness for foreign-made wines still quite low and the consumers are quite price-sensitive outside the top 11 cities that account for 76% of imported wine sales and 60% of domestic wine sales by volume (Bouzdine-Chameeva, Zhang and Pesme, 2014). Third, the wine distribution network in China is dominated by big wholesalers, hotels, restaurants and bars (80%) while the retail sector and online players are also growing (Wine Australia, 2016). Fourth, the demand for wine in China is quite seasonal, with about 60% of the sales during the two main holidays (Chinese New Year and Mid-Autumn Festival) driven by the demand for gifting purpose, an integral part of Chinese culture. Finally, despite a high country-of-origin recall (66%), Australian wines still have quite low penetration (4%) and repeat demand (16%) in China (Wine Australia, 2016).
This chapter addresses all these challenges and opportunities faced by the Australian wine industry in China, by exploring the changing consumer attitudes and lifestyles, increasing consumer awareness and growing preference for branded products couple with improving penetration and repeat purchase rates for wines in China. This chapter concludes by exploring the impact of the recently signed China Australia Free Trade Agreement (ChAFTA) on the demand for Australian wines by eliminating the tariffs ranging from 14 to 20% at present, within four years.
