Getting To Know The Chinese Wine Market
April 17, 2011 Many American winemakers would love to break into the Chinese market, but they’ll have to hustle to compete against the prestige of Old World wines. That conclusion is derived from research conducted by economists at Washington State University (WSU).
Jill McCluskey, a professor in WSU’s School of Economic Sciences, said the research used auctions in order to understand Chinese consumers’ preferences for wine from China, France, Australia, and the U.S.
“The purpose of these auctions was to understand how information and country of origin affect how much Chinese consumers are willing to pay for imported wines, including U.S. wines,” McCluskey said.
According to the Bordeaux Wine Council, in 2010 China was the largest wine importer in the world. In 2008, Chinese per capita consumption was 1.08 liters, compared to annual per capita consumption of 9.68 liters in the U.S. and 53.22 liters in France.
From their experimental auctions, McCluskey and graduate student assistant, Hainan Wang, noticed a couple trends. “The participants were willing to pay more for ‘old world’ wines from France than for ‘new world’ wines from the U.S. and Australia or for domestic wines from China,” McCluskey said. “It was with the younger participants, where we saw a greater willingness to pay more for wine products from China and the U.S.”
The weekend wine auctions were conducted in 2009 in seven different Chinese communities and three universities in Beijing and Shanghai. In total, 195 residents and 228 students participated in the economic experiments.
“Generally, the resident participants exhibited higher bids than college students for all of the four wine products in the auctions,” McCluskey said. The types of wine used in the auctions were Dragon Seal, a domestic Chinese wine; Chateau Saint Pierre, from the U.S.; and Chateau Marot Bellevue from France. All three wines are made from Cabernet Sauvignon grapes. The fourth wine was an Australian Shiraz-Cabernet blend made by Lindemans. All four types of wine were purchased at grocery stores in Beijing and Shanghai.
McCluskey and Wang said that household income had a positive effect on a consumer’s bid for wine, while there was no evidence that gender had any effect on the participants’ wine bids. Currently, wine is being marketed mainly in urban supermarkets in China, according to McCluskey.
Wine is both marketed and consumed differently than most Americans are used to. “I have seen importer-marketed boxed gift sets with two bottles of wine that come with a western necktie,” McCluskey said. “It is also very popular in China to dilute wine with soft drinks.” She recalled a saying from an article in The New Yorker that is popular in China: “Red wine and Sprite: the more you drink, the sweeter you’ll be.”
As to how U.S. wines can get more shelf space in Chinese urban supermarkets, McCluskey suggests sending sales representatives to China so they can develop a solid relationship with particular retailers.
McCluskey’s research received funding from the WSU Impact Center.
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