SHANGHAI | 8 Nov, 2020
Building a Wine Brand in China
At an average hypermart of China's iconic cities, there would be more than five hundred wine brands available to choose from. Make your wine brand stand out in such a crowded field.
While demand for foreign wine imports in China is booming, there is more to building a wine brand in China than just finding the right importer or distributor. As Western winemakers are finding out, there is a lot that goes into ensuring that your bottle of wine is the one that Chinese consumers ultimately select when they are at the point of purchase. At an average hypermart in Beijing or Shanghai, for example, there might be 500 or more wines to choose from. So how do you stand out in this crowded field? The answer is to build a solid wine brand.
Understand Chinese consumer behaviour
The first step to building a wine brand in China is to understand the behaviours, preferences and habits of Chinese consumers. According to UK-based wine consultancy Wine Intelligence, the No. 1 factor that determines how attractive your wine brand is to Chinese consumers is its relative prestige. In a study by Wine Intelligence, consumers valued a prestigious brand overall factors – including country or region of origin, grape varietal or even quality.
The reason is that many Chinese consumers are “buying into a lifestyle” when they buy a bottle of wine. From this perspective, having the ability to afford an expensive and prestigious bottle of wine is social proof that a consumer has achieved a certain level of success in life. Moreover, since bottles of wine are often exchanged as gifts or given to mark special occasions, the overall prestige of the brand matters more than in other cultures.
While Chinese consumers are becoming better educated about wine and wine culture (especially when it comes to food and wine pairings), they still tend to buy on the basis of an instantly recognizable brand that reduces the effort required to understand all the factors that help to determine the real value of the wine – such as soil, climate, terroir or the special attributes of certain grapes. In another study cited by Wine Intelligence, terms like “social superiority” and “prestige” appeared again and again. This is a clear sign that any successful brand must be able to convey a certain level of prestige.
French winemakers, for example, have embarked on extensive efforts to build a recognizable brand around the Champagne region of France. From this perspective, “Champagne” is a brand and not just a region – and one that Chinese consumers wish to enjoy on the most important and festive occasions. Other wine regions – most notably, Bordeaux – have also established themselves as brands in the mind of the average Chinese consumer.
Target a specific demographic or sector of the market
Unfortunately, not all wines come from regions such as Bordeaux, Burgundy or Napa Valley – and that has forced winemakers to become much more creative about how to build recognition for their brands. For example, some winemakers have become more involved with retail and restaurant channels, targeting the on-premise sector of the market. The goal here is simple – if Chinese consumers routinely encounter certain wine brands at their favourite restaurants, bars and hotels, they will be more likely to pick up a bottle of that wine the next time they go to a retail location.
However, there is another step that wine brands can take that might have a greater impact on overall sales: targeting the Internet wine sector. If you take a look at the overall structure of the Chinese wine market, you can see why this is such an important approach to take – only 18% of all wine sales occur at on-trade establishments. Moreover, supermarkets and convenience stores account for only another 30% of all wine sales. The other 52% of wine sales from come from online sales and speciality wine stores.
To see this strategy in action, take a look at what Australian winemakers are doing to improve the visibility of their wines in China. While there are some high-end Australian wine brands that Chinese consumers recognize – such as Penfolds – there is a lot of education that goes into teaching consumers about Australia’s diverse wine regions and wine varieties. In other words, how do you convert a French Bordeaux drinker into an Australian Shiraz drinker?
The answer is simple: go to where the consumers are online, and spend time creating unique experiences that appeal to Chinese consumers. There is plenty of opportunities to brand website destinations on popular e-commerce sites such as Tmall or to create unique social media experiences on Chinese social media sites that help to convert users into buyers.
Pay as much attention to branding as you do sales
Many foreign winemakers operate under the strategy of “if you build it, they will come.” In other words, if they find the right importer and distributor in China, it’s only a matter of time before the sales start to pile up. However, the only thing wrong with that approach is that the Chinese wine market is extremely fragmented, with nearly 1 million different wines available for sale within the country (compared to 100,000 in the United States). Even if you sell on a direct-to-consumer (DTC) website, you might be competing with over 5,000 different wines at one time.
Thus, it is very important to pay attention to branding. At the very minimum, you need to make sure that you have a distinct name and recognizable logo or symbol that is protected. Otherwise, you run the risk of copycat winemakers using similar trademarks or logos. An unsophisticated consumer might reach for a bottle of “Pinfolds,” not realizing that it is a cheap copycat of a “Penfolds.” In 2013, the French wine company Castel found this out the hard way – without realizing it, there was already another “Kasite” (the phonetic rendering of Castel in Chinese) in the market, and this led to a long, painful trademark infringement process that the Chinese company Panati Wine eventually won.
Find the right distributor for your wine brand
Finally, it’s important to find an importer-distributor who can actually move your product. There are nearly 4,000 different wine importers in China according to Chinese Customs, but 97% of them handle relatively small volumes. In fact, this 97% accounts for only 40% of the total volume, meaning the small handful of mega-importers (such as ASC Fine Wines) handle 60% of the volume. If you are not partnering with the biggest importers and distributors, there is the very real risk that your wine will be ignored.
Moreover, Wine Intelligence has highlighted the unique incentive structure in China, in which distributors make more money on cheaper, easier-to-sell wine than on expensive bottles that retail for $40 or $50. As a result, they tend to view the “big brands” and high-profile wineries as just a way to bolster the prestige of their overall portfolio and attract even more wine suppliers, rather than as a source of profit.
The future outlook
By taking these steps above, you can improve the chances that your wine brand ultimately becomes successful within China. Right now, New World wineries are using this strategy very successfully to occupy the middle range of the Chinese wine market, while Old World wineries are using this strategy to claim the upper range of the market.