Despite an increase in exports last year China’s wine market is still slowing as a result of government austerity measures, a new study shows.
New research by Vinexpo found the country’s anti-corruption campaign and economic slowdown was impacting on wine sales.
The wine market research firm reported that Chinese wine drinkers consumed 131.9 million cases of red wine in 2015 – 7 million cases less than 2014 and 16.8 million less than 2013.
This decline occurred even though Chinese customs figures for the first nine months of 2015 indicated that wine imports rose by 38.7 percent in volume to 297.7 million liters and by 34.7 percent in value to $1.4 billion.
French and Australian wines dominated the import market.
French wine imports increased by 36.1 percent in volume and 34 percent in value to equal $623 million, while Australian imports grew by 83.6 percent in volume and 58.7 percent in value.
Despite their recent gains, import levels remain below those of the pre-austerity era and experts are not expecting a full China wine market recovery this year.
Retail values will continue to shrink
According to the latest issue of the China Wine Report by Mintel Group Ltd wine prices and retail values will continue to shrink in the coming year.
Price cuts that kept China's wine market low in recent years will continue this year, the report predicts.
And the retail market value will shrink, only to rebound from next year, with the market growing at a healthy 5 percent or more until 2020.
Up until 2012, volume growth was in double digits, but the government's anti-extravagance campaign hit sales and imports of wines hard. Volume growth turned negative, necessitating industry restructuring and price cuts.
Three years on, the market is showing signs of recovery, suggesting cuts helped prices to reach a sustainable level amid relatively strong demand from the mass market.
Shift to mid-priced wine
The nature of demand is also changing. Although red wine has dominated the China wine market for long, other types like white wine and sparkling wine are eating into its share.
And although imported bottles are seeing a high growth rate, many are taking the place of domestic wine, which Vinexpo says is seeing a “sliding” market share.
Experts believe the category with the most potential amidst these market conditions is mid-priced wine as opposed to high-end labels from the boom era.
According to China customs data, the average price of China’s imported wine has been declining since 2013, with many new distributors selling cheaper wine in bulk through online shops.
As China’s growing middle class gains more interest in wine and the anti-graft campaign continues, more people are switching their focus from top-tier wines toward mid-range options.