Guests at weddings, government banquets and corporate meetings across the land clink wine glasses, as Chinese upgrade and diversify how they toast special occasions.
Wine is now a firm fixture on the dining table of middle class consumers. This has excited wine producers the world over. Yet brands trying to sell into the market are struggling with the reality that volume lags variety. More than 80% of the wine bought in China is produced locally and the vast bulk of wine sold is red, as a first generation of drinkers sticks to conservative choices.
This is a characteristic trait seen in previous emerging markets like Japan that eventually opened up their palates to other varieties, notes Guilllame Delglise, CEO of Vinexpo, a global wines and spirits exhibition, but it will take time for the same to happen in China.
In an interview during a recent visit to Shanghai, Delglise, who was previously Asia Pacific director for Laurent-Perrier, also told China Economic Review that officials in Beijing are not inclined to serve champagne to their guests, and explained why that might be good for marketers of bubbly as they chase affluent urban youngsters at fancy nightclubs.
China is the world’s largest red-wine consuming nation, but what types of red wines are most popular, and from which regions?
China is the world’s largest red wine consuming nation. It’s true it was in a way a shock for the industry to know that China has already become the number one market for red wine. But 82% of the red wine consumed is Chinese. Imported wine in China only represents 18% of the market.
Chinese consumers have sought out wines from traditional sources such as France and Italy. Do you see growing acceptance of New World wines?
It’s growing very much. For many new markets, France is usually the destination. France has the image of a country producing good quality wine. But when there is a wine boom, as we can talk about a wine boom in China for the last few years, there are more wines coming from elsewhere.
Chinese wine consumers often drink for show rather than for taste, which is why expensive wines have proven popular. But a truly healthy market needs consumers at all levels. What signs are there that this is emerging in China?
Wine in general, not just expensive wines, has been considered by the Chinese as a new way to entertain people. Another way of enjoying wine is with food. They entertain and buy wine, as before they used to buy cognac or hard liquors or spirits. This image is prevalent in China. This will probably change in the future, but it’s difficult to know exactly when. Most of the players are trying to educate the Chinese palate and to watch how the food palate works.
What can wine brands do to encourage the wider middle class population to drink wine?
20 years ago, Japan was in the same situation as China. Now, Japan is one of the most sophisticated wine markets in earth. I’m not sure if China will come to that, but at least there will be a lot of education, for sure. I know a lot of wine organizations are doing a lot of tastings and a lot of master classes. Plus another important thing to note is that the Chinese people are traveling more and more and they are getting to know the food and wine pairings when they go abroad. This may have some consequence on local wine consumption habits.
Are white wines becoming more popular in China, after being overshadowed by reds for such a long time?
Red wine, by far, will be number one in China, and for a long time. But white wine will be coming as China improves knowledge about wine in general. This is what we in all emerging countries. China will go to it, as well. For China in the very beginning, red wines were very popular because the color red is so symbolic in China, so red wine has been very popular. But white wine will come also. I think it’s linked with the temperature: People in China are not used to drinking wine with a low temperature. It’s also a question of acidity: The Chinese are not used to drinking such acidic wines. White wines are usually more acidic. It’s a lack of knowledge, basically. The white wine producers will have to work a lot.
How can brands such as Lafite tackle the problem of fake products that arises from such huge demand?
That happens. These producers are already taking measures to fight against this. There are already some companies that work on this subject with the Chinese government. The Chinese government is cooperating and enacting stricter laws against this. Now, it’s easier to tell a fake wine label from a real one. In the future, as the market matures, this problem will be solved but it will probably take some time. It’s true, I know the main importer for Lafite in China very well. They are extremely concerned, and they trace where all bottles come from. They have the whole sales force looking at this problem. They actually have made a specific sign on the label to guarantee the Lafite wine is real. This should be a kind of alert to potential consumers.
The central government is clamping down on expensive government dinners. Is this having an impact?
Yes, of course. I think there are two things here. First, there have been in China a lot of new importers which were not extremely relevant and who considered the wine business as a hobby. These people were not serious enough because they had no idea of how to distribute wines. They imported a large number of famous wines because they were famous and “parkerized”, if I can use that word. And this proves to be a bad situation, because these companies were overstocked. And now they have to get rid of the remaining stock. And at the same time as you said there were these anti-corruption laws from the government and this had an impact on the entertainment thing. This is why there is a lot of leftover stock in China and we will need a few years before we return back to a normal situation. But we don’t believe this will affect the development of the wine business because this will happen anyway.
Champagne is often served at big diplomatic events in the West. Is this also the same case in China?
I believe it is not served at these events in China, not yet. In China, champagne is mostly consumed at clubs and bars. It is still very much a category of alcohol that is used in the nightlife. This was how it was developed, at least.
So from your understanding, even from officials and the big government companies, you don’t see champagne as becoming a drink that is replacing baijiu?
Not much. They will use still wine to entertain. It’s not the same case as in Hong Kong or the more mature markets.
I’ve been to lavish parties at nightclubs in Shanghai where whole private rooms are stacked with champagne. What are your views on this?
It’s pretty amazing. Not even in Europe you can see such things. But there again this has been encouraged by these great brands. They have targeted China. They have targeted Chinese women. They have targeted the clubs. They want to promote champagne as the ultimate, glamorous drink. And they’ve been pretty successful. But these are a lot of investments.
What is the thinking behind that? You target younger consumers, but how does it develop?
I think it’s much more simple. The champagne brand, they want to associate champagne with glamor, success, stars, Hollywood. That is exactly the image they want to give. Basically, you go to a club and you drink champagne, it means you’re successful, famous and a potential star. Or you’re already a star. They want to promote it this way because they rather show the glamorous side of champagne as opposed to champagne being served at the government parties in Beijing because if the Chinese government drinks champagne, the
younger generation of Chinese will not be interested. But if they see Brad Pitt and Angelina Jolie enjoying a glass of champagne, yeah, that means something. So they are very much attracted to this Western style environment and that’s what the champagne brands want to promote.