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Economy

Retail sales of wine to shrink, only to swell from 2017

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2016-01-06 09:54China Daily Editor: Qian Ruisha

Price cuts that kept China's wine market low in recent years will continue this year, and the retail market value will shrink, only to rebound from next year, according to an industry survey.

According to the latest issue of the China Wine Report by Mintel Group Ltd, prices will rise from next year, so too will retail sales value, with the market growing at a healthy 5 percent or more till 2020.

Till 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.

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.

In the past five years, red wine has lost 4.9 percentage points, a drop considered normal in a developing market.

Still, in terms of penetration, red wine tops other types of alcoholic drinks with 75 percent of the market share. According to the report, some 95 percent of wine consumers drank red wine in the 12 months to June 2015, suggesting red wine is often the starting point for many wine drinkers.

This also shows the wine market in China remains in its infancy stage. So, niche and under-developed segments like white wine have greater opportunities to grow, the report said.

In global markets, white wine accounts for 40 percent of the dry wine market and it is likely that the trend will continue in the future.

Sparkling wine and champagne are seen as the most fashionable drinks among different types of wines. But winning consumers over has not been easy, as sales volumes over the years testify.

In 2011, the top 10 brands in China were all domestic ones, accounting for almost 26 percent of the wine market volumes. But in 2014, their share by volume plummeted to 14.3 percent, hurt by the anti-extravagance campaign that appeared to help smaller brands, which are more likely to be imported, to gain a foothold in China, said the report.

Chinese wine producers have been increasing their imports too by way of acquisition of assets overseas. For instance, loss-making Yantai Changyu Pioneer Wine Co Ltd, one of China's leading wine producers, went ahead and bought a 90 percent stake in the Bordeaux-based Chateau Mirefleurs for 3.33 million euros ($3.54 million).

Sun Jian, Changyu's deputy general manager, expects the company to return to the black once more of its high-quality bottles are sold in China. "This is only the latest step in our expansion. We're looking at more chateaux of this quality and character in Bordeaux and other areas of France."

Changyu's search is being extended to wine-producing countries like Australia and Chile, he said.

According to the Mintel report, Chinese drinkers are eager to learn about the nuaces of wine, like its constitution, age, provenance, whether it is full-bodied, crisp or fruity. They want to try out new types of flavors. So, wine producers are making sure to include as many details as possible on bottle labels.

  

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