Chinese Consumers Buying Wine Online

E-commerce is taking off in the Far East, but price per bottle may be prohibitive for U.S. producers

by Kate Lavin
Wayne Batwin and Xin Ruibao (from right) watch as Napa Valley College president Ron Kraft presents a gift to Zhu Qunde, deputy county governor of Huailai County in China’s Hebei Province, on Tuesday at the college.
Napa, Calif.—While online wine sales were virtually non-existent in China as recently as a few years ago, nearly 20% of wine in the country is now sold through e-commerce, according to a speaker at the Cal-China Wine Forum held Tuesday at Napa Valley College.

Wayne Batwin, president of PRIME Market Access International in Napa, is a consultant to the nascent Cal-China Wine Culture Exchange, which organized the event. According to Batwin, Chinese e-commerce is growing rapidly, with food and beverage products performing especially well in the sector. But the sales channel also presents challenges to North American wineries looking to cash in on new sales avenues.

For example, the majority of wines sold online are priced less than 100 RMB, or about $16 per bottle, and import duties alone are around 48% for wines originating from the United States. While France still handily beats out the competition (representing more than 40% of wine imports in China, according to the Organisation Internationale de la Vigne et du Vin), Chile and New Zealand recently scored a coup by negotiating better trade deals with the country of 1.36 billion. In fact, this year Chilean wine producers won’t pay any duty fees at all, Batwin says.

Importers and distributors

Additionally, many online sellers in China won’t want to work through an importer, so the North American wineries currently lacking distribution in China may have the easiest time finding a niche in China’s online sales channel, according to Batwin.

For those looking to sell wine on the ground rather than cyberspace, Batwin encourages newcomers to consider second- and third-tier cities. Forty percent of all wine imports are destined for the “big three” sales hubs of Shanghai, Beijing and Guangzhou, but there is less competition in other areas, he says, where it might be easier to create a consumer following.

While wine distributors may try to convince North American clients that they can market a brand across China, Batwin says this is not the case. “Many distributors will ask for an exclusivity contract to cover the entire country, even though they can’t handle that.”

As many following the international wine trade are already aware, Chinese president Xi Jinping implemented an anti-corruption program that nearly halted sales of super premium wines starting in December 2012. Until that point, wine was a popular gift between government officials, who threw lavish banquets featuring more pricey bottles.

The austerity measures “had a chilling effect on the wine market,” according to Batwin, who reported the market for some Bordeaux wines that had been selling for between $1,000 and $10,000 per bottle, seemed to dry up overnight. He adds, “The impact is still being felt today.”

Consumers and market share
According to Batwin, young and successful Chinese males represent a prominent share of the wine market, and they are often very brand conscious. As in the United States, where wine selection carries an element of pretense, many Chinese consumers lack the confidence to try unknown brands, leading them to stick to names they know, such as Robert Mondavi or Beringer when selecting U.S. wines.

Predicting that China will be the top premium wine market in 10 to 15 years, Batwin suggested that North American wineries try to win back some of the market share they lost during the past decade.

In 2004 China imported $53 million worth of wine, 7% of which came from the United States. By 2014 that figure had climbed to $1.5 billion, but the share from the United States had fallen to 5%.

“We have not been keeping up with the growth in terms of market share,” Batwin said.

Learning acceptance
Master of wine Tim Hanni says it’s not surprising the Chinese haven’t embraced U.S. wine in the same way they have flocked to China’s domestic brands. We try to sell wine using unfamiliar terms and language. Imagine someone tried to sell you a Pinot Noir by saying it tastes like raspberry, he offered, when you’ve never even seen a raspberry.

Choose language they know: Juices, fruits and teas that are popular in China, Hanni suggested.

“Everything a wine can tell you can be related to a tea,” Hanni says, “the region, the weather, the growing conditions, the aging.”

He also blasted the theory that Chinese consumers prefer red wine, saying the notion that sweet, white wines are “starter varieties” spurred consumers to order red wines, even though they found the tastes bitter.

“We’ve so embarrassed people, they won’t tell us what they like!” Hanni fumes, asking the audience what is so wrong with a consumer drinking dessert wine with prime rib, if that is what he or she likes. “What China doesn’t need is false expertise.”

Hanni and Batwin both reveal their hope that China ushers in an era of consumer-led wine sales, where wine drinkers choose what appeals to them, rather than being told what is and is not a “good wine.”

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