Industry Insights | The Road to Reverse Export of Chinese Wine

Despite significant fluctuations in wine production in recent years, global wine consumption has remained at a relatively stable level. Global wine production fluctuates due to natural weather, planting areas, and weakened demand in some regions. In 2022, Italy (4.98 billion liters), France (4.56 billion liters), and Spain (3.57 billion liters) accounted for 50.8% of global wine production. The vineyard area in the United States has been continuously declining since 2014, while that in Argentina, South America, has been decreasing since 2015.

In 2019-2020, affected by the COVID-19 pandemic, global trade was hindered, raw material prices rose, and purchasing power declined, resulting in a slight decline in global wine consumption. However, it rebounded rapidly in 2021, indicating that the global wine market has strong resilience. From 2022 to 2027, the global wine consumer market is expected to grow steadily at an annual compound rate of 1.2%.

The United States is the world's largest wine consumer, with a consumption volume of 3.31 billion liters in 2021. Followed by France, Italy, and Germany, with 2.5 billion liters, 2.4 billion liters, and 2 billion liters respectively. The European region is the main global wine-consuming area, with a wine consumption volume of about 142 billion liters in 2021, accounting for about 60% of the global total wine consumption. These major countries have a high penetration rate of wine in society due to their long history of wine consumption. In 2021, China's wine consumption ranked sixth globally, with a total annual consumption of 1 billion liters, a 15% decrease compared to 2020.

Despite the Chinese wine market entering a consolidation period due to multiple factors such as the pandemic and the broader environment, the trend towards upgrading in the market has not changed. The planting area of wine grapes and wine production in China are expected to grow steadily, and the quality and reputation of domestic wines are gradually improving.

With the economic recovery following the post-pandemic era, there will be signs of a rebound in China's wine consumption volume and expenditure. Driven by favorable policies, the growth of disposable income among residents, and a shift in consumer concepts, the Chinese wine market still has good development potential. Consumption upgrading and the increasingly rational nature of the wine market will bring greater changes to the wine industry. The Chinese market is one of the few wine markets in the world that still have significant growth potential, and major producing countries are accelerating their layout in the Chinese market.

• Consumption levels have risen, and the consumption structure has upgraded

The improvement in the living standards of the Chinese people is an important factor driving the development of the wine market. With the development of the Chinese economy, per capita disposable income has been continuously increasing, along with the overall consumption level. According to data from the National Bureau of Statistics, per capita consumption expenditure has risen from 13,220 yuan in 2013 to 24,538 yuan in 2022. Among them, in 2022, Chinese residents spent 7,481 yuan on food, tobacco, and alcohol, accounting for 30.5% of total expenditure, making it the largest proportion.

The rapid development of the Chinese economy and the improvement in living standards have made the prospects for the development of China's wine market increasingly broad. Consumers' demand for high-quality wines with rich cultural content is also increasing, which has prompted wine companies to innovate and upgrade in terms of product quality, cultural brands, marketing, etc., to meet consumer needs and increase market share.

• The prevalence of wine culture

Since China joined the WTO in 2001, a large amount of imported wine has entered the Chinese market. With the openness and diversification of Chinese culture, more people have accepted and embraced the wine culture. The tasting, drinking methods, and cultural connotations of wine have become hot topics of interest. Consumers' requirements for wine quality are also getting higher and higher, making tasting wine a way to experience the quality of life and demonstrate social etiquette.

Conversely, the improvement in the maturity of the wine market has also promoted the upgrading of the wine industry and driven its healthy development. The competition in China's wine industry is fierce, and in the future, the competition between imported and domestic brands will become increasingly intense. Moreover, many domestic wine companies are seriously homogenizing their products at the low-end, which provides good development opportunities for wineries that can offer high-quality wines. The demand for high-end products plays an important role in promoting the wine consumption industry towards better development.

• Market specialization and standardization

The Chinese wine market is also gradually becoming more standardized and improved. To meet market demand, more and more wine companies are focusing on enhancing product quality and taste, rather than simply pursuing scale and production. At the same time, some companies are also paying attention to the cultural connotations of their products, making wine not just a beverage but also a cultural and artistic item. These changes have elevated consumers' perception of wine, thereby increasing market demand.

In addition, the government has also introduced a series of policies and regulations to standardize and improve the wine market. For example, setting wine standards and strengthening the supervision of wine imports. These measures help to improve the quality and safety of wine products, protect consumers' rights and interests, thereby enhancing market confidence and promoting the healthy development of the entire wine industry.

• Product strength enhancement

Products are the most important point of contact for all enterprises with consumers. True product strength comes from craftsmanship and a deep understanding and integration of customer needs. The competition among Chinese wine enterprises is internationalized, and product strength should also be considered within the global wine landscape. China has many well-known wineries and producing regions, and excellent products are infectious. As the market matures, consumers' attention to the quality, flavor, and region of the product itself will gradually increase. Product strength is always the cornerstone of a winery.

• Branded development

Branded development is not only about the individual growth of enterprises but also one of the external manifestations of industry norms and upgrades. The Ningxia wine industry has steadily entered a stage of high-quality and branded development, where brand building is particularly important. Although the upfront investment in branding wine is significant, requires continuous investment, and carries high investment risks, especially during market fluctuations when wine brands are reshuffled, brand value becomes even more prominent.