Wine100 china wine trade forum report by WINE100

WINE100 China Wine Trade Forum Report

16 May, 2013

2013 WINE100 China Wine Trade Forum Report

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2013.05.16

WINE100 China Wine Trade Forum Report

16 May, 2013

Acknowledgement We come to the successful ending of WINE100 China Wine Trade Forum. Hereby we would like to express our thanks to all participants. It's really appreciated for your concerning and supporting on WINE100. Besides, we would like to thank our simultaneous interpretation team. It’s their excellent interpreting that makes sure our forum go smoothly. Also, it's grateful for all participating staffs at Shanghai Sheraton Hotels & Resorts. Thank you for your contribution on WINE100 China Wine Trade Forum. 369

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Our most sincerely thanks will go to all guest speakers on this WINE100 forum. On the forum, your professional viewpoints for Chinese wine industry are much appreciated. At last, we would like to thank staff from our co-organizer Vinsanity— staff from professional wine marketing company. Thanks for your contribution to WINE100 Forum.

WINE100 China Wine Trade Forum Report

16 May, 2013

CONTENTS PREFACE

1. CONSUMER MARKET IN CHINA

1.1 THE HISTORY AND DEVELOPMENT OF CHINESE WINE MARKET 1.2 CREATING ATMOSPHEREE FOR PERSONAL WINE CONSUMPTION 1.3 BUILDING MORE CHANNELS FOR CONSUMER MARKET

3 4 5

2. PUBLIC WINE EDUCATION IN CHINA

2.1 THE CURRENT SITUATION OF WINE EDUCATION IN CHINA 2.2 PUBLIC WINE EDUCATION IN CHINA-TRADITIONAL MEDIA, NEW MEDIA, WINE INSTITUTION 2.3 THE CHALLENGE AND FUTURE OF PUBLIC WINE EDUCATION IN CHINA

7 8 9

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CONCLUSION

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Andrew Caillard Master of wine

Shaohe Huang Founder of Vinehoo.com

Lisa Perrotti-Brown Master of wine Editor in Chief of Wine Advocate

Martin Hao The editor in chief of Wine Press

Marcus Ford Frankie Zhao Founder of Pudao Founder of Wangjiu.com

Edward Ragg Initiator of Dragon Phoenix Wine Consultants

Stephen Lee Senior lecturer of Eswine

WINE100 China Wine Trade Forum Report

16 May, 2013

Preface During the WINE 1OO competition, on May 16, 2013, we especially invited eight elite experts of wine business to deliberate the current situation and future development of Chinese wine markets. These experts include Andrew Caillard (Master of Wine), Shaohe Huang (founder of Vinehoo website), Marcus Ford (founder of Pudao), Frankie Zhao (founder of Wangjiu.com), Lisa Perrotti-Brown (the editor in chief of Wine Advocate), Martin Hao (the editor in chief of Wine Press), Edward Ragg (initiator of Dragon Phoenix Wine Consultants), and Stephen Lee (senior lecturer of Eswine). 369

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Two themes for WINE100 Chinese Wine Trade Summit Forum are the development of Consumer Market in China and the Public Wine Education in China. It’s quite concerned to wine professionals that how to seize the tendency of Chinese wine market when facing instability and high rate of elimination. This report is not the actual records for 2013 WINE100 China Wine Trade Forum, but it's meant to illustrate the key point and analysis during the forum discussion.

WINE100 China Wine Trade Forum Report

16 May, 2013

1. Consumer Market In China 1.1 The history and development of chinese wine market There's a history of 20 years of wine importing, if we take the year 1993 as opening year when Montrose wine company was founded and got index from COFCO. After a long calm period, the wine market finally began to bloom in 2006. In the following 6 years, the average annual growth rate of total import volume exceeded 70%, and wine companies with importing qualification were increased to 4421 from 812 of the year of 2006. While at the same time it's crisis-ridden in the market. According to the Custom data of recent years, a large amount of companies would never import wine after the first shipment, which means the company will get out of the market after obtaining the importing qualification. This kind of company takes ratio of 30%, which means among the roughly 4000 import companies of 2012, more than 1000 companies would not import wine anymore. Actually bubble bossiness hides behind the prosperity, 369

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*Data comes from the speech of Marcus Ford, Founder of Pudao In 2013, the market begins to transform. The growth rate of total import volume slows down and the traditional sale channels are with keen competition. Newly issued policy of government expense restriction

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extremely affects the sales of wine. From this we know that the market is not really opening up. In this historic time, wine sellers put emperies on the personal wine consumption. Those mature wine markets all experienced the transformation from beer to wine worldwide, such as USA, and Australia. In China, CADA estimated that the total revenue of drink wine and fermenting wine in 2010 is CNY509.3 (USD 83.2) billion, including CNY271.3 (USD44.3) billion for white spirit, CNY129.4 (USD 21.1) billion for beer and CNY32.5 (USD 5.3) billion for wine. Also, according to 2012 Mintel latest analysis report, the total consuming volume of Chinese wine market is CNY46.3 (USD 7.6) billion. Importing wine sales revenue takes 19.4% of total wine sales; only take 10% of beer sales and 3% of Chinese liquor sales. The wine market is with highly potential, but the key is to develop the personal consumption market. 369

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1.2 Creating atmospheree for peronal wine consumption A lot of factors affect Chinese wine market development. Besides the traditional trading factors, such as wine price, wine education, wine culture publication and marketing expansion, the relative policies also can adjust and influence the Chinese wine market. When analyzing the external factors, we can easily find that Chinese wine market development does not concentrated on the public and spread of wine culture. This minor sales pattern will lead market fluctuation by small influence of external factor. Only when the wine consumption becomes the public life, Chinese wine market can be mature and stable. It is the general foundation that to let the public learn the wine knowledge, know about the wine culture, love the wine history, build a market atmosphere with general interest for wine, find the loyal fans and foster the fixed custom of wine consumption. Wine culture could be learned through tasting. Only when more consumers directly taste wine, the Chinese wine market could become mature. Many concerned people deem the development of personal wine consumption will be the new increasing point in the Chinese wine

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16 May, 2013

market, while the development need more corporation between all concerned businesses. As regarding to the wine sales channel in China, we should pay more attention on the public consumption, especially for those large importers. We should let the public have the consuming capacity for wine and even be accustomed to taste wine. There are many standards of wine category in the global wine market. It can be categorized by price as fine wine, table wine and bulk wine. For Chinese market, both fine wine and table wine are important for people to learn the wine culture. Even, we can say that it's much more important for those large importers to bring table wine rather than fine wine into Chinese food culture. 369

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Besides, we also need the cooperation among wine media, education organization and sales institutes to lead the public's wine consumption to build a proper wine market atmosphere. 1）We need more wine activities to let consumers learn wine knowledge and know about the wine brand by tasting and discussing with wine experts. 2) Wine media should take efforts to publicize the wine education and let more and more people understand wine culture. For example, through Weibo (Chinese Twitter) and WeChat, an article can spread much more wine information to the public easily. 3) As for wine education organization, it can provide training to those hotel waiters or waitress who can directly learn and satisfy the public's needs for wine.

1.3 Building more channels for consumer market How to explore the Chinese wine consumer market? All guests in meeting state their own opinions. The traditional way is to open wine shops. In old world, consumers have more channel to buy wine. Besides the supermarket, club and restaurant, many

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16 May, 2013

cellardoors or wine shops take large parts of wine market share. In wine shops，professionals provide consumers more wine experience. This can lead consumers directly learn wine knowledge and build their loyalty to brands. Thus they will grow habit to wine consumption regularly. The other innovative method is E-commerce, quite eye-catching in current Chinese wine market. This arisen E-commerce changes public's lifestyle worldwide. Although wine E-commerce serves as value-added “dessert” in Europe, experts still consider wine E-commerce will lead mainstream in China market in the future. At present, some E-commerce merchants such as Wangjiu.com and Vinehoo.com show enormous advantages as online wine shop. For wine merchants, online sale is benefit for maintain brand influence. Through traditional advertising, it will take around 7 days for consumers to remember a brand and almost one month to find this brand and to purchase. While through Internet advertisement such as 2-D Barcodes, consumers can buy the wine immediately. Therefore, wine merchant can easily build the direct sales channel to consumers by taking use of the internet technology and E-commercial platform. 369

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Besides the advantages on time-saving, E-commerce saves remarkable operation cost. It not only can reduce the transport and warehousing cost and risk of overstocking, but also can provide cheaper price to online consumers.

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16 May, 2013

To consumers, the traditional sale mode by exclusive supply will lead to asymmetric information between some wholesalers and consumers. But the E-commerce can provide all information packages through 2-D Barcode screening. The information may include other consumers' comments, scores, and even the winemaker's opinions, which can provide consumers enough data to exactly choose the proper wine. To sum up, facing the high elimination rate in Chinese wine market, one should grasp the new opportunity to impel the market mature. Only when we pay more attention on the wine personal consumption, no matter by traditional wine shop or innovative E-commerce, we can be much more competitive in this growing market. Meanwhile, consumers can gain more and more wonderful experience on wine. 369

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16 May, 2013

2. Public wine education in China 2.1 The current situation of wine education in China The business statistics show that till the end of 2012, China has become the biggest market for WSET. WSET has about15000 students in Asian and Pacific regions. As rapid increasing of wine education needs, it's a concern for people that education resources are enough or not to provide standard and even high qualified wine education. In most inland cities, wine market has the powerful potential, but shows a lack of professional education to influence consumers. Therefore, wine educators have a long way to go in these undeveloped markets. 369

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Apart from the factor of uneven education resource, data from WSET shows non-wine-profession students only take 20% in Chinese market, comparing with 35% in America and 30% in England, which means we should concentrate a lot on the common public fans, coach and guide them through more channels. In that case, more and more people will begin to reasonably consume wine. At first people consume wine only for gift and purchase wine only relied on brand name, in the future people will gradually learn to appreciate wine culture and stories behind. This virtuous circle also will help the whole market to grow more healthily.

2.2 Public wine education in china-traditional media, new media, wine institution In lack of high quality education resource, at present wine loves in China could learn wine knowledge and culture in other ways.

WINE100 China Wine Trade Forum Report

16 May, 2013

Traditional media, new media and some wine institutes play a significant role in actively stimulating the public's enthusiasm for wine. Traditional media deeply affect the public's lifestyle. During a long period it guide and promote the public to reasonably consume wine. As the first wine magazine in China, Wine Press is the information resource, not only for professionals, but also for the public to learn about wine culture and new lifestyle. Together with other traditional media, Wine Press gradually influences and promotes the growing up of Chinese wine market. At the same time, with the rapidly development of new media, information spread way varies. Consumers can absorb wine knowledge from more and more channels, such as books, media and internet. On the public social communicating platform consumers can learn some scattered wine knowledge, and through the internet forum they can also enhance their interest for wine. Especially, those professional media like Eswine and Tastespirit can simplify the information and spread the systematic knowledge to consumers. 369

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Wine institutes also contribute to increase wine consumption culture in China market. For instance, via series of wine events, wine origin association， such as Australian Wine, ProChile help more consumer understand more about wine tasting, local terroir, winery stories and so on. It endows wine consumption as lifestyle. At present, different wine competitions and exhibitions are great chance for consumers to learn about wine. Direct communication with wine experts and winery owners can enhance consumers' interest and understanding.

2.3 The challenge and future of public wine education in China Comparing with other Fast Moving Consumer Goods, wine contains profound culture meaning. With the increasing market competition, more wine importers start to participate in the wine education. On one hand, they take training for employees to improve the whole company competition from the culture aspect. Thus, it’s a concerned issue that bothers education institutes and wine lectures in order to maintain their independency: Should wine education institute cooperate with importers or not? Importers provide

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16 May, 2013

wine for education, which can directly improve the wine education quality. Meanwhile, education institutes need clear marketing positioning to maintain independence and keep authoritative image. On the other hand, they need more cooperation on wine culture promotion, discovering creative methods to market this “wine life-style” together. On Oct. 2004, with the movie Sideways hot show in America, the sales of Pinot Noir increased 16% in western coast of US. According to statistics from Sonoma State University, this movie leads to increasing sales of Pinot Noir. During the fast development of Chinese wine market, we need culture to drive, not only professional wine knowledge, but also to influence properly consumers' concept of drinking and consuming. And it's necessary to bring creative ideas to extend consumer group. 369

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Lisa Perrotti-Brown MW, the editor in chief of Wine Advocate (TWA for short), has pointed out the media development in American wine market. Not only the wine education institutes should maintain their independency to teach consumers, but also the professional wine media should keep independent, authoritative and creative. For example, TWA is neither the first wine media in America, nor the first one who uses the scoring system. But it’s the first wine media who adopts the unified 50-100 score system which is similar with the US education scaling system. This creation on system of course can guide consumers to purchase wine and also cultivate wine educator and observer. Furthermore, the importer and winery also can easily promote their wine by the benefit of the standard system. This score system is well used in wine market just like it’s created for guiding consumers. However, Media creation on contents should be on the base of consumers, this clear positioning of the brand and contents can help wine professional media get long term development, and it’s a necessary factor to push forward the wine education. Comparing with TWA's unified score system and professional instruction from wine master like Robert Parker in America, there's lack of authoritative and influential key opinion leader in Chinese wine market. It's difficult for the common public to find the purchase guide, and also difficult for the wine merchant to get massive attention and interest in a short time. In the future, we will need more independent, authoritative and influential organization in Chinese wine market to culture the personal consumption market positively and build reasonable and regular purchase habit. That will ferment the marvelous prosperity of our wine market.

WINE100 China Wine Trade Forum Report

16 May, 2013

Conclusion The success of WINE100 China Wine Trade Forum draws wide-range attention and participation of people in this field. Though it's a slow-down developing period for Chinese wine business and flocculation of the market increases the difficulty to predict the future market, guests' speech and participants' discussion in the forum provide us points of views and opinions to promote Chinese wine market. On one hand, cooperation among media, education institutes and 3rd-party institute show organized to draw consumers' interest, guide their reasonable consumption and promote the wine culture. On the other hand, the Chinese wine supplier should actively explore more direct purchase channel, encourage public experience wine and enjoy the pleasure of wine culture and tasting. Offer consumers with more capability, willing as well as more channels to purchase wine. 369

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WINE100 China Wine Trade Forum Report

16 May, 2013

About WINE100 Wine100 is professional wine consulting institute, dedicated in promoting wine and culture in China. In line with “Professional, Fun, High-quality’, we are offering “Most Professional Wine Challenge” and “Most Popular Wine Festival”. n Professionalism - WINE100 Challenge WINE100 Challenge is first wine competition aimed at consumers' daily drink in China market. Due to world-class judges, transparent process, and professional organization, we have become the most influential and credible wine challenge in China. n Consumer Impact – WINE100 Wine Festival WINE100 Wine Festival is a large-scale consumer-oriented wine festival. By presenting wine, food and culture of various regions, it creates great wine experience to consumers with fun and substance. n Service – WINE100 Consulting WINE100 offers full range of marketing strategic consulting, such as brand positioning, marketing tactics analyzing, promotion and communication, matching wholesalers and marketing events execution and so on for wineries with intention to enter Chinese Market. Help wineries create brand value and localize in China. 369

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WINE100 China Wine Trade Forum Report

16 May, 2013

Copyright Statement The report points may not be the forum guests' opinions really. Zunrang (Shanghai) Ltd. Co legally own the copyright of this report. It is forbidden to reprint and excerpt this report or by any other ways without authorization. The authorized using this report should be in the permit limit and remark origin from WINE100. Anyone who violates the above statement, we will hold the legal responsibilities.

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