As China underwent its economic transition in the past 10 years, its citizens have become important consumers in the luxury goods market. Mainland consumers are becoming increasingly demanding of food and drink as their income and spending power increase. As luxury and lifestyle become more important to mainlanders, the demand for wine has been steadily growing in recent years, with increases registered in both the value and volume of wine imports.
China is likely to displace Britain as the world’s second largest wine consumer in terms of value by 2021, according to research from Vinexpo—one of the largest exhibitions for wine and spirits professionals globally—and the UK-based International Wine and Spirit Research.
The growth rate of the Chinese wine market is estimated to exceed 30% over the next five years, starting from 2017 onward, and attain a size of $23 billion in 2021, second only to the US.
According to the presentation of Dr. Justin Cohen, research fellow at Ehrenberg-Bass, in 2013 at Hong Kong International Wine & Spirits Fair, the most important motivation for drinking wine in China was that wine was good for the health. However, over the years, the wine consumers and consumer behaviour have changed. According to Wine Intelligence Senior Research Manager Chuan Zhou, Chinese wine consumers are now younger, and drinking for pleasure, rather than status or health.
Red wine remains the default wine choice for many in China. Red wine occupies 71% of all the wine products on online shopping malls and white wine follows as 16%. Sparkling wine makes up just 1% of wine sales in China, but in 2017, bottles of bubbly made up a lot of ground, reaching $75 million—a 33% increase from the previous year. Over the last three years, we have seen remarkable growth of nearly 80% in organic and biodynamic wine entries.
China now boasts 21 million online wine buyers who look for imported wine. Of all Chinese imported wine customers, 62% view news and information online, and 47% buy wine via online channels. Wine is the most purchased among all the online alcohol customers with a robust growth compared to other alcohols.
Hong Kong as a Major Player
For the most part, wine collectors in Asia still regard wines as an investment rather than a mere drink. Hong Kong is quickly becoming a regional wine trading and distribution hub in Asia.
This is because it has zero duties on wine, a policy instilled in 2008, which makes imports a hassle-free process. Hong Kong is also now the world’s second largest wine auctions, surpassing London. Sotheby’s was able to raise 14.3 million USD in just two auctions held in Hong Kong. To offer some context, it took eight auctions to raise the same amount of money in London. Hong Kong also provides easy access, as it has an ideal geographical location for Asian distribution. Many imported wines are then stored in Hong Kong facilities. Plenty of these storage facilities are converted factories that had been empty for long periods of time. Hong Kong is serious about wine storage, with the Hong Kong Assurance Agency launching a certification program to ensure proper storage conditions. Requirements cover adequate temperature, humidity, lighting, vibration, monitoring, and review.
Foreign Investment of Vineyards
Chinese investors have turned to vineyards as their next lucrative financial prospect. France’s wine region of Bordeaux has seen an influx of international buyers in addition to Tuscany, Italy’s wine hub. As of 2010, more than 140 wineries have been purchased by Chinese investors, many of which are hotel owners. In doing so, they are able to reduce costs and streamline the distribution process. The investments are also a way of diversifying risk, with many Chinese purchasing the vineyards as a vacation home.
According to Forbes, there are only four fundamental ways to invest successfully in fine wine:
1. Stay focused and buy the best of the best ‘brands’;
2. Buy those wines in quantity and in original packaging whenever possible;
3. Don’t be afraid to pay up for the scarcest brands;
4. Store your wines in ideal conditions.
Focus Wine Cellars is dedicated to bringing you luxury wine storage solutions. Learn more about our services by calling 1-905-617-6106.