China Wine Market

Topics: Wine, Chardonnay, Fermentation Pages: 10 (2353 words) Published: August 26, 2013
STRATEGIC SNAPSHOT : CHANGYU WINE : FEB 2010

INDUSTRY OVERVIEW – GRAPE WINE MARKET IN CHINA
➢ China Wine market potential is high
➢ China is the leading growth rate of wine consumption in the world ➢ Consumption growth is healthy and set to soar
➢ Modern domestic wine production capabilities is relatively new and beginning to improve ➢ Despite an influx of imports, demand is outpacing supply, especially on the high quality red wine segment ➢ Competition is high, but market indicates attractive growth ➢ Key players are dominated by 4 domestic companies who control 27% marketshare of the grape wine market

STRATEGIC ASSESSMEMNT OF YANTAI CHANGYU WINE

YANTAI CHANGYU (1892) IS CHINA’S OLDEST WINE BRAND WHOSE EARNINGS HAS GROWN FASTER THAN THE INDUSTRY

CHANGYU SUCCESSFUL BUSINESS PRACTICE
➢ Marketing & Brand building
➢ Attractive customer targeting of high end products
➢ Aggressive partnering
➢ Adoption of international leading practices (through their JVs) ➢ Strong breadth and depth of distributors
➢ Forefront of creating a wine culture throughout China with the help of partners ➢ Large barriers to entry protect ChangYu
➢ Key Risk

INDUSTRY OVERVIEW – GRAPE WINE MARKET IN CHINA

China is the leading growth rate of wine consumption in the world ➢ Global Average 1%; Asia 9%; China 12% (5 yr growth rate) ➢ 2009 : approximately USD9b - Euromonitor / Author Estimates o 1 bn bottles

o annual growth rate of 17% since 2003
o 2009 estimated 680 million consumers
➢ Q2 2009 marked first decline since 2003
➢ 2010 to grow by 12% annual increases over the next 5 years ➢ Approximately USD7 bn in 2009, up 12% from 2008
➢ Since 2003, annual growth rate at 17% Euromonitor / ATK

China Wine market potential is high
➢ Raised awareness of food safety and growing health concerns ➢ NPC trumpeting the health benefits of grape wine consumption in order to preserve grains for food rather than alcohol production ➢ Fueled by a prestigious image, red wine is increasingly becoming a common gift and a symbol of wealth and living well ➢ Further demand will be driven by China’s economic development, blossoming tourism and demand from expats

Consumption growth is healthy and set to soar
➢ China’s per capita wine consumption is low compared to its peers o China (0.7 liters) 2009
o United States (8.1 L)
o England (21.2 L)
o and Canada (15.2 L)
o Japan (1.8 L)
o Hong Kong (0.9 L)
➢ Q2 2009 marked first decline since 2003; however, growth is set to stabilize to 12% next 5 yrs ➢ The overall wine market in China is one of the key segments which are developing rapidly, but is still only a small part of the alcoholic drinks market in China

20002010 (f) - million liters Alcoholic production22,24536,817
Alcoholic Drink Sales30,377.6045,268
Wine sales1,4302,591
Beer Sales21,179.8037,277
Spirit Sales7227.805,400

Per Capital Consumption (lit)24.0632.87

Source : China Brewing Association, Customs General admin of PRC; US Census Bureau, BMI Calculations, estimates/forecasts

Wine is becoming the fashionable drink for the wealthy younger generations in China’s cities and the drink of China’s wealthiest elite ➢ 600m young Chinese exploring new types of alcoholic drinks, the potential market for sales of wine in the future is great. o Price driven upwards by domestic producers’ experimentation and preference with higher quality wines, in particular foreign imported wines ▪ Average bottled price was US$3-5, but now the avg off-trade retail price for a domestic red wine was $9.62 ▪ Domestic Red retail price ranges from $1.09 to $57.66 ▪ Premium wines are...
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