Chan: Austerity has given rise to ‘real consumers’ in China
China’s austerity drive has been positive for Chinese winemakers, allowing for the “birth of the real consumer”, believes the CEO of one of the country’s biggest producers.
Speaking at a conference chaired by Debra Meiburg MW at the Hong Kong International Wine and Spirits Fair Judy Chan, president of Grace Vineyard in China, explained that China’s austerity measures had allowed winemakers to more easily identify “real” wine lovers.
“In the past the people that bought wines were not those who consumed the wines”, explained Chan. “It was not rational buying at all. In the past if you had relatives or friends in the government you could sell wines, and if you were willing to give kick backs you could sell. Now we are dealing with real consumers who care about the brand story and value of wines.”
China’s austerity drive began almost 18 months ago by Chinese President Xi Jinping, cutting some $9 billion in public spending, according to state media.
Grace Vineyard in Shanxi Province was the first family owned winery in China, founded in 1997 by CK Chan. Chan’s daughter Judy is now its CEO, having joined the team in 2002, with the winery considered one of the most progressive in China.
Explaining that Grace never “had very strong government connections”, Chan said she had been “forced to build a brand and price for value”, which has paid off given the recent changes to the industry.
“In moments like now it’s actually much better”, said Chan. “It’s cleared out some of the people who were only in the trade because they thought it was an easy way to make money. A lot of players have left the industry.”
Looking at the way in which China’s wine industry has changed Chan notes a significant rise in the number of wineries operating across the country.
“Ten to 15 years ago there were only a handful of wines, the famous sate-owned wines controlled the market”, said Chan. “Grace was one of the few privately owned wineries in China. Now we have nine different wine regions and many wineries have built up in the last five years.”
Not only are there more wineries than ever, but winemakers’ passion for producing quality wines has also increased, says Chan.
“It’s exciting because everyone wants to do something”, she said. “Instead of focusing on quantity people are focusing on quality. They want to have a story and different people are joining the industry.”
However as China’s soil composition is “pretty similar” across all regions, it can be difficult for winemakers to communicate their brand story as they are all “basically selling the same story”, according to Chan.
“Our soil difference is not that great. In Europe the difference is huge. In China soil is pretty similar so the wine’s character is not very different. So it becomes a brand. How do you communicate your brand?”
One way that Grace is experimenting with expanding its reach is through social media, targeting a generally younger demographic. Earlier this year Grace launched a sparkling wine called Angelina, marketing and selling it solely on social media.
“We wanted to use a product to try a new distribution channel and promote it through social media and the internet. It’s a small quantity but in a month we sold a third of our projected quantity for the year.”
However while China’s wine market is growing, Chan acknowledges that wine drinkers in China are still a “very small group of people” and that it would be “a big mistake to consistently target wine lovers”. Instead, she says the industry should be trying to convert people that do not yet drink wine.
Explaining two ways of doing this, Chan cited the perceived health benefits of wine over hot liquor, which is traditionally served at banquets in China.
“Wines are seen as more healthy” said Chan. “These are the people I can convert first. The other way is with sparkling wines. We do pretty packaging and hopefully we can convert younger people who want to try it out. The wine is seriously done but we don’t make it about tasting notes or anything. They are called Joy, Hope and Pursuit, so its more emotional appeal of the wine.”
While Chinese wine is gaining greater recognition in international markets, Chan believes its biggest market will always be China, as the country’s huge population tends to make producers “lazy” when it comes to tackling markets overseas.
“We have such a huge market from a producers perspective”, explained Chan. “I’m still only selling in selective places in China. In our province we have a population of 35 million. It makes us a lot more lazy to go oversees. I think there will be more acceptance of Chinese wines as there are more quality producers but I think the primary market will still be China.”