by Casey Hall
SHANGHAI (Reuters) – Difficult economic conditions could limit wine consumption in China in 2024, after the country had been the main contributor to the development of global markets for 20 years, observers said.
The increase in wine consumption was due to the growth of the Chinese middle class, whose thirst seems to have been quenched since Covid.
“Consumer interest in the market has declined significantly and there are no indicators to give hope for a turnaround,” explains Kym Anderson, director of the Wine Economics Research Center, at University of Adelaide.
Read also…
Wine consumption in China in 2023, domestic production and imports included, reached only a quarter of its peak reached in 2017. Imports fell by more than 60% over the period, adds the expert.
China’s alcohol market is the world’s largest and is estimated at $336 billion (€310 billion), but the erosion of consumer confidence during the pandemic has weighed on exports of foreign drinks in China.
At the same time, competition has increased in the market, with many alcoholic beverages now competing with wine, says Judy Chan, general manager of Grace Wineyards.
“There are more cocktails, craft beers, the choice is much wider for the consumer,” she notes.
“Wine has this halo (…) of sophistication. The problem is that it has lost this halo,” adds the manager, who started producing gin to diversify her offering.
Yan Yu, who uses WeChat to sell wine directly to his customers, notes that consumers have become more price sensitive since Covid, favoring bottles priced below 200 yuan (26 euros).
“The environment is complicated. I try to find people who have never tried wine, and who are curious, that’s how I develop my business,” explains Yan Yu.
TOP OF THE LINE
The market for good quality, high-end wines nevertheless remains significant, according to Judy Chan.
“Penfold’s will be successful in my opinion. People are prepared to pay for recognized brands,” she believes, referring to a famous brand of Australian wine produced by Treasury Wine Estates.
TWE thinks the same, the group having continued to invest and produce wines in China, despite sanctions imposed on Australian wines which caused its exports to the country to collapse.
The lifting of restrictions on Australian wines will further intensify competition. France, Chile and Italy filled the void after the imposition of Chinese taxes, and represented respectively 48.24%, 19.31% and 10.1% of an export market estimated at 1. 6 billion dollars in 2023.
The Chinese market can nevertheless still grow, with Judy Chan counting on a stabilization of demand.
Kym Anderson points out that annual consumption for an adult is less than half a liter, and that wine only represents 1.5% of alcohol consumption in China currently.
However, the evolution of demand for wine is “surprising”, according to the expert. “Given income growth and historical examples, we expected to see strong growth in wine demand continue in China,” he concludes.
(Casey Hall report, French version Corentin Chappron, edited by)
©2024 Thomson Reuters, all rights reserved. Reuters content is the intellectual property of Thomson Reuters or its third party content providers. Any copying, republication or redistribution of Reuters content, including by framing or similar means, is expressly prohibited without the prior written consent of Thomson Reuters. Thomson Reuters shall not be liable for any errors or delays in content, or for any actions taken in reliance thereon. “Reuters” and the Reuters Logo are trademarks of Thomson Reuters and its affiliated companies.