China Red Wine Market Research

1、China Red Wine Market ResearchIn China, red wine accounts for over 90% of the wine market. So throughout this report, the word “wine” we used refers to red wine.1. Market information1.1. Chinese red wine market sizeChinas wine consumption has been continuously increasing since the late 1990s. The pe

2、r capita consumption of wines rose from 0.19 liters in 1997 to 0.75 liters in 2009, representing a 4 times increase. Nevertheless, compared to France (51 liters), Italy (44 liters), USA (11.5 liters) or even Japan (1.9 liters), Chinas per capita wine consumption is still far behind. China wine consu

3、mption volumePer capita consumption (L)Increasing rate (Source: State Statistical Bureau)Since 1996, the Chinese government has been trying to slow down hard liquor consumption and encourage wine consumption, this through several actions favoring domestic wine production and the bottling of imported

4、 bulk wines in China. However, wine still accounts for a small percentage of Chinas alcoholic drinks market compared to beer, white spirits (Chinese liquor), and yellow rice wine.Structure of alcohol consumption in 2009Beer White liquor Yellow liquor WinePer capita consumption (L)(Source: State Stat

5、istical Bureau)1.2. Red wine market growthØ Chinese red wine market growthChina is the world's fastest growing wine consumption market. Consumption level in the world's traditional wine consumer countries have remained flat in the last 10 years, with the Chinese market being an exceptio

6、n. China's wine sales continue to increase, leading to a stampede from global wine producers.In 2009, China wine production volume was 960 million liters, increasing 27.63% from 2008. The industry revenue was RMB 22.3b, increasing 20.72% from 2008. In 1H2010, China wine production volume reached

7、 500 million liters, up 21.43% yoy.Research data from British research institute ISWR / DGR showed that by 2010, total global wine consumption will reach 24 billion liters. Among them, Chinese wine consumption will reach 558 million liters. Ø Chinese import red wine growthChina wine markets rap

8、id growth pushes the import wine to grow fast. The import volume rose from 66.7 kilo-tons in 2005 to 187 kilo-tons in 2009, increasing by 1.8 times, implying a CAGR of 29.4%. From 2005 to 2009, the market share of import wine also rose from 12.3% to 18.1%.According to the diagram, the growth of impo

9、rt wine volume slow down, which is because the bulk red wine import volume reduced. From 2005 to 2009, the import rate of bulk red wine reduced from 81% to 44%. Detail percentage is shown below:The import rate of bulk wine declined because the China local raw material wine supply increased fast. Als

10、o compared with imported bulk wine, local wine has the lower price and fair quality.Ø China wine market grow fast for the following reasons: Drinking red wine is healthier than white liquor and beer China published “Chinese wine quality standard” in order to raising the wine quality in the mark

11、et. Its good for Chinese wine market growth After jointing WTO, the import tax of wine production reduced from 65% to 14% Wine industry in China has higher profitability so more and more companies enter this market1.3. Global main wine export countriesAverage Price (USD/bottle)FeatureAcceptabilityFr

12、ench-2008: 73-2007: 97French wine is produced in several regions throughout France, in quantities between 50 and 60 million hectolitres per year, or 78 billion bottles. France has the world's second-largest total vineyard area, behind Spain, and competes with Italy for the position of being the

13、world's largest wine producer. French wines accounted for 17.6% of world exports in 2005.HighItaly-2009: 25-2008: 31Italian producers have moved rapidly to the forefront of world enology, improving techniques to create wines of undeniable class in every region, north and south. Their wines deriv

14、e not only from native vines, which represent an enormous array, but also from a complete range of international varieties.HighSpain-2009: 19-2008: 21Spain has a relatively large number of distinct wine-producing regions, more than half having the classification Denominación de Origen (DO) with

15、 the majority of the remainder classified as Vinos de la Tierra (VdlT). HighUSA-2008: 43-2007: 43The North American continent is home to several native species of grape, including Vitis labrusca, Vitis riparia, Vitis rotundifolia, Vitis vulpina, and Vitis amurensis, but it was the introduction of th

16、e European Vitis vinifera by European settlers that led to the growth of the wine making industry. the United States is the fifth most planted country in the world after France, Italy, Spain and Turkey.LowAustralia-2009: 19-2008: 27In general, the warmer the wine region, the more likely it will prod

17、uce rich, full flavoured styles which many people come to associate with Australian red wine.  However, Australia also has cool climatic conditions well suited to red varieties which produce lighter and more delicate red wine styles.High(Source: wine-) The following table shows the top 10 wine

18、export countries to China2006-2008 China bottled wine import volumeRankCountry2006/liter2007/liter2008/liter08/07 growth %1French6,887,28315,517,25122,945,45847.872Australia4,582,3018,783,92711,628,06732.383Italy1,845,6645,113,1815,053,292-1.174Chile1,243,8472,646,4324,206,32458.945USA1,658,8272,358

19、,5393,867,32263.976Spain1,797,0903,399,4253,140,280-7.627Argentina244,966972,2021,527,65757.138Germany621,3661,127,8561,415,59225.519South Africa311,597643,950977,34451.7710Romania56,499156,617873,420457.68 (Source: China Customs)1.4. Top 3 Chinese wine companies (Changyu, Great Wall, Dynasty)Ø

20、 Market shares Changyu has the largest market shares by either revenue or net profit. Its profit margin is far more than other companies because their sales price is higher Great Wall has similar market shares with Changyu by sales volume but the revenue and profit is lower because the production st

21、ructure is not as good as Changyu which means the average sales price is low Dynastys growth speeds of revenue and profit are lower than the industry average level so their market share was continually reducing these yearsØ Leader brand in each part of ChinaPlace of ChinaLeader brandMarket shar

22、esMid-northGreat Wall28.5%Mid-eastChangyu26.7%NortheastChangyu14.6%Mid-southGreat Wall36.3%SouthwestGreat Wall43.0%NorthwestGreat Wall21.2%(Source: Qunyi securities)ChangyuGreat WallØ Gross profit levelThe following diagram shows the gross profit of the top 3 wine sales companies and industry a

23、verage level:Gross margin level of top 3 wine companiesChangyu Dynasty Great Wall Industry average level (Source: Companies annual report) Changyu has the highest gross margin over its peers, which is attributable to its shorter distribution channels as well as higher proportion of high-end products

24、Ø Sales modeSales team structureAdvantagesDisadvantagesChangyu 3 level sales system Group directly owned 37 sales companies High controlling power High gross profit margin Low accounts receivable High prophase selling expense Hard to enter new marketGreat Wall Multi-regional distributors + regi

25、onal distributors Each distributor has own sales team Low sales expense Easy to extend the market Competition between distributors increase the enthusiasm Low controlling power Low bargaining power for the production Low gross profit marginDynasty Regional distributors Easy to manage Low selling exp

26、ense Easy to extend the market Low controlling power Low enthusiasm for distributors2. Related policies2.1. Import policiesØ Volume limitationThere is no volume limitation in accordance with existing policies.Ø Import approvalThe import company should prepare the following documents: Norma

27、l business documents (company registration document, tax registration certification) Products of business scope must include alcohols Get the “Alcohol import business approval” and sanitary license Fill the “Foreign trade operator registration form” and enroll in department of commerce Get the wine quality test certification Foreign Wine producers “Production permit”, “Sanitary license” and “Prod