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China market 2021: return to pre-pandemic levels

www.winemeridian.com by Emanuele Fiorio21/03/2021  

After a decrease in value of 32% in the 2020, the Chinese wine market this year should return to pre-Covid levels of 2019.

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A year ago, in March, Wine Intelligence reported that estimates of the decline in wine volumes in China in the 2020 would be at least at -20%. That figure, as the crisis worsened, was revised to -30%.

Today, a year later, Juan Park, Director of Wine Intelligence, wanted to meet Alberto Fernandez, Director General of Asia-Pacific, Middle East and Africa for the Torres family and the Master of Wine Fongyee Walker of Dragon Phoenix Wine Consulting, to receive updates on the current market situation in China.

What was the impact of Covid-19 on the Chinese market in the 2020?

Alberto Fernandez (AF): Last year we estimated that the Chinese wine market in the 2020 would decrease by 30% in value. I have to say that the forecast was quite accurate, as the final decline was very close to 32%. We are still experiencing some effects of the crisis, but the situation is very different now from last May.

Fongyee Walker (FW): The biggest difference is that Chinese consumers do not tend to drink much wine at home. This means that domestic consumption could not compensate for the overall decline in wine sales as it did in other markets such as the United States and the United Kingdom. But it was not a negative year for the wine market in China, as many operators were able to keep their business active and functioning during the lockdowns, relying mainly on direct relationships with consumers and special offers.

What is the current market situation?

(AF): The Chinese market seems to have returned to normal. Some cases of Covid-19 have been identified locally, but overall the wine fairs have returned to normal and the restaurants are in ferment. The lack of international visitors has a minor impact on China, as it represents only a small part of the business. In this case, the shortage has been compensated by rich Chinese consumers spending their money locally rather than in Tokyo or Paris, for example. The luxury brands are achieving good results in China this year too, thanks to the increase in consumer spending and also thanks to the reduction of counterfeiting and smuggling. The Chinese went back to eating wine in restaurants and enjoying their holidays.

(FW): The restaurants are also crowded during the week, because the Chinese feel liberated and want to socialize. One positive impact of the crisis is that Chinese consumers now seem to be more focused on their life choices. I see many young consumers now enrolling in wine courses and we also see that cooking at home is becoming much more important, the Millennials are increasingly interested in good wine and food. Rich consumers are now spending locally and Hainan Island has become a tax-free shopping destination.

How will the Chinese wine market develop?

(AF): Overall, I foresee that the market in China in 2021 will be similar to 2019 and return to pre-pandemic levels. We expect the off-premise to become increasingly important in the coming years and communication with consumers will continu e to develop. I also anticipate that apps will continue to be important for serving ordinary consumers and offering them exclusive wines. Furthermore, we have learned that investing in authoritative ambassadors is essential. The Australian situation will obviously affect the operators in the sector and I think that wines from Spain, Chile or Argentina can grow together with a return from Bordeaux in terms of the most expensive wines.

(FW): I see potential for Italian and Spanish wines, as well as all those wines that prove to be different and interesting. During the crisis of the Covid-19 there were companies that educated their customers to consume wine at home. These companies will continue to do well on the Chinese market and have shown everyone the way forward. When consumers can travel, I believe that many will head for the cellars. That's why I'm organizing visits to the basement for 2022! The consumer is keen to continue learning and to start travelling again.