A Comparative Study of Wine Consumer Behavior in China and the United States
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A COMPARATIVE STUDY OF WINE CONSUMER BEHAVIOR IN CHINA AND THE UNITED STATES: DOES CULTURE AFFECT CONSUMER BEHAVIOR? A Project Presented to the Faculty of California State Polytechnic University, Pomona In Partial Fulfillment Of the Requirements for the Degree Master of Science In Hospitality Management By Michael Wang 2017 SIGNATURE PAGE PROJECT: A COMPARATIVE STUDY ON WINE CONSUMER BEHAVIOR OF CHINA AND THE UNITED STATES: DOES CULTURE AFFECT CONSUMER BEHAVIOR? AUTHOR: Michael Wang DATE SUBMITTED: Winter 2017 Hospitality Management Department Dr. Zhenxing Mao _______________________________________ Project Committee Chair Professor of Hospitality Management Dr. Neha Singh _______________________________________ Graduate Program Director Collins College of Hospitality Management ii ABSTRACT Chinese wine culture has been flourishing recently, with more and more Chinese consumers wanting to purchase and consume wine. The U.S., being the largest consumer nation for wine in the world, still fails to significantly impact the Chinese wine market, and lies far behind France, which is the largest exporter to China. Using comparative analysis, this study seeks to find similarities and differences between wine consumer behavior in China and the U.S., and investigate relationships between these similarities and differences in consumer behavior towards the final purchase. Using this analysis, this study will recommend methods for American wineries and wine companies to better penetrate the Chinese wine market. Keywords: wine, consumer behavior, American wine, Chinese wine, comparative analysis iii TABLE OF CONTENTS SIGNATURE PAGE ....................................................................................................... ii ABSTRACT ................................................................................................................... iii CHAPTER 1 .................................................................................................................... 1 CHAPTER 2 .................................................................................................................... 4 CHAPTER 3 .................................................................................................................. 12 CHAPTER 4 .................................................................................................................. 14 CHAPTER 5 .................................................................................................................. 24 REFERENCES .............................................................................................................. 32 iv CHAPTER 1 Introduction In 2013, the film “Red Obsession” by filmmaker Warwick Ross explored Chinese wine consumers’ obsession with red Bordeaux wines and their increasing demand for the best of these wines. According to a 2013 article by Wee, during the height of the 2011 Bordeaux bubble, prices of sought-after bottles soared. Cases of the famed Chateau Lafite were going for $23,000. As a result of limited production and the amount of media attention an exceptional vintage brings, these top-tier Bordeaux wines are rare and highly desirable. As these Chinese consumers voraciously drive up the prices for these wines, therefore, they are either “drinking the wines, presenting them as gifts, or serving them to guests to show the esteem in which they are held” (Wee, 2013). Chinese consumers religiously follow the idea of mianzi, or face, in their consumer behavior. Mianzi adds significant societal value to the Chinese consumer, especially when they purchase a particular bottle of wine (e.g., a French red wine). This allows the buyer to show other Chinese society members that they have excellent taste and follow modern tradition. Recently, however, Chinese professionals have been spending more than ever to experience extravagance, trying to experience more wine from all over the globe. This shift in Chinese wine culture seems to indicate a more westernized approach to wine consumption, with consumers experimenting and spending more on wine. Most recently, a 2016 study conducted by the Wine Market Council showed that consumers are increasingly opting to purchase more expensive wine, from $15-20 upwards (Hernandez, 2016). Additionally, the millennial generation has increasingly become the generational group to market towards, being extremely well- 1 connected and having consumed the largest amount of wine of all the generational groups in 2015, 159.6 million cases of wine. Furthermore, while the baby boomer generation, the largest generational group of wine drinkers to date, has been the largest purchaser of domestic bulk wine, the millennial generation (generally born between the 1980s and the 1990s) has been increasingly experimental, driving imports for wines from Greece, Portugal, and South Africa. Thanks to the Judgment of Paris in 1976, where two bottles of Napa Valley wine bested some of the best French wines of the time, respect for American wine has been increasing. And while Chinese wine culture has recently been flourishing as well (as evidenced in “Red Obsession”), exports of U.S. wine are still significantly behind those of other countries, at a meager sixth place compared to the number one Chinese exporter, France. Given recent shifts in Chinese wine culture and consumer behavior, an investigation of similarities and differences in wine consumer behavior in China and the U.S. could enlighten American wineries and wine companies on how to better market their products towards the Chinese wine consumer, and penetrate the Chinese wine market. Furthermore, the investigation of relationships between consumer behavior and final purchase decisions could reveal how better marketing strategies could increase purchases of American wine. The purpose of this study is twofold: 1. To conduct a comparative study of Chinese and American wine consumer behavior to find similarities and differences between the two cultures. 2. Having conducted this analysis, to offer practical suggestions for the American wine industry on how to better market to the Chinese wine consumer. 2 In order to fulfill the purpose of this study, the author will seek to answer the following research questions: 1. What are the similarities in Chinese and American wine consumer behavior? 2. What are the differences between Chinese and American wine consumer behavior? 3. How do these similarities/differences affect the final purchase decision of wine? 3 CHAPTER 2 Literature Review The literature review will be presented in two main sections in order to give a background to the current study: Wine in China, and Wine in the United States. Each section will have two sub-sections detailing the history of wine and the wine culture of each country. Wine in China History of wine in China According to a study conducted by Jenster and Cheng (2008), there were three periods in Chinese history in which wine production and consumption were recorded: the Han Dynasty (206 BC – 8AD), the Tang Dynasty (618 – 907 AD), and the Yuan Dynasty (1279 – 1368 AD). In 138 BC, Emperor Han Wu sent diplomatic envoy Zhang Qian to the western region of China, which is today comprised of the Xinjiang Province and other western provinces. It was in the western region that Zhang discovered a popular local alcoholic drink made from grapes, which he then brought back along with viticulture and viniculture techniques. Jenster and Cheng (2008) explain a few of the reasons that wine did not flourish after the Han Dynasty. First, harvesting grapes was a seasonal activity; second, viniculture was not very well developed at the time, wine made from grain (the most famous being baijiu) being far better developed; and, finally, wine was only served as a tribute to the emperors, making the consumption of wine very selective. At the beginning of the Tang Dynasty, Emperor Tai Zong occupied the city of Gaochang where he collected Maru grape seeds that were indigenous to the area to be grown in the 4 imperial gardens; by this simple act, he revitalized winemaking in ancient China and grape wine began to gain popularity in the capital city of Chang’an (Jenster & Cheng, 2008). In 1892, towards the end of the Qing Dynasty, a Chinese businessman by the name of Zhang Bi-shi returned to China from overseas and set up China’s first wine company, the Chang Yu Winery. Chang Yu’s success derived from its owner’s collaboration with international partners and specialists, which resulted in innovations in the Chinese winemaking industry. The Qingdao or Tsingtao winery, more famous for its beer than its wine, was first established by Germans as the Melco winery in 1912, and in 1937, the Tonghua winery was established on Changbai Mountain in Jilin Province. These wineries served as the backbone of China’s modern winemaking industry, even though by 1949, because of consecutive periods of war, the industry was barely sustainable (Jenster & Cheng, 2008). As a result of the 1949 Chinese Revolution, Chinese Communist leader Mao Zedong’s rise to power, and the creation of the People’s Republic of China, all wineries were “confiscated and turned into state-owned enterprises” under the Ministry of Light Industry (Jenster & Cheng, 2008). During this time, economic development focused on a quantity-oriented industry. As a result of this new industry and the lack of updated winemaking techniques, Chinese wine was made using a blend of wine with water, fermented cereals, colorings, and sugar, leading to a sharp decrease in the quality