French Wine Marketing in China]

2013

MIEB 2 Sijing XU

21111347 Academic year 2012-2013

[FRENCH WINE MARKETING IN CHINA]

Supervisor: DR. Thierry Lorey

SIJING XU: FRENCH WINE MARKETING IN CHINA

ABSTRACT

French wine enjoys a good reputation, compared with wine from different parts of the world and with prices generally much more affordable. The China market was previously price oriented, there is a saying which was regarded with favor: the more expansive the wine is, the better quality it has. This gives opportunities to those famous brands like Chateau Lafite. Nowadays, increasing numbers of Chinese start to wine-tasting and enjoy imported wine. All kinds of wine are slowly getting into the Chinese market but the consumption is still dominated by red wine. Sometimes French wine is considered as a luxury product in China that is not yet accepted by all people. Therefore, French brand needs marketing to make his products recognized by distributors and different consumers. If a well-known wine with a good brand image will be easy to sell, however, for an unknown wine the task will be harder. This paper will focus on French wine through a qualitative and quantitative research to analysis the consumer behavior, examine the driving forces and research the key success factors for French wine marketing in Chinese market. Hence, it can provide useful marketing strategies to French wineries.

Keywords: French wine, Chinese wine market, marketing strategy, success factor

Acknowledgements

I would like to acknowledge the support of my supervisor DR. Thierry Lorey, who helped me establish the direction of research and gave me valuable advice. Then, I received tremendous support from EM Strasbourg, both material and intellectual. And many thanks to those 110 respondents for taking precious time leave their comments and advices, without them this study would not have been possible. Finally, I express all my gratitude to my family who offer me this opportunity to pursue my master degree in EM Strasbourg and encouraged me throughout this study.

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SIJING XU: FRENCH WINE MARKETING IN CHINA

Table of contents

Introduction……………………………………………………………..3

1. Current situation analysis of wine industry in china……………..6

1.1 A brief introduction of Wine in China...... 6 1.1.1 Developing history…………………………………………………….7 1.1.2 Domestic market……………………………………………………...... 8 1.1.3 Imported wine market………………………………………………….10 1.1.4 The main issue of Chinese wine market………………………………..14 1.2 An analysis of Chinese concepts of consumerism……………………………15 1.2.1 A philosophical approach………………………………………………15 1.2.2 An economic approach…………………………………………………16 1.2.3 A cultural approach…………………………………………………..18 1.3 The characteristics of Chinese consumer behavior in wine purchasing……..18 1.3.1Key criteria for choosing a wine………………………………………..19 1.3.2 Target consumer for imported wine……………………………………20 1.3.3 Consumer motivation…………………………………………………..21

2. The development of French Wine in China market………………22

2.1 An overview of China importing French wine ……………………………….22 2.1.1 Historical process………………………………………………………..22 2.1.2 Development factors…………………………………………………….23 2.1.3 Actual situation…………………………………………………………..24 2.2 The Distribution channels …………………………………...... 25 2.2.1 Wholesalers……………………………………………………………...26 2.2.2 Off-trade…………………………………………………………………27 2.2.3 On-trade………………………………………………………………….28 2.2.4 Direct sales………………………………………………………………28 2.3 Other main market elements……………………………………………….…..29 2.3.1 Product………………………………………………………………...... 29

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SIJING XU: FRENCH WINE MARKETING IN CHINA

2.3.2 Pricing ……………………………………………………………………30 2.3.3 Promotion…………………………………………………………………31

3. SWOT analysis of French wine in Chinese market………………32

3.1 Strengths……………………………………………………………………….32 3.1.1 Tradition………………………………………………………………... 32 3.1.2 Popularity …………………………………………………………….....33 3.1.3 Brand image…………………………………………………………...... 34 3.1.4 Quality…………………………………………………………………...34 3.2 Weakness ……………………………………………………………...... 35 3.2.1 Structure of French vineyard………………………………………...... 35 3.2.2 Rigidity ………………………………….………………………………35 3.2.3 Unadapt with Chinese market…………………………………………...36 3.3 Opportunities ………………………………………………………………….36 3.3.1 A growing market………………………………………………………..36 3.3.2 New stage for varies wine……………………………………………….37 3.3.3 Beyond Bordeaux………………………………………………………..37 3.4 Threats ………………………………………………………………………..38 3.4.1 Trustless market…………………………………………………………..38 3.4.2 Aggressive competition……………………………………...... 38 3.4.3 Lack of wine culture………………………………………………………39

4. Result analysis: What kinds of French Wine meet Chinese

Market? ...... 40

4.1 Qualitative study ……………………………………………………………...40 4.1.1 Female consumers between 20 -35 years………………………………..40 4.1.2 Female consumers between 35-55 years………………………………...41 4.1.3 Male consumers between 20-35 years…………………………………...41 4.1.4 Male consumers between 35-55 years…………………………………...41 4.2 Quantitative study …………………………………………………………….42 4.2.1 Type of the wine…………………………………………………………42 3

SIJING XU: FRENCH WINE MARKETING IN CHINA

4.2.2 Relative factors of wine………………………………………………….42 4.2.3 Price of wine……………………………………………………………..43 4.2.4 Regions of wine………………………………………………………….44 4.3 A brief summary of consumer preference……………………………………..45

5. Recommendation: How to make French wine marketing more successful in China, in terms of French company? ………………...46

5.1 Before reach the market……………………………………………………….46 5.1.1 Wine education…………………………………………………………..46 5.1.2 Brand awareness…………………………………………………………47 5.1.3 Partnership……………………………………………………………….48 5.2 Entering the market……………………………………………………………49 5.2.1Segmenting the market…………………………………………………….49 5.2.2 Advertising……………………………………………………………….50 5.2.3 Selling ……………………………………………………………………50 5.2.4 E-marketing ………………………………………………………………52 5.3 After into the market…………………………………………………………..53 5.3.1 Reputation protection………………………………………………….....53 5.3.2 Wine and social network service………………………………………….53

6. Conclusion …………………………………………………………..54

Bibliography……………………………………………………………56

Appendix A……………………………………………………………..58

Appendix B……………………………………………………………..60

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SIJING XU: FRENCH WINE MARKETING IN CHINA

INTRODUCTION

Background The wine we talk about in this study is defined as a beverage made of the fermented juice of any of various kinds of grapes (Middle English), in other words, could be grape wine. From a view of globalization of wine industry, regional wine producing and consuming countries have been trading for thousand years. There has been a considerable increase in export achievement by both new and old world producing countries. In response to increased competition from the new world, Australia; Canada; Chile; New Zealand; and US, many old world countries like France and Germany have expanded their target markets to Asian countries such as china and India. A third of all French wine produced is exported - is worth more than 10 billion euro a year and is increasing especially from Asian demand (“French wine/alcohol facts,” 2012) Chinese consumers have shown increased demand for foreign wines, especially for emerging middle class, they are ready and willing to purchase more non-traditional products, and this could provide important new opportunities for wineries worldwide.

Table 1 Top 10 Wine Exporters 2000-2011, (mhl)

30000

25000

20000

15000 2000

10000 2005 2011 5000

0

Source: OIV International Organization of Vine and Wine (Reader & Hemisphere, 2012)

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SIJING XU: FRENCH WINE MARKETING IN CHINA

Turn to a micro view, we focus on France; traditionally known as the leader in wine industry. Forecasting based on the history statistics (Table 1), France is the third exporter of wine behind Italy and Spain with a huge gap in 2011, while it ranks as the largest producer and consumer of wine, with 16.17% of world production and 12.41% of consumption (Table 2). We can see from the table 2 that France’s wine production and consumption are actually in decline. France exports in 2012, valued at about $10.4 billion, remained flat compared to 2011. In value terms, European Union countries and the Unite States are the main importers of French wine. China is the second large destination for French wine exporting following the United States in Non-European area.

Table 2 French wine production, consumption and exports

French Wine Production (000Hectoliters) 2007 2008 2009 2010 2011 2012 %of the world’s Production 2010 45.672 41.640 46.269 45.669 50.757 40.609 16.17% French Wine Consumption (‘000Hectoliters) 2007 2008 2009 2010 Change2010/2007 Change2010/2009 %of the world’s consumption2010 30.34 29.73 29.30 28.92 -4.7% -1.3% 12.41% French Wine Exports 000HL $Mln Country 2010 2011 2012 2010 2011 2012 EU-27 9.006 9.035 9.161 4.452 4.814 4.759 China 754 1.177 1.395 367 708 702 United states 947 1.016 1.170 982 1.229 1.327 Japan 585 590 717 468 531 617 Canada 541 571 605 354 423 437 Switzerland 475 448 460 381 440 478 Hong Kong 154 205 182 408 600 408 WORLD 13.511 14.185 14.967 8.395 9.967 10.038

Source: Adapted from Wine Institute-statistics-2013; GTA; OIV; FAS Europe Offices; Eurostat.(2010_World_Wine_Consumption_By_Volume_Rank, 2010)(Sloop, 2013)

In such a background, the issue we are committed to solve is that improve the value

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SIJING XU: FRENCH WINE MARKETING IN CHINA on French wine exports to chase and close the gap between Italy. Meanwhile, China is the most potentially market that we should aim at; this is the reason why this paper studies on French wine marketing in china.

Methodology According to understand the Chinese wine market in relation to the main factors, such as country of origin, brands, price, on Chinese consumers’ wine evaluation and purchasing decision-making in different scenarios, it is necessary to formulate a questionnaire based on the following most normal hypotheses.

Hypothesis 1: There are three types of Chinese consumer who only buy national wine or imported wine, or both of them.

Hypothesis 2: The origin country is an important criterion on Chinese consumers’ wine valuation.

Hypothesis 3: There is significant difference in price as wine quality evaluating indicators when Chinese consumers evaluate wine in general.

Hypothesis 4: There is significant difference in brand between Chinese consumers’ purchasing wine for personal consumption and for gift giving or public consumption.

Hypothesis 5: There is significant difference in the impact of propaganda and sales method on Chinese consumers ‘purchasing decision-making.

The survey was simultaneously and mainly spread in Beijing, Shanghai, Wuhan, and Hangzhou. Consumers in these four cities were chosen as the target population for the survey for several reasons. Firstly, Beijing is the capital city of China; secondly, Shanghai as the largest city in china and is an international and metropolitan city which has a long history of foreign trade. The disposable income of the citizens has been always been above the national average; therefore Shanghaies may have a wider 7

SIJING XU: FRENCH WINE MARKETING IN CHINA choice of imported wine. Similarly, Hangzhou is an important traffic hub city in China with its proximity to Shanghai. Finally, the choice of Wuhan lies in its sister cities relationship with Bordeaux, a world's major wine industry capital in France, thus Wuhan people have more access to the French culture, let alone French wine.

The questionnaire was draft in Chinese and posted on Askform.com, a popular Chinese survey website as the respondents were Chinese. It was divided into 3 sections: Section A contained questions about the respondents’ demographic information such as gender, age, income, profession and educational level; Section B was concerned about Chinese wine consuming habits and preference. Question included for example: what wine and where they would normally buy, for what motivation and which country’s wine they prefer. Section C aiming to collect information regarding the impact of varies cues affecting the consumers’ wine purchasing behavior and evaluation, such as brand, price and sales guide. What’s more, some opening questions allowed them to express their impression and feelings to French wine particularly.

In this way, a quantitative and qualitative research was carried out. 100 useful returns of the questionnaire from different cities were obtained in total, and the 10 personal interviews were selected randomly in those four different cities. The 110 respondents whose data were translated and used through this paper were either wine consumer or people intending to consume wine in the near future. We should be clear about a fact that some of them would buy wine even if they don’t drink it, while some others drink it but never buy it properly.

1. Current situation analysis of wine industry in china

1.1 A brief introduction of Wine in China

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SIJING XU: FRENCH WINE MARKETING IN CHINA

Being familiar with the Chinese wine industry and its history are necessary to understand Chinese wine market and customer demands, especially, because it strongly influences the wine import to China. China owns the world’s second biggest territory, mixing different cultures, religions, nations so that wine market has great differences, not only between provinces, but inside regions and customs. Equally, knowing the main issues of Chinese wine production can enlighten us about the ideas for imported wine strategies.

1.1.1 Developing history

Did China’s grape wine making industry just begin recently? Does china have own wine history? The history is actually long and colorful, although the importance of wine has risen and fallen over time. In china, the practice of using grapes to produce wine probably dates back to the Han Dynasty (206-220 BC) or the Three Kingdom period in the Central Plains (220 BC- 265 AD). In 138 BC, an envoy was sent to the western part of China (Xingjiang region) to learn the techniques of planting grapes and winemaking, then he brought back to the Emperor Hanwu and soon the growing of grapes and winemaking was developed on a large scale(“Wine in China : A Report to the California Association of Winegrape Growers I,” 2005).

In early years, grape wine was produced in the same way as rice wine and consumption was limited, although in Xinjiang wine made of grape juice was common. Grape wine is easier to produce than rice wine. However, as grapes are seasonal and cannot retain their freshness for a long time compare to grain, the Han Dynasty was unable to develop the wine industry in a significant way and actually, after Han Dynasty (220 AD), wine production disappeared in ancient China.

It was not until 400 years later at the beginning of the Tang Dynasty (618-907 AD), the grape wine became popular again in China’s capital which benefit from the

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SIJING XU: FRENCH WINE MARKETING IN CHINA increased interaction between Chinese and foreign culture. During this particular period time, wine as a valuable commodity in the capital city, many poets wrote poems in praise of wine.

China’s wine production industry did not grow much during the Ming (1368-1644) and Qing (1616-1911) Dynasties. The nation’s industrialized wine production did not start until 1892, when an overseas Chinese, Zhang Bishi, established China’s first modern vineyard, with a vine stock from Europe and found the Changyu Wine production company in Yantai, Shandong province. This was the first large scale modern winery by Chinese and still is one of China’s premiere wineries today. Following the founding of the People’s Republic in 1949, the grape and wine industry grew slowly, several varieties of grapes for making wine were introduced from Eastern Europe. Large scale production does not take place until the launching of the Economic Reforms in the early 1980s(Mei Meili, 2012).

In 1978, China produced its first bottle of dry white wine and began exporting. In the following year, China sent its first wine delegation to the International Organization of Vine and Wine (OIV), the first outreach effort of China’s wine industry.

China’s wine market has been gradually expanding over recent years, In 2012 China accounts for approximately 2.4% of global wine production. According to data from Vinexpo, China will have moved from eighth-largest wine producer in the world in 2012 to the sixth largest by 2016(Emily, 2012).

1.1.2 Domestic market

We have seen China rapidly expansion of domestic vineyards and the development of a domestic winemaking industry. Currently, there are over 500 wineries in China(“Wine in China,” 2012). Spurred by rapid growth of consumption market,

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SIJING XU: FRENCH WINE MARKETING IN CHINA

China grape wine’s output climbs year after year. From 2001 to 2011, the output of grape wine presented an Average Annual Growth Rate of 16.5% (PRWEB, 2012). China Daily reported that China’s five-year Plan for the Wine industry predicts that production will reach 2.2 billion liters in 2015. In 2012 it has already valued at just over US$10 billion with a market size volume of around two billion liters(National bureau of statistics of China, 2012).

Now the largest wine production region is Ningxia province, and other major wine producing areas in China include the North East, Hebei, Bohai Bay and the Shandong wine region, the Yellow River area, Yunnan, Gansu, and Xinjiang. Boasting an incredible mix of terroirs and terrains spanning more than three million square mile, China is researching more idea wine making regions from coast to coast.

Table 3 Major Chinese wine regions map

Source: chiff.com 2011

The Chinese market is fairly fragmented with the presence of numerous roles. The fast-growing market is attracting not only a number of domestic entrepreneurs, but also foreign importers. Currently, the wine industry of China involving three types of companies. The main players in domestic market in terms of market volume are

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SIJING XU: FRENCH WINE MARKETING IN CHINA

Yantai Changyu with over 21%, Great Wall which is higher than 17%, while Dynasty Fine Wines is about 10% with a strong presence in Shanghai. These top three domestic wine producing companies as the first group control 50% of the market share and 67% industry profit share, they are powerfully competitive with sound development foundation and excellent operating results(“Wine in China : A Report to the California Association of Winegrape Growers I ,” 2005). The second part refers to the numerous small-scale wine firms such as the small and medium sized enterprises in Yantai, Shandong province, they mainly produce low-end wines. The rest part comprises some independent small-sized vintage wine enterprises. Domestic brands still lead Chinese grape wine sales.

From table 4, obviously we can see that beer dominates wine market by volume with an 85% share, while spirits on 8% and grape wine on 3%. However, beer’s share by value us much lower at 40%, ahead of spirits with 38% and grape wine with 12%. Grape wine is fourth by volume but third by value. Regarding grape wine, domestic wine production is mostly concentrated on dry red wine and with an emphasis on quantity rather than quality.

Table 4 Sales of alcoholic beverages in China

Other Grape Other SpiritWine Wine Wine s 4% 3% Grape 10% 8% wine 12% Beer 40% Beer Spirits 85% 38%

Volume share Vlaue share

Source: Euromonitor international

1.1.3 Imported wine market

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SIJING XU: FRENCH WINE MARKETING IN CHINA

China began importing bottled wines only in the last 15 years or so, but the market grows rapidly in China, according to a report from China Merchants Securities, China’s wine imports have grown in value at an annual rate of 50% in recent years, and it currently accounts for around 25% of the Chinese Market(Wang Zhuoqiong, 2012). Many years before, French wine has held sway in China, however, competitive positions and consumption patterns changed radically and rapidly in recent years. Several new rising powers are attracting the consumers’ eyes, more fundamental changes are happening in the world’s fastest growing imported wine market. We will find that Chinese wine lovers pursuing the prestige wine from Australia, California, Chile and perhaps more regions. Today, thanks to the influx of diversified culture, rising disposable income, the growing sense of life quality and greater exposure in the consumer media, Chinese consumer are evolving to be more open to all kinds of new wines and start to realize that wine should be a partner of tasting life.

China is an emerging, but rapidly developing wine market with approximately 19 million urban-middle class imported wine drinkers and 8 million potential drinkers(Perrouty & Halstead, 2012). Rabobank estimates that 248 million people in China have the purchasing power to occasionally consume imported wines.

Table 5 Rank of China wine imports 2012

Origin country Destination city Bottled wine Bulk wine hl Market share hl Market share hl Shanghai 143,000 France 48% 290,000 Chile 48% 287,000 Guangzhou 44,000 Australia 13% 110,000 Australia 28% 140,000 Wenzhou 38,000 US 5% 49,000 Spain 9% 73,000 Shenzhen 32,000 Italy 7% 48,000 France 6% 20,000 Xiamen 26,000

Source: cnwinenews.com(“China wine imports in H1,” 2012)

Origin country According to Chinese Customs statistics, the total volume imported in 2012 was 394,455,181 liters, 7.9% more than 2011. France, Spain, Chile, Australia

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SIJING XU: FRENCH WINE MARKETING IN CHINA and Italy are the major sources of China’s wine imports, accounting for 82% of the total(Wang Zhuoqiong, 2012). Table 5 shows that in Chinese bottle wine market, France is the largest source country, while Chile ranks first in bulk wine market, and both of them followed by Australia. In the past five years, Australia has been gradually gaining market share of bottled wines from traditional market including France, Italy and Spain, which means that Australia is the most threatening competitor to France in China imported wine market.

Consumer city China is one country, but with many markets. Its economic growth has been concentrated in the major urban centers and coastal regions, including Beijing in the North; Guangdong in the South and Shanghai in the East and theses market are generally considered the main markets for new entrants and have the greatest potential for wine (Trategies & Clark, 2013). The various provinces each have different characteristics driving differing preferences for taste. The main ports of wine import are Shanghai, Shenzhen, Nanjing, Yantai, and Wenzhou; naturally, Shanghai has the most consumers of imported wine followed by Guangzhou and Wenzhou, as shown in Table 5. For bulk wines, Qingdao is the largest destination of import. In 2012, there is 55.6 million liters imported bulk wine from Qingdao port, with year-on-year growth of 21.13%, accounts for 46.26 of total import amount valued 54 million US$(Philip, Webey, Stephanie Jiang, Bryan Balmer, 2012).

Table 6 Imported share VS Domestic shares in Tier 1 & Tier2 cities

Beijing 25.0% 75.0% Guangzhou 20.0% 80.0% Shanghai 20.0% 80.0% Shenzhen 25.0% 75.0% Chengdu 15.0% 85.0% Imported Hangzhou 15.0% 85.0% Domestic Nanjing 18.0% 82.0% Qingdao 10.0% 90.0% Tianjin 15.0% 85.0% Wuhan 18.0% 82.0%

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SIJING XU: FRENCH WINE MARKETING IN CHINA

Source: Rabobank

It may be seen in Table 6; imported wines hold the highest market share in the Tier 1 cities of Beijing, Guangzhou, Shanghai and Shenzhen. The 10 cities presented are estimated to account for 76% of imported wine sales and 60% of domestic wine sales by volume (Bailey, 2011). Competition in the imported wine field in China’s Tier 1 cities is increasingly rapidly but starting to become saturated. Hence although the Tier 1 cities still occupy the main market for imported wines, we can forecast that consumption in the other Tier 2 cities will grow faster as their expanding economies.

Wine category Red wine is overwhelmingly more popular than white wine and sparkling wine in china. Maybe it is because the color red relates to its image of vintage, sophistication, elegant and healthiness plus it symbolize of good fortune and happiness. According to Table 7 we can find that since 2007, the volume of red wine boomed much more and faster than before, than whites as well. The ratios of Rosé and sparking wine are small but growing gradually. Red wine driving wine sales growth in China, accounts for three –quarters of china’s wine market, while whites have less than a quarter.

Table 7 China wine market by wine category (volume, million cases)

140

120 Still Red Wine Still Whinte Wine 100 Still Rosé Wine 80 Sparkeling Wine

60

40

20

0 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012

Source: Euromonitor International

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SIJING XU: FRENCH WINE MARKETING IN CHINA

Selling price The Chinese market is price sensitive, the price-points of import wine range from US$6.5 to US$350 per bottle. The highest selling retail price-point of medium-end imported wine is approximately US$ 15 (Trategies & Clark, 2013). For example, wines from New Zealand are often placed on restaurant wine list in Shanghai and Beijing and are priced at about US$40- to- 90 dollars a bottle. We can find in table 8 that prices of imported wine have decreased in China in 2012 while the increasing Chinese production and supply competition from lower priced producers such as Chile. China has signed Free Trade Agreement with Chile, that’s why we see their price is more interested for consumer.

Table 8 Average price of imported wine US$/Liter

Country World France Australia Chile Italy New Germany United Zealand States 2006 3.82 4.24 3.73 3.34 4.07 7.12 3.94 3.19 2007 4.35 5.33 4.15 3.21 3.5 7.07 4.46 3.64 2008 4.80 5.53 4.72 3.42 4.28 8.80 5.68 3.82 2009 4.14 4.46 4.29 3.54 3.58 8.07 4.95 3.34 2010 4.48 5.44 5.13 4.14 4.19 9.02 5.56 4.05 2011 5.27 4.93 6.05 4.62 4.75 9.54 5.94 4.23 2012 5.6 5.97 5.75 4.30 4.41 9.13 5.82 4.11 Source: GTIS, China Customs Data 2013

1.1.4 The main issue of Chinese wine market

Various problems of domestic wines have already more or less disclosed by public media. Firstly, some domestic wine enterprises’ products are not standardized with out production registration number, content of grape juice and wine composition tables. Secondly, near the well-known brand enterprises, there are certain small producers produce inferior-quality wines. Furthermore, some wine producers still keep using the aged production technology; or reduce the content of grape juice; there is no strict quality control and professional management approach, resulting in disqualification of wine products or even fake wine. Thus, China’s grape wine quality does not have a

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SIJING XU: FRENCH WINE MARKETING IN CHINA good reputation, but this is rapidly improving due to the efforts by those three largest grape wine breweries.

What are the main market constraint faced by domestic grape wine producers and wineries? Primarily, short of quality wine grape terroir as well as investment hinder the development of china wine industry. Under the current production and marketing structure, it will be difficult to get high quality wine grapes to make good wine. Even we have modern facilities and a lot of foreign advisory, without good wine grapes, it is in vain.

As more and more merger and acquisition happens on the wine market, now the competition between domestic and imported wines is getting fiercer. After the price war and quality war, wine market is turn to a new stage which is brand war, a wine company’s comprehensive and core competitiveness including brand image will decide their fate in this market.

1.2 An analysis of Chinese concepts of consumerism

There are two basis reasons for consumption: to feed, clothe and satisfy human’s basic needs for survival, but also, in a background which products are distributed at an increasingly faster pace and people interact with one another, consumption has become one of the most important social behavior and a way of life for the mass.

1.2.1 A philosophical approach

Materialism, which is a way for men to affirm their worth and status, is becoming the main mechanism in Chinese consumerism(Shi Zhengxin, 2008). In recent years, following the extremely fast development of our whole society, the rapid penetration of consumerism into the Chinese mainstream value has much changed the world view,

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SIJING XU: FRENCH WINE MARKETING IN CHINA life view and value view of younger generation. Domestic consumption and the concept of quietly are moving closer to the international consumption concept. For some large urban citizens, luxury products are increasingly becoming essential goods leading to an overall improvement in living conditions for the mass, they began to chase around the world, fashion and popular, world-class consumer environment and luxurious services and facilities. It means that the consumer pursue not only the number and value of goods, but also more concern about the additional services, goods and values, such as brands, taste, fashion, modeling ,environmental, spiritual pursuit and cultural enjoyment. From a materialistic point of view, differences in consumption between social classes are also reflected in the real estate, transportation and leisure sectors.

1.2.2 An economic approach

Table 9 Engle coefficient for Chinese urban households and rural households from year 1978 - 2012

80.0% Engle coefficient of rural households 70.0% Engle coeffiecient of urban 60.0% households

50.0%

40.0%

30.0%

20.0%

10.0%

0.0%

1996 1980 1985 1990 1991 1992 1993 1994 1995 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 1978 Source: China Academy of Agricultural Sciences (CAAC), 2013

Consumption is directly connected with personal income. If basic clothing and food needs are not met, they won’t consume any non-necessity. We could say with doubt 18

SIJING XU: FRENCH WINE MARKETING IN CHINA that wine is belong to non-necessary food consumption. People always firstly do purchase for their physiological needs-the most basic level of human needs, then turn to satisfy their safety needs, social needs, and other needs.

Engel coefficient (%) = total expenditure on food / household or personal consumption expenditures, it is a measure of the proportion of the food expenditure in total consumption expenditure. Since it changes with income changes, it reveals the relationship between income and food spending to illustrate the impact of economic development and income increase on consumption. A high Engel’s index means that people spend a greater proportion on food and other necessities, like those in a subsistence economy and developing country. A low Engel’s index shows that people spent less on necessities and thus more on other non-essential discretionary items such as entertainment and luxury products. According to the standards set forth by the UN Food and Agriculture, the Engel coefficient above 59% poverty, 50 - 59% for food and clothing, 40-50% for well-off, 30 -40% for the wealthy, and less than 30% for rich economies. We can find from table 9 that the Engel coefficient of Chinese residents has been falling since 1978, last year it drop to 37.1%. In addition to the fact that disposable income per capita is rising, it indicate that their consuming level and quality are significantly improved as well as their ways of life.

Because of personal revenue and characteristic divers, there are nine consumer groups and five kinds of consumer behavior. The nine groups are: low income group or those close to the minimum threshold, those with an income above the minimum threshold, white collar workers both in the broadest and narrow sense of term, gold collar workers, those in unusual profession, wealthy households, and those in vulnerable position like facing a high risk situation due to age or their abilities. The five kinds of consumer behavior are: unplanned impulsive consumerism; expansive consumerism like buying more to consume more; uninhibited consumerism; brand consumerism; and those stick to one brand with certain reasons so called loyal consumerism.

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SIJING XU: FRENCH WINE MARKETING IN CHINA

Different from Anglo-Saxons models, Chinese prefer saving money for tomorrow, usually they will not spend tomorrow’s money to realize today’s desire. They have to make a huge budget for buying house, education and healing. Another important point, unequal income and the excessive gap between rich and poor is a serious problem in China, as consequence, people’s living standards and consumer patterns in towns and rural areas are indicating considerable regional disparity.

1.2.3 A cultural approach

Accelerated development of science and technology will provide people with more and more leisure time and cultural needs. Along with the global culture shock, the Chinese traditional concept of thrift has gradually being replaced by the pursuit of personal consumption, which is high quality life. When the consumer attitudes and cultural needs have been reintegration, the consumer goods are no longer satisfied with humanity, pleasure-oriented performance, but also desire to show their own life style and cultural taste. At this point, I would like to mention about that Chinese care much about ‘face’. Within the Chinese context, “Face saving” is one of the important factors influencing consumers’ purchasing behavior. Face is lost when conduct or performance fall below the minimum level considered acceptable or when some essential requirements corresponding to one’s social position are not satisfactorily met (Li, Hu, & Jun, 2011)). Hence, most Chinese people always act to meet the expectation of others so as to maintain face, they used to making themselves look rich and comparing with each other. People are willing to show their choice of value and culture of thinking, hope to upgrade their cultural quality to give themselves face. The pursuit of these new consumer attitudes signify the rising value of Chinese culture consumption and of course, promote the gradual expansion of cultural consumption, which is the most potential modern consumer space.

1.3 The characteristics of Chinese consumer behavior in wine

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SIJING XU: FRENCH WINE MARKETING IN CHINA purchasing

This chapter will present you several parts of our survey results to find out how and where Chinese consume wine. Grape wine have become a fashion product in the consuming market and have been linking to our daily life. People pursue products on fashion, health, hobby, and culture such different aspects, simply because they would purchase consuming products to satisfy their changing demands. This makes wines different to other products and wine consumers also make different behaviors with different tastes and values based on their personal characteristics and lifestyle. There is a positive relationship between product attributes and consuming behaviors, while people in different lifestyles will behave different when purchasing grape wines.

1.3.1 Key criteria for choosing a wine

Table 10 what information have key effect on wine purchasing

mass-following, i know what i like, 4.38% 9.48%

convevience of price, purchase, 4.38% 14.60% packaging , 4.38% advertisement, 3.65% sales' advice, 2.19% brand, 13.14% i don't care, 5.11%

origin, age, 7.30% past experience & 13.14% recommendation, 18.25%

Our survey shows that when the Chinese consume wine, they mainly rely on their past experience, price, region of origin and brand. In our sample, 7.3% choose production year are their important information sources, 9.48% believe that they know which 21

SIJING XU: FRENCH WINE MARKETING IN CHINA wine they prefer and can select them out individually, while 4.38% are market-followers, they drink what others drinking. Some of them reported that convenience of purchasing has important influence and only a few people consider the sales advice or advertisement as a key factor.

1.3.2 Target consumer for imported wine

Imported wine are warmly welcomed by Chinese young consumers and are perceived as being of higher quality with a better taste than domestic wine, particularly those from France and Australia, which have enjoyed high reputation due to its inherent image and effectively advertising. However, as China has huge populations with different income and life condition level; there are significant differences in consumption between different regions and provinces; it is not yet that all Chinese can accept imported wine.

Wine drinking has a strong relation with social status and incomes, and influence by the westen fashion streams, it is more popular in urban areas of the coastal provinces. In rural areas the cheaper, local and domestic wines are popular, while in urban areas the more expensive import wines are favorable. According to our survey results, most of the import wine drinkers are between age 30-45, the portion of men and women is similar. More than half of respondents drink wine just a few times a year, 31.34% wine drinkers consume wine on a montly base, and weekly consumption is only considerable over age 40.

Table 11 Possibility and frequency of purchasing imported wine

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SIJING XU: FRENCH WINE MARKETING IN CHINA

Prefernce Frequency of purchasing

I prefer domest ic wine. Never, 25% 26.87% Occasion ally, Frequent 62.69% I prefer ly, import 10.45% ed wine. 75%

From table 11, the good news we get is 75% people prefer imported wine; the bad news is that only 10.45% buy it frequently. Then, by checking the detail information about those 10.45% consumer, we find that they are almost all well- educated men between 30-50 years old having a month salary at least 5000 CNY. As a result of our analysis, we can say that imported wines are positioned for middle or high educated and wealthier men between 30-50 ages old in big cities.

1.3.3 Consumer motivation

Table 12 Consume motives of imported wine

status, 0.83% collectin never, Western g, 5.00% Restaur 1.67% Chinese ants Restaur 20% At socializi ants home ng , entertai 5% 27% 15.00% n, 35.83% Bars/Cl drink, ubs Friends/ 19.17% 6% Busines gifts, s Party 22.50% 42%

Occasions of drinking wine Objectives of purchasing wine

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SIJING XU: FRENCH WINE MARKETING IN CHINA

Concerning on what occasion consumers drink wine most frequently, 42% of the respondents indicated that party with friends or colleagues would be their main opportunity to consume wine. 27% choose at home is an attractive to consume wine and 20% respondents reported dinner at western restaurant as the main reason to consumer wine.

Regarding their motivation for buying wine, only 19.17% consumers buy wine for them drinking. Comparatively speaking, they usually buy wine for other reasons, such as 35.83% of the respondents buy wine for entertaining their guests and friends, 22.5%buy wine as gift or present, and 15% consume it only on social or business occasion with companion. Since all these rest motivations are about socializing or showing their status, I would like to explain a little more about this behavior. If someone can afford an expensive wine, especially one that is imported, this shows others that the individual has succeeded economically. That is why expensive bottles of imported wine have become the latest “trophy drink” of the Chinese new rich, who like to drink such wines when eating out in order to show they are successful and have both money and good taste to be wine drinkers.

2. The development of French Wine in China market

2.1 An overview of China importing French wine

2.1.1 Historical process

In 1995, China began allowing foreign alcohol imports. French wine was the first foreign wine imported into China. In the beginning, for some historical and political reasons, the Hong Kong rich are the first taster of French wine, particularly Chateau Lafite wine. At the same time, those Wenzhou people who live in Europe gradually started to drink Lafite wine and they found that Lafite wine holds great commercial 24

SIJING XU: FRENCH WINE MARKETING IN CHINA value; therefore they brought the wine culture to China mainland and set up the wine import company in Beijing and Guangzhou which are rich communities.

In 2006, following the visit of French president in China, a famous French wine company ‘Savour Club’ firstly entered Chinese market by adjusting the taste to adapt Chinese preference. Thus, Chinese started to learn French wine culture. What most people agree on is that French wine led the field when China’s imported wine market was in its first phase, with prestige wines-principally from Bordeaux.

2.1.2 Development factors

Firstly, Before, the Chinese took a fancy to invest in huge profit domain such as real estate and coal, however due to the investment environment is getting worse recent years, they turn to focus on French wine which has a great preservation and collection value. After several years’ development, those investors found that Lafite wine became the highest return imported product from Europe market. Thus, an investment boom for imported wine was rising.

Secondly, Europe as the largest wine consumption area, was Influenced by the world economic crisis, the volume of consumption has been declining since 2009, and so French wine producers had to seek for new market to export the wine.

Thirdly, after China joined into WTO, the custom tax decreased. Since 2005, the tax rate for bottle imported wine reduced to 14% from 43%, for bulk wine; it drove down to 20% from 43%(Bailey, 2011). What’s more, as Hong Kong is free zone, there were increasingly imported wines enter in mainland market through Hong Kong port. The import cost reduced sharply so that the competitiveness of French wine was enhanced in Chinese market.

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SIJING XU: FRENCH WINE MARKETING IN CHINA

Since the Chinese consumers’ demand increased rapidly, the Chinese producers are no longer willing to merely rely on their own production due to the long waits and high fees; they need and have to import large volume of original grape wine juice, and then sold them as bottle wine after manufacturing and packing.

Last but not least, in the circumstance of same level, French wine is actually high quality with low price compare to Chinese domestic grape wine. Meanwhile, as discussed in the beginning that French wine enjoys a high brand reputation in China, and Chinese consumer usually chooses it for some business or social occasions to show their respect and state. We can see that French wine totally cater to the different needs of Chinese consumer, especially after Chinese purchasing power and diet requirements markedly enhanced, both in low-end and high-end market, at restaurants, as gift and at wedding ceremonies.

2.1.3 Actual situation

In terms of social market, several years ago, Chinese consumers could only understand and accept red wine, they thought grape wine is just red wine. But now they have learned about white and rose wines and recognize the difference between the wine regions. In addition, more Chinese people are going to France for vacation or even study abroad, their understanding of French culture and products is becoming deeper. It can be proved by table 13 who shows that the volume of bottled wine imported to China from France are increasing year by year. Nevertheless, after calculation, we should also aware that the rate of volume growth during 2009 was 77%, while for 2012 it declined to 23%. The chamber which is affiliated with China Ministry of Commerce, said that although French wine imports still account for the highest share, at 46.3%, its monopoly advantage has largely weakened(LyuChang, 2013) .

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SIJING XU: FRENCH WINE MARKETING IN CHINA

Table 13 Volume of Bottled Wine Shipped into China from France, (million cases)

11 Incremental growth during year 10 9 8 7 6 5 4 3 2 1 0 2007 2008 2009 2010 2011 2012

Source: Global Trade Atlas

As with economic and political, China’s import of French wines have fallen amid fears that a trade spat between the European Union and China might lead to higher import tariffs on European wine. A punitive tariff would be added to that rate if China’s probe concludes unfavorably for the EU. Thus, it would influence the French wine import business.

2.2 The Distribution channels

The leading distributors of imported premium wine are still foreign companies. Many trade companies have added wine business import to their portfolio. Then they will sell wines to wholesalers, wine bars, hotels; restaurants, wine stores and supermarkets(“Wine distribution in China,” 2012).

Table 14 Imported wine distribution channel

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SIJING XU: FRENCH WINE MARKETING IN CHINA

WHOLESALERS OFF-TRADE ON-TRADE DIRECT SALES

•SUPERMARKET •WINE BARS •COPORATE •BOUTIQUES & •HOTELS •INDIVIDUAL CONVINIENT •RESTAURANTS STORES •KTV/SPA •DEPARTEMENT STORES

2.2.1 Wholesalers

Wholesalers are definitely today’s biggest market, with about 75% of wines distributed. There are Chinese companies whose main business is not wine, but they are taking advantage of the popularity of imported wine to reach more profitable clients. Clients of these wholesalers are more or less forced to buy those wines at high price in order to continue to do business with the enterprises. This distribution channel ideal to boost sales volume by low prices, but absolutely not to create the brand image of high quality.

A French wine exporter who has the real success in this area is Castel Frères; it is the largest seller of wine in China. It has decided to sell exclusively via wholesalers, and the local wholesaler has his networks. They are doing well in the wholesaler network, because some reasons as following; firstly, it has been exist for a long time in China, and Chinese prefer ancient brand; secondly, they have a team with enormous financial power to assist wholesalers do advertising and promotion; third, there no incredible sales due to its low presence in general merchandise stores. The problem today is that Castel is copied almost everywhere in China, with counterfeiters who reproduce its labels and even a company that has registered the name Castel Frères.

2.2.2 Off-trade

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This market has just started and represents only about 5% of the total market in China, but it grows fast. There are twenty new stores open every month in each of the chain stores.

SUPERMARKET Based on our survey data, there is 44.78% of people buy wine in supermarkets. Carrefour is the first to invest and develop the imported wine, the first to have created wine fairs with free tastings. It is the leading brand in China on wine trade with almost 220 stores. All competitors take Carrefour as their model. Metro is the only chain that imports 99% of its wines in a direct way and whose sales stagnate. Auchan has put priority on wine for 2 years with a selection of wines which in cheap and directly imported. Wal-Mart creates many aberrations in the product offered because each region is free to choose its suppliers.

CONVENIENCE STORES & BOUTIQUES The convenience stores are grocery stores like a little corner shop, open 7 days a week and even 24 hours a day. It is small but provides everything, including imported wine. 23.88% consumers usually go to there for buying wine. They always located near the resident area in Shanghai and Guangdong, but they are not very popular in Beijing. Similar with convenience store, there are lots of wine shops everywhere in China. They sell beers, Baijiu, both domestic and imported grape wines.

THE DEPARTEMENT STORE 13.43% of the respondents chose the department store as a frequented place for purchasing wine. It is the Galleries Lafayette type of stores; they are the privilege shopping places for wealthy Chinese because it provides many international brands and high-end imported products. They are all over China’s big cities, even in small towns with large population.

2.2.3 On-trade

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Less than wholesaler in terms of volume and value, the on-trade market represent about 15% of the total market of imported wines. In the on-trade business, we distinguish between 5* hotels, gourmet restaurant, clubs and high-end boxes, and the rest, like small restaurants, small bars and Chinese restaurant.

The first group always provides the global level or high reputation and of course the most expensive wines, but few Chinese can afford to have a dinner or consume wine in such establishments. Chinese has the habitude to gathering; they like to and frequently have diner in the restaurants, have fun in KTV or SPA with their families, friends or business partners. This kind of happy time cannot without wine, and their decision of choosing which wine, to a large extent, depends on the waitress’s advice.

2.2.4 Direct sales

In China, there are not many big imported wine distributors. But there are plenty of online wine distribution websites, such as WIneNice.com, Jiuxian.com, Winekee.com, Wine9.com, and Yemywine.com and so on. The website selling different kinds of wines ranging from the imported ones to domestic made ones with lower prices. For individual, to some extent, online shopping is more popular than real stores. Some net citizens believe that there are less intermediate process for online wine shops, thus the price is cheaper than the wine shops. So far, for purchasing wine, online shopping is not very common, only 4.48% of our respondents choose it as a channel.

Around the holidays, there are a lot of group consume on wine in China. For example, when spring festival or anniversary ceremonies, some corporates will offer their employees wine as reward; when a wedding party of more 500 inviters in a hotel, the host will arrange wines for each table, etc. All this kind of big occasions, the volume demand of wine is much huger. Hence, they prefer to directly negotiate with distributors or imported wine companies to get a lower wholesaler price for a certain

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SIJING XU: FRENCH WINE MARKETING IN CHINA volume of French wine.

2.3 Other main market elements

2.3.1 Product

Generally speaking, first, most French wines are named after the region they come from, such as “Bordeaux” or “Burgundy”, besides these two regions which are well known by Chinese, there are also the cool wines of the Loire Valley, the more powerful, muscular offering of the Rhône, the warm wines of Languedoc-Roussillon, the stylish whites from Alsace, the great Champagne, and so on. Among so many region wines, the Bordeaux red wine is the Chinese favorite.

Secondly, French make a big deal about terroir, French wine generally very much reflect their terroir, place and culture, in other words, it means the characteristics of the particular location where the grapes grew. Thanks to centuries experience, it makes every wine different, makes many of them special. The grapes of many French wines grow in cool or temperate-climate regions. As cool-climate wines, French wines are lighter bodied, lower in alcohol, and higher in acidity than warm-climate wine, such as many of California wines. These characteristics enable many French wines to go with food more graciously(“FRENCH WINE FACTS,” 2012).

Third, wines come from places, and these places are designated appellations. France’s appellation system was created in the early 20th century. This complex system of law ultimately defines each wine region and its boundaries and imposes strict rules around winemaking practices. An appellation controlée on a wine label is not only a guarantee of quality, but also a guarantee of origin, a sign that the wine has been made following certain rules and process specifying grape varieties, soil, planting, yields and winemaking. There are nearly 280 appellations in France, ranging from the huge

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SIJING XU: FRENCH WINE MARKETING IN CHINA to the tiny, from regional and district appellation to those which cover only one commune(“FRENCH WINE FACTS,” 2012).

Currently, there are two poles to the wine industry. First, wine that most people drink, commodity wine. Another one is fine wine, even although this need not to be very expensive, it is wine bought by people with a specific interest in wine; usually made in limited quantities. Now French fine wine is thriving at the moment, but the problem for French is that while they can do fine very well, they are not terribly good at making cheap wine. Indeed, the AOC system ensure a certain level of quality, but we can not ignore and avoid the fact that certain appellations still product lots of rubbish wine, and that the average level attained in mediocrity.

2.3.2 Pricing

In general, the wholesalers in China sell the French wines that they have bought very cheaply at high price, sometimes even much higher. In this way, many table wines are found in shops of small grocers in province at exorbitant price, like 300 RMB when a table wine at Carrefour costs with 20 RMB, just because the intermediates are many during the transaction. To be specific, some company A imports, and sells to company B with a margin of 70%, and then the latter will sell to company C with the same percentage, and so on. In china, the distributors tend to mark-up imported French wine much as 100% to 200% to the distributor price, restaurant and hotels typically add 250% to 300%(“Wine distribution in China,” 2012). As a consequence, the final consumers buy the wine really expensively; the price is not corresponding with its quality and class.

From table 15, it shows that French wine is present along the entire price spectrum, from the lowest-end which is cheaper than 30 RMB to the higher end with more than 400 RMB. It has a strong presence in the mid-range price segment between 100-400

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RMB, and has the largest sales volume for 100-150 RMB part. We can conclude that the French wines in middle and high price categories are more attractive for Chinese consumers.

Table 15 French wine sales volume by retail sales price (million cases)

1200

RMB/750ml bottle 1000

800

600

400

200

0 <30 30-50 50-100 100-150 150-200 200-300 300-400 >400

Source: IWSR, Rabobank, 2009 (“China Wine Market Competitor Analysis Section 1 : China Wine Market Profile Section 2 : Australian Profile Section 3 : Competitor Analysis,” 2010)

2.3.3 Promotion

Professional promotion is the core model of French wine marketing in China. The top brand French wines generally are promoted in sponsor events including golf, tennis, baseball, racing, public welfare activities or industry conferences; wine tasting; exhibition; direct marketing and media campaigns. The most efficient methods are sponsorship, tasting and exhibition, which can be classified into professional exhibition model. This model is characterized by carrying on directional transmission and communication to the specialized objects such as distributors or target customers, apart from watching the showpieces, we can experience any wine as we like; this way is narrower than mass advertising, but more widely, more focused than terminal sales.

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Besides, for Tier1 & Tier2 cities, it is a current trend that French wine are entering the high-end shopping mall by setting up outlet stores; or, founding a wine area in the senior clubs to directly sell wines to the clients. Furthermore, since Chinese investors have started to invest in the well-known Chateaux brands, wine domains or wine trading companies, many French wine producers established their cellar or vineyard in China for taking the geographic advantage of closed to local customer.

3. SWOT analysis of French wine in Chinese market

3.1 Strengths

3.1.1 Tradition

Compare to other wine producing countries, French wine is the first foreigner in Chinese wine market. In Chinese consumers’ mind, most of them believe that France is definitely the oldest and the most honorable leader in wine producing and consuming.

France is seen as the cradle of wine gastronomy. Traditionally, in France, wine is classified by its terroir. This classification emerged over the centuries as villages developed specific approaches to wine making; as a result, there it is the unique French wine. Taking a look at French wine history brings us back to the 6th century BC. At that time, the Phoenician and the Celtic grow some vineyards in the very south of France, Marseilles(ADMIN, 2012). All over the following centuries, wine making was improved and modern technique like wine storage or large scale production was initiated. Consequently, the rooted tradition of grape-growing and wine production has contributed to associate wine with French’s’ belief, customs and life style, in other words, with an important part of French cultural capital and stereotype.

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3.1.2 Popularity

Perhaps no country evokes such strong association with fine wine as does France. Its reputation has led to worldwide imitation. Many varieties that are now known global, such as Cabernet Sauvignon and Chardonnay, are France. According our questionnaire research, French wine could be regard as an everyday consumer product, a health drink, a gift, a social tool, a luxury good, or even a collection. Its market position is so flexible that all kinds of consumers could afford it and accept it. French wine is the wine with the breadth range.

Table 16 Chinese upper middle class imported wine drinks survey

A. Favorite source country B. Country awareness France 58% France 94% China 11% China 88% Chile 9% Italy 65% Australia 5% Australia 63% California 2% Spain 51% Portugal 2% New Zealand 45% New Zealand 2% Portugal 45% Spain 1% Germany 45% Argentina 1% Argentina 40% Germany 1% Other USA 38% Other USA 1% South Africa 36% South Africa 1% California 31% Part A: % who chose country as their favorite grape-wine producer Part B: % who are aware of that the country makes grape-wine Source: Wine intelligence vinitrac China Nov. 2011, n=1,101(Perrouty & Halstead, 2012)

From the percentage of table 16, in Part A, we can know that France is the favorite source country, with domestic Chinese wines a distant second, followed by Chile. In Part B, there is an overwhelming majority of imported wine drinkers in China are aware of France as a wine producing country. This is particularly true for older drinkers between 40-50 years old(Perrouty & Halstead, 2012). Italy, Australia, Spain, and Chile form a secondary tier in the minds of consumers.

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3.1.3 Brand image

Thanks partly to French luxury brands from Cognac to cosmetics of fashion that have been present in the Chinese for years, no doubt it gives a large advantage to French wines compared to other countries.

France has earned a reputation and an image of prestige and quality in China for boasting of its unique terroirs and millennia-old viticultural traditions. In China, no matter they are wine drinkers or not, young or old, man or woman, all of them aware that France has a high image in wine industry. Further, many French wineries posses strong brand names, such as Lafite and Medoc, which enable them to achieve a better competitive position and consumer loyalty. Actually from Chinese view, well-known brands in French wine industry are associated with a high level of quality. According a study by Ubifracne, the wines of Bordeaux continue to dominate Chinese import of French wine because of their very strong image and brand(Marche et al., 2011). For Chinese, French wine is the wine with the best image promoted by its country of origin.

3.1.4 Quality

As above mentioned, perfect terroir makes favorable wines, appellation refers to high quality. Taking the huge Bordeaux appellation as an example, great reds from the great chateaux are what make the headlines, but Bordeaux is so big, that there is plenty of choice. The general level of quality has improved dramatically. The red are fruity, but never over-alcoholic, always with layer of tannin which makes them great with food wines. The whites are fresh; the best wood flavors to give complexity. As the quality of Chinese domestic wines had let the consumers down, they prefer to choose a real wine with good quality like French wine. According our interviews, all of them definitely believe that French wine has a reliable quality.

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3.2 Weakness

3.2.1 Structure of French vineyard

French wine production is concentrated into mainly small and usually family-owned wineries, which often do not have any precise and practical strategy. In addition, scarce economic of scale, complex labeling practice, difficulties in affording advertising and inability to leverage new production could make it challenging for vineyards to enter and be attractive in the Chinese market which has many other strong competitors.

3.2.2 Rigidity

One of the main results of wineries being small, family managed and strictly tied to tradition is their weakly develop ability to adapt their production to rapidly changing demand. This desire to perpetuate tradition maintains a degree of complexity in understanding French wine, limiting its accessibility to Chinese customers and hindering sales. Rather than looking to adapt, many French winemakers and critics revert to terroirisme and overemphasize the importance of terroir in define wine, while ignoring modern trends. Knowledge as well as technical and modern managed model cannot change as quickly as Chinese consumption reference do. From this standpoint, tradition could be also a limiting shortcoming if producer stick to it.

3.2.3 Unadapt with Chinese market

Most French wine producers have no idea about Chinese Market, and even have not been to China, let alone the market survey. They are interested in Chinese this new market but without concept of long-term investment. They used to spend some

37

SIJING XU: FRENCH WINE MARKETING IN CHINA meager money on spec to do some promotion, but it is only a short run profit.

French wine exporters should make their marketing strategy correspond with the specific condition of Chinese local market. Lack of marketing network and competitive after-sales service will hinder the further development of French wine in China.

3.3 Opportunities

3.3.1 A growing market

Because of Chinese economic continually boom, as well as people’s live condition is improving, increasingly Chinese will become the French wine consumer, or drinker. Then thanks to the increasingly consumption, the French wine market will progressively be mature. As wine becomes a bigger part of mainstream life which is to say more and more Chinese consume it for pleasure rather than for show, and the ability to buy it on a regular basis trickle down from the elites to the middle class, the characteristics of the product will start to reflect the dominant tastes of the population(Perrouty & Halstead, 2012).

In the beginning, maybe it is the abroad student who was influenced by French wine culture, and then transmit their ideas to their family and friends. But currently, besides of this manner, French wine promotion like taste fair, exhibition are allowing the French wine culture penetrate in public minds. They are willing to learn more about French wine, or even French products and culture.

3.3.2 New stage for varies wine

As table 7 in above chapter shows, a large majority of Chinese consumer only know 38

SIJING XU: FRENCH WINE MARKETING IN CHINA about and consume red wine, or even some them thought that grape wine is just red wine. Actually, French wine’s fascination is not limited to red wine, but including all kinds of wines with different characteristics. As young Chinese consumers always take a fancy to try new things, it is an inevitable trend that more successful mainstream products which have higher residual sugar level and significantly lower tannin than are typically contained in traditional Bordeaux reds will enter in Chinese market. Equally, there may also be more of a role for rosé and white wine, or even sparkling wine, though these will still make up a much smaller fraction of the market compared to red wines. In an environment that family celebrations, happy time share, prestige, and face are so important, sparkling appears to be ready to make a niche product. However it will take time for Chinese consumer to migrate to the idea that wine can be white, rose, and sparkling as opposed to red and still, the only thing we need is patience.

3.3.3 Beyond Bordeaux

A few years ago, Chinese consumers preferred either the cheapest wines or top-notch ones, such as Château Lafite Rothschild. The market has matured as consumers have become more rational. They have become more familiar with a greater varies of wine regions outside the top-tier brand. Spinoff effect works very well in Chinese minds, as long as they believe that French wine is good quality, all regions’ wine will be considered valuable. Wines from other French regions that ride on the strongly positive perception associated with French wine have a chance to thrive. The recent surge in interest in Burgundy is one example of this already happening, we predict it will push further, probably staying with well-known region in the short term, encompassing the wines of the Champagne, Languedoc and Rhône(Perrouty & Halstead, 2012).

3.4 Threats

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3.4.1 Trustless market

We talked many times that the image sophistication of France in the Chinese consumer minds; nevertheless, the dominance of the French brand is not totally assured. Fraud and low quality products threaten to upset the association of France with high quality. For example, fake bottles, low quality wines shipped to China as French wines and sold at ridiculously high prices could damage the industry in the medium long term. As a result, gradually the consumer has doubt about the truth of the French wine in the market; they have no idea about where and how to buy a real quality French wine at a fair price.

3.4.2 Aggressive competition

The wine producers are experiencing from globalization, especially wider and stronger competition, the reasons are following: a worldwide over-supply of grapes and the incumbent pricing pressures; increased consolidation at the producer, distributor and retailing sectors, and shifting consumer behavior patterns(“An Analysis of Globalization Forces in the Wine Industry: Implications and Recommendations for Wineries,” 2007).

France risks losing its leader position to other domestic or new world wines who offer quality wines with appealing and catching images at lower prices. Historically, in times of oversupply a country restricted its markets to imports. However, many countries have signed trade agreements to keep markets open. For instance, Chile, New Zealand and Australia have agreed with China to accept differences in winemaking techniques and will be approving difference on labeling laws and tariff agreements to reduce the barriers.

Furthermore, as for smaller French wine producers, it is increasingly difficult for them

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SIJING XU: FRENCH WINE MARKETING IN CHINA to get their product onto the retailers’ shelves, because the wholesalers prefer to distribute only the top selling brands, instead of small or new labels. The same, smaller brands have a harder time gaining placement on restaurants’ wine lists, since the head office may choose a few brands that are proven bestsellers to use in all of their locations to gain more profit.

3.4.3 Lack of wine culture

Traditionally Chinese do not drink wine; they have the habitude to drink rice wine or Baijiu. Although Chinese wine industry has grown rapidly, the country as a whole lacks wine drinking culture and knowledge. Based on the survey result, on one respondent is very familiar with French wine; 47.76% knows a little, 37.31% has a general understanding, and 14.93% know nothing about French wine. Normally, even the wine salesperson is not well equipped with the information of the wine they are selling; wine culture education is on a low level. Expect of few people who love tasting and know about imported wines, purchasing bottles according the taste, region or age, the others they often rely on gossip, appealing labels or, if the aim is to show off, merely pick out the most expensive brand available.

Among those wine consumers, most of them drink the wine, but not taste it. Indeed, drinking shots of wine and even mixing Bordeaux with Coke or Spirit is not unheard of among many consumers; this may be shock to French people. It appears that Chinese consumers prefer the image associated with drinking wine to the taste, the symbolic value is more important than its pleasure value. This kind of culture vacancy is to the disadvantage of the long term development for French wine in China.

4. Result analysis: What kind of French Wine meets Chinese Market?

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In this chapter, we are going to comprehensively review the questionnaire results and interview notes, discuss what sorts of French wine can attract Chinese’ eyes. As the Metrology in the Introduction chapter mentioned, the qualitative interview is for customer-orientation, while quantitative questionnaire is for product-orientation.

4.1 Qualitative study

As I selected 10 responders in different genders, ages and main cities (Beijing, Shanghai, Hangzhou, and Wuhan) in China for an interview, to some extent, regarding the content of our talking about French wine, their idea could well represent a majority consumer in different groups.

4.1.1 Female consumers between 20 -35 years

This group may be the most open-mind and fashion consumers, some of them mentioned they like Bordeaux red wine, some indicated that they prefer sweet wine, and there is a lady who have more experience in French wine said that she love the rose from Côte de Rhône and Alsace white wine. They know wine through friends’ introduction, wine list in restaurant or the sales’ advice in bottle shop. Besides their friends’ recommendation, their purchasing decision always depends on the taste, price and origin of the wine. As for this group, there is unique feature that most of them drink a glass of red wine every night to keep a beauty face, as there is saying that red wine is good for keeping young.

4.1.2 Female consumers between 35-55 years

For older women, they have the same taste preference as the younger group that do not like dry wine, and they also drink it regularly for healthy. The difference is the way of purchasing wine; they usually buy the wine of sales promotion with discount 42

SIJING XU: FRENCH WINE MARKETING IN CHINA in supermarket, especially around the holidays. In addition, some of their children study abroad in France will take good wine home for family and friends, or the parents come to visit some chateau in France, therefore they learn more about French wine and know how to choose a good wine in china.

4.1.3 Male consumers between 20-35 years

The young boys report that under the same price, they would buy import wine instead of domestic wine, and they prefer the French wine at about 200CNY. They usually drink champagne in the bars or restaurants with friends. Regarding the channel to know about wine, video documentary of wine introduction and wine testing are mentioned as the useful ways for spreading the French wine culture, but the problem is the wine on wine tasting is too expensive to accept by general public.

4.1.4 Male consumers between 35-55 years

Compare to previous groups, this consumer group has the richest experience of imported wine. They have the habit of drinking at home, one or two times per week and they love to try different high quality imported wines with original packaging, for example, Bordeaux red wine, German white wine or Australian wine. When they try a new wine, they would rely on the sales’ recommendation, supermarket sales rankings or the advertisement on the gourmet magazines. If they like the taste at first time, they will keep on buying it in the future.

4.2 Quantitative study

4.2.1 Type of the wine

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SIJING XU: FRENCH WINE MARKETING IN CHINA

Table 17 which type of the wine do you prefer?

Saprkling wine/ Champagne, Rosé, 12.20% 7.32%

White wine, Red wine, 15.85% 47.56%

It was found red wine has occupied almost half market, white wine and sparkling wine has each grabbed more than 10% market share, and rosé only has 7.32% of the market among the respondents’ consumption. This fact well correspond with the earlier discuss that red wine is much more favorable than other kinds of wine. They know that red wine is healthy, has good effects on cardiovascular and blood system, and this factor is very important for Chinese consumer.

4.2.2 Relative factors of wine

Table 18 Which factors make you remember a wine brand?

Wod of mouth, 15.00% Taste, Advertisement, 32.50% 16.67% Family & Package, Friends 16.67% recommendation , 17.50%

In terms of factors affecting their brand cognitive, 32.5% of respondents indicated that

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SIJING XU: FRENCH WINE MARKETING IN CHINA taste is the most important factor. Besides it, there are nearly the same portion of the respondents consider that friends recommendation, advertisement, package and world of mouth as the important factors deciding their impression of a wine.

This would probably result from the Chinese consumers’ current lack of brand image knowledge and proper experience of French wine, they need various external elements to help them remember a kind of wine or a wine brand, to know whether this wine actually produce in France or not, to feel safe about the wine he is drinking.

To respond to this particular case, the information of French wine should be more transparent and clear. Consumers prefer the packaging and label that indicating where the wine is from and why it is a quality wine, such as name of brand of the wine, ingredients, importer, content of must, origin and so on. However, within these characteristics, not everyone has the same important function as an indicator when consumers are selecting wine. Producers could emphasize the product’s origin and import process on the label as the choice criterions that provide an easy way for consumers to select wine.

4.2.3 Price of wine

Table 19 Acceptable price

51-100CNY, 13.43% >1000CNY, 1.49%

100-200CNY, 200- 46.27% 1000CNY, 38.81%

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SIJING XU: FRENCH WINE MARKETING IN CHINA

Obviously, middle range price wine win the majority of the market. Normally for Chinese consumer, if they buy a wine for home consumption, they probably will not pay more than 200CNY, or higher than 100CNY. For those who attend social activities more frequently, they would buy the wine more expensive or even higher than 1000 CNY for richer people.

When products are used for private consumption, Chinese consumers are likely to adopt a rather simple way of thinking, favoring the physical function of the product, tend to focus their decision on the price of a product and buy whatever is the least expensive. In contrast, when choosing a wine for consumption in a public place, they generally focus on quality, taste and image of the brand.

4.2.4 Regions of wine

As the first chapter puts it, country of origin is one of the main choice cues in the Chinese market. From my research, 84% of imported wine drinkers in China are aware of France as a most famous wine producing country. Australia, USA and Italy remain a secondary position in the minds of consumers.

However when the question of regions become more detail, the answers are divers. As table 20 shows, Bordeaux, Burgundy and Champagne are the three most popular regions of wine in Chinese minds. Perhaps because they do well in publicity and they has a longer export history. In France, it is for sure that Alsace white wine enjoys a high reputation, but in China market it is known only by 13 % of consumer. And there are fewer people aware of Val de Loire or Val de Rhône.

Table 20 Preference of original country and awareness of France origin

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SIJING XU: FRENCH WINE MARKETING IN CHINA

Coutry of origin French origion No idea Others Val de USA 7% Italy 9% rhône 2% 1% 8% Australia Val de 4% loire Bordea 9% ux 33% Alsace 13% France 84% Cham Burgu pane ndy 15% 15%

4.3 A brief summary of consumer preference

All in all, Chinese wine preference can be summarized in descending order of importance as “red wine, then French wine, then Bordeaux, then Chateau like label. Young consumers have shown a preference for fruitier and fuller flavor, while regarding adulterated wine. Chinese wine drinking habits are different. Some of them mix wine with ice or beverages. They do so, because their taste is naturally “sweet”, they go for easy-to drink fruity wine without too much of woody taste. The growing health and safety awareness of middle-aged consumers will drive them to choose trusted international brands that are from reliable destinations.

Moreover, we can see a surge in sales of white and sparkling wines fueled mainly by the increasingly important female segment, there will be increasing attention paid to boutique wines from non-mainstream regions, not only limited in Bordeaux. The Chinese wine consumers, especially those aged fewer than 35, love to experiment with wines and are increasingly looking to less mainstream options such as Alsace wine.

At present, stricter drink-driving laws in China likely to push the customers to lower alcohol grape wines whose alcohol is less than 15%. Thanks to it, the grape wine sales

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SIJING XU: FRENCH WINE MARKETING IN CHINA are expected to continue their acceleration,

5. Recommendation: How to make French wine marketing more successful in China, in terms of French company?

After the characteristics of the right French wine products are confirmed, we carry out the marketing step by step; different timing has its particular strategies. Before launch the product into the market, the preparation work plays a fundamental role in the whole project. It determines whether or not the Chinese will expect and demand this wine. Next, when we are selling the wine, it is all about advertisement and sales means and strategy. At last, a long term success depends on the Chinese consumers’ loyalty, consumption habit and a belief in French wine or even French lifestyle.

5.1 Before reach the market

5.1.1 Wine education

Before we talked about that most Chinese consumers are lack of French wine knowledge, so first we choose tasting and exhibition as the most two efficient methods to let the mass have access to the French wine information.

Wine Testing and exhibition should be held more frequently in other cities besides Shanghai or Beijing. This combination of wine culture and Guanxi (business relationship in Chinese) can be very interesting, since wine tasting like golf is a great opportunity to meet high level people in the business community, it provide a perfect environment for business man talking about their cooperation plan. At the same time as gift playing an important role in business, wine could be a prestige gift which can

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SIJING XU: FRENCH WINE MARKETING IN CHINA help to have a good Guanxi and a successful business.

Moreover, wine testing could offer some wine education sessions to teach the Chinese consumer how to taste and choose a French wine, to let them know more about French wine culture. If you want the French wine have a long term success in China, you must combine the wine with Chinese cooking and table culture that how to choose a wine in case of different food, figure out which wine goes best with which Chinese cuisines. To gain credibility, wine experts are needed. A sommelier or a French working in the wine industry will reassure consumers. Nowadays Anglo-Saxons dominate the world of wine education, they should take the responsibility of transmit this cultural heritage. It is good idea to introduce the education lessons in universities, despite of the students may are not able to purchase much for this moment, they are the most open-mind, enthusiastic, educable young group, they will be the main consumers a few years later.

Besides the education for consumer, it is also important for wine trade players to have more professional wine knowledge, for example, clerks, retail staff, sommeliers and restaurant waiters who will give the suggestion to the consumers when they are hesitating. Obviously, a better trained sales representative, better sales achievement.

5.1.2 Brand awareness

Multimedia is a powerful tool for branding in China. Chinese are very open to new technologies and digital media. Nice video and beautiful photos are always useful for a showcase and the wine is no exception. For instance, the Chapoutier recently broadcasted a video telling the story of its founder. Although the video was viewed very little, she had very good returns; Moët & Chandon has pretty picture as superb posters for point-of-sale display which generally provided by LVMH group; another more interesting case, a video game called Fancy Cellar designed to educate Chinese

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SIJING XU: FRENCH WINE MARKETING IN CHINA consumers to drink different wines. This kind of digital media will serve in B to B to convince distributors to showcase your wine but also B to C to raise consumer awareness(Mora, 2007).

More basically, we should provide support and resources for French winemakers to deliver a comprehensive program of press relation, media, communications, events and visits. These activities mostly aimed at web magazines and newspapers helps to build brand image among general public. Bordeaux wine is already very famous, for other regions like Alsace, it will be very interesting to invite journalists to some marketing campaigns or visit some vineyards to establish ties with them. Chinese consumer is brand and market followers, in China 10% people affect 90% of the population. The power of social media is beyond imagination. From my experience, all the Chinese people who have drunk Alsace wine feel it taste good. It means that actually Alsace wine is to Chinese taste, it will become popular as long as they do well in publicity.

5.1.3 Partnership

Since we are talking about French wine, not Chinese local wine, thus it is important for a French brand to understand that if it really wants to enter Chinese market, it has to take the time and money to establish a long term relationship with Chinese wine dealers for building a strong in-market presence. The French exporters and Chinese importers should build collaborative business models and shared investment in the market, such as shared resources, joint venture investments, and cross-promotional activities. If a French wine company cooperates with a good Chinese partner, it is more easy and effective to enter the Chinese wine market. It was possible a few years ago to find a distributor or importer who would have distributed and promoted your wine. But now the market is becoming very competitive and as margins will gradually decrease, before investing in a domain Chinese used to ensure secure suppliers and

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SIJING XU: FRENCH WINE MARKETING IN CHINA gets more information about your castle.

A more directly way, set up branches or agencies in China with both Chinese and French sales representatives. This perfect multicultural team can not only grasp the main essence of the products, but also handle the Chinese market.

Both of these approaches are for the purpose of moving closer to Chinese market by eliminating intermediaries, making up the lack of distribution infrastructure as foreign companies.

5.2 Entering the market

5.2.1Segmenting the market

The advantage of having real market segmentation is that consumers can be grouped homogeneously. This helps to improve the efficiency of any products marketing action. Mckinna (1987) showed that wine consumers could be classified into four main market segments: connoisseurs (25%), students (51%), new consumers (10), and bulk consumers who drink wine served in boxes, etc. (14%). These averages may represent significant national variations(Mora, 2007). As a result of segmentation comes from various approach, price setting should include price strategies rooted in a differentiation based on a specific vinification process or grape variety. Strategies of this sort must be able to rely on segmentation information that can identify which consumer group is willing to pay higher price.

For instance, to some elite Bordeaux wineries, the criticism like “Bordeaux wine is too expensive!” does not seem to hold. Certainly, marketing strategy says that market participants should fight with the weapons they have. A great wine will always be an expensive one, especially in Bordeaux, where local land cost more and labor prices

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SIJING XU: FRENCH WINE MARKETING IN CHINA are higher than in many other places, and whose appellations contrôlées system prohibits certain vineyard methods, like irrigation which could reduce costs. Therefore, Bordeaux producers should apply a “skimming” policy focusing on value and not production volume to meet the quality requirement of the high end customers.

Take Alsace wine as another example, we all know that Alsace white wine is specialized on grape variety, like Chardonnay, Riesling. As for marketing, only one type of consumer is targeted: “connoisseur” who supposedly posses a solid knowledge of wine, white wine notably, and who base their decisions on precise criteria like vineyard, grape variety, region of origin and vinfication process. For these individuals, consumption corresponds to a lifestyles choice and to certain values.

5.2.2 Advertising

Marketing and advertisement play more and more important role on the Chinese market(Economic, 2011). French wine or expensive wines can be advertised in TV-s and magazines, for wine fans there are few special wine or gourmet magazines. As the survey shows, Chinese consumer’s preferences largely influenced by advertising, 16.42% rely on newspaper and magazine, 26.86% depend on TV and internet advertising and the rest part is influenced by friends’ advice or other reasons. In Chinese television, there is little French wine advertisement. To fill the gap, the French brands can follow Laffite as the example of product placement, Laffite made investment in Chinese sitcoms and now it is seen as the better red wine for celebration since it presented in a popular Hong Kong film. Embedded marketing is an effective form of advertising where branded goods or service are placed in context usually devoid of ads such as movies, music videos, video games or TV shows. Very few companies use product placement but some have been very successful in it. It is a good way to targeting on specific groups and to use implicit memory of potential consumers to build a product familiarity.

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SIJING XU: FRENCH WINE MARKETING IN CHINA

Another visual impact is press advertising; we can display the advertising in the luxury shopping mall billboards, cities’ key subway or bus stops, and bus wrap advertising on major shopping boulevards of the city.

5.2.3 Selling

The sales channel of French wine has three types: distribution channel; retail terminal and direct selling to group purchasing(Lucas, 2011). On distribution channel, we must attract the valuable distributors not only through high channel profits; but also give proper support on promotion, thus cultivating final consumers’ loyalty which in turn will bring distributors loyalty. In addition, regarding the distribution destination, not only stay in Tier 1 cities, the wine market in China’s Tier 2 cities has already evolved. Whilst the situation in regional cities is currently in a chaotic state, we will see the signs of in increasingly professional industry emerge very soon. Of course, different urban level has different sales strategy. As for Tier 1 cities, the high and mid-range wines are in the majority while in others mostly are mid and low-range wines.

Following where to sell, then it is how to sell. Generally speaking, promotion in international supermarkets such as Carrefour, City Shop have become popular than in the clutter of large super marketing venues, companies need to do something to bring their product to the attention of the shopper. As the above chapter discussed, there are many types of promotion which can influence consumer’s choice: discounting prices with showing the original price and the new “sale price”; wine tasting, free testing works very effectively to Chinese consumers, they are always glad to accept the free offer; so many other ways have a similar effect, for example, prize drawings, “buy one bottle of wine, get another one free or get a partner product free”.

In retail terminals, the most important sites are wine rooms, western-styles restaurant, upscale supermarket and large wine retailing website. Agents can arrange the layout

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SIJING XU: FRENCH WINE MARKETING IN CHINA of the terminals according to its product positioning. Powerful enterprises can operate several terminals at the same time, but avoiding the price conflict on line and off line. At present, some big brands has appeared in large wine website, chain wine rooms and large supermarkets at the same time, realizing the wide layout of the core terminals. The direct selling group purchase is generally seen as a resource that cannot be replicable. Among these three selling methods, we should strengthen the control on core channel which is the most suitable regarding the target segment market.

Not to be forgotten, peak season for wine business in China is in January before the most important Chinese family event, Chinese New Year Eve. Since wine symbolizes the welfare of the people, and also because of the symbolic meaning of colors in Chinese culture, red is the color of luck and happiness, gold is the color of welfare, packaging should be ostentations, which left the gift over valuating.

5.2.4 E-marketing

Since Internet is the main source of information for Chinese people and increasingly consumer prefer online shopping for the reasons that improving technology and the ability for trusted online retailor to reduce concerns about fake wines, E-marketing should be highly valued now and future. Online wine retailors will continue to increase their influence as modern sales channel. According our interviewers said, the two major online wine retailors are currently Yesmywine.con and Tmall.

Chinese usually read articles on specialized websites, wants to see the notation obtained by brands in Forums or learn about appellation, grape varieties. So it is important for wine brands to pay attention to their e-reputation as many consumers will check on the internet domain information, name of castles, and associated comments.

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SIJING XU: FRENCH WINE MARKETING IN CHINA

For website selling online, don’t hesitate to provide very detailed information to consumer or use a sommelier with videos. The future wine market in china rest with the younger population; a population whose day- to -day life is seamlessly integrated into the online words. For these consumers, buying online not only allows for quick price comparison, access to information and user generated reviews but represents a natural and convenient solution that fits with their busy lifestyles.

5.3 After into the market

5.3.1 Reputation protection

We know there is counterfeit French wine in China market, as a result of growing concern about some French wine brand names being used on wines made elsewhere; it is time to protect and grow the reputation and position of French wines. In the near future, fake wine will be continued to be a hot issue. We will see increased pressure from government, industry and consumers to work together to improve this problem. As the owner of the brand, they must ensure proper quality control over the production and manufacture of its wines, one single mistake is enough to ruin the whole brands. At the same time they can take an active effort to employ active anti-counterfeit measures will benefit from positive consumer sentiment.

5.3.2 Wine and social network service

Concerning the customer relationship management, it is a good choice to open a blog (Weibo) to share the companies’ story and promotion information, to provide a communication platform for the clients, so that you can continually observe the consumer’s behaviors, opinions and motivations, prompt understanding customer requirements, market trends, then change the strategies and make the sales process base on that information. To build up customer loyalty, it is a good idea to hold 55

SIJING XU: FRENCH WINE MARKETING IN CHINA regularly the wine tasting fair or membership meeting, or some other nice activities to provide an environment that each one can communicate and discuss with their feelings and opinions of the different wines. This kind of events will allow clients feel that they are valued, in return, they will trust the brand more as well. As for new client exploitation, the companies can offer some gifts, benefits and privileges to those members who are managed to introduce new customer into this club.

6. Conclusion

The major objective of my master thesis is the collection the features and explores the success factors in the Chinese wine market for French wine companies. In a practical way, I have presented past and present trends of the Chinese wine consumption, and I have inquiry different consumers’ behaviors, examined the impacts of different marketing methods on different consumer groups and research which wines meet their requirements. By using marketing mix and SWOT analysis I defined the characteristics of the Chinese wine market and traced strategic steps and practical strategy for French wine companies.

Indeed, the China market has enormous potential for French wine industry, there has already been massive growth in exports to China. However, the changing global environment has enhanced competition and forced French wine industry to change and to adopt new strategic marketing process. It is clear that a large and interesting opportunity is opening up for French wine from other regions except Bordeaux, driven by the need of quality French wine at mainstream price point and the positive association between these wine and a desirable lifestyle. Whereas, China is a particularly challenging market for small wine companies that want to be successful exporting into that marketplace and thus increase their market share. To achieve these purposes, some strategies need to be undertaken.

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It is a perquisite to have an embedded presence in market, in the form of a local agency of office. First, it should get a team, or at least someone to be based in China, to be really working there. Then the other specific advice is to try to run marketing campaigns in the Tier 1 cities of Beijing and Shanghai, later extend to Tier 2 cities.

Opportunities will open up for well-prepared brand owners who are effectively supported by their regional promotion apparatus. The main challenges are how to communicate effectively and transparently, and how to leverage France’s positive image in the Chinese market while still differentiate your region brand from Bordeaux.

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BIBLIOGRAPHY

2010_World_Wine_Consumption_By_Volume_Rank. (2010) (Vol. 2010, pp. 2007–2010). ADMIN. (2012). French wine culture. Retrieved from http://www.wineshoppe.us/french-wine-culture/ An Analysis of Globalization Forces in the Wine Industry: Implications and Recommendations for Wineries. (2007). Bailey, P. (2011). Profile of the Chinese Wine Market.

China wine imports in H1. (2012, September 2). Retrieved from http://www.cnwinenews.com/html/201008/25/2010082510121695020.htm

China Wine Market Competitor Analysis Section 1 : China Wine Market Profile Section 2 : Australian Profile Section 3 : Competitor Analysis. (2010).

Economic, F. O. F. (2011). PHD SCHOOL OF MANAGEMENT AND BUSINESS ADMINISTRATION THESIS OF THE DOCTORAL ( PH . D .) DISSERTATION WINE MARKET AND WINE INDUSTRY OF CHINA IN THE 21ST CENTURY Written by : Emily, K. (2012). China to be sixth-largest wine producing country by 2016. Retrieved June 19, 2013, from http://www.harpers.co.uk/news/china-to-be-sixth-largest-wine-producing-country -by-2016/347010.article FRENCH WINE FACTS. (2012). Retrieved from http://www.winemag.com/Wine-Enthusiast-Magazine/france/ French wine/alcohol facts. (2012). Retrieved from http://www.frenchdesire.com.au/facts/wine/ Li, B. L., Hu, X., & Jun, Z. (2011). Do Chinese Consumer Prefer to Buy Imported Wine ? —— the Effect of Country-of-Origin. Lucas, B. (2011). Market and marketing of imported wine in China- Distibution Networks. Retrieved June 26, 2012, from http://www.zhongguo-wine.com/2012/07/26/market-and-marketing-of-imported- wine-in-china-distribution-networks/ LyuChang. (2013). China’s imports of French wine go sour. Retrieved from http://www.asianewsnet.net/Chinas-imports-of-French-wine-go-sour-49315.html Marche, L. E., Vins, D. E. S., La, E. T., Et, T. A., Du, R., & Marche, T. D. U. (2011). Sommaire 1. Mei Meili. (2012). Chinese wine. Retrieved April 12, 2013, from http://www.chinatravel.com/facts/chinese-wine.htm Mora, P. (2007). KEY SUCCESS FACTORS IN TODAY ’ S WINE SECTOR.

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National bureau of statistics of China. (2012). CHINA STATISTICAL YEARBOOK. Retrieved from http://www.stats.gov.cn/tjsj/ndsj/2012/indexeh.htm Perrouty, J., & Halstead, R. (2012). Who will be the winners in China ’ s Opportunities for Mediterranean wines in the Chinese. Philip, Webey, Stephanie Jiang, Bryan Balmer, L. R. (2012). China wine market snapshot. Retrieved from http://www.dpi.vic.gov.au/agriculture/investment-trade/market-access-and-comp etitiveness/markets/china/china-wine-market Reader, D., & Hemisphere, S. (2012). OIV 2012 Statistical Report on world vitiviniculture. Shi Zhengxin. (2008). Ten Chinese Publications : Consumer concepts, behaviour and culture. Sloop, C. (2013). EU-27 Wine Annual Wine Annual Report and Statistics. Trategies, C. O. S., & Clark, A. (2013). C OMMENTS TO THE D EPARTMENT OF F OREIGN A FFAIRS AND T RADE A USTRALIA I N THE A SIAN C ENTURY. Wang Zhuoqiong. (2012, August 14). Wine imports give Chinese firms a hangover. Retrieved from http://www.chinadaily.com.cn/cndy/2012-08/14/content_15672763.htm Wine distribution in China. (2012). Retrieved from http://daxueconsulting.com/wine-distribution-in-china/ Wine in China. (2012). Retrieved from http://www.nzte.govt.nz/en/export/market-research/wine/wine-in-china/ Wine in China : A Report to the California Association of Winegrape Growers I . The Macro Picture. (2005).

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APPENDIX A Qualitative study Interview questions about French Wine

姓名 性别 年龄 职业 月收入 居住地 学历 备注

1． 你喜欢喝葡萄酒吗？喜欢喝法国葡萄酒吗？喜欢喝哪种法国葡萄酒？喜欢哪个产地的 酒？

2． 你的家人朋友喝葡萄酒吗？有喝葡萄酒的习惯吗？你多久喝一次葡萄酒？在哪里喝葡 萄酒？

3． 多久买一次葡萄酒？买哪种酒？在哪里买酒？ 买什么价位的进口葡萄酒呢？

4． 在什么样的场合，场所，环境下你会想要喝葡萄酒？想要买葡萄酒？饮用目的是什么？

5． 你怎么知道葡萄酒品牌的？通过哪些渠道了解进口葡萄酒的？

6． 影响你选择买葡萄酒的因素？影响你喝葡萄酒的因素？你觉得那些媒体对葡萄酒的传 播有帮助。

7． 你怎么看待国产葡萄酒和进口葡萄酒？优缺点？对比？

8． 你怎么看待法国葡萄酒在中国的市场营销？

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Interview questions about French Wine Name Gender Age Profession Salary City Education Comment

1. Do you like grape wine? Do you like French wine? What kind of French wine do you prefer? Which regions’ wine do you prefer? 2. Your family and friends, do they drink wine? And do they have the habitude of drinking wine? How often do you drink wine? Where do you drink wine usually? 3. How often to buy a wine? What and where to buy? What price would you accept? 4. In what kind of occasion and circumstances you will want to drink wine? 5. How do you know wine brand? By which method to learn about imported wine? 6. What factors influence your purchase decision? Which criteria do you consider when evaluating a wine? 7. What kinds of media do you think are helpful to the spread of French wine? 8. Could you please compare domestic wine with French wine? 9. What do you think of French wine marketing in china?

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APPENDIX B Quantitative study

法国葡萄酒在中国市场的问卷调查 页数：1/1 题目数：26 作为本人硕士毕业论文的一项研究，希望能通过此次调查获得对于法国葡萄酒的中国消费者行为的相关信 息。本问卷调查属匿名调查，所填写信息不会涉及到泄露私人信息问题，请各位放心认真回答。在您回答 之前，先感谢您对本人学业的支持与帮助！ 1.您属于哪个年龄范围？*

0-18 19-30 31-40 40-50 50 以上

2.您的性别？*

男 女

3.您的职业是*

学生 教师 医生/护士 个体经营者 技术人员 公务员 从事一般商业活

动者 自由职业者 其他

4.您的收入在以下哪个范围？（人民币每月）*

无 1000-2000 元 2001-3000 元 3001-5000 元 5000-10000 元 10000 元以

上 5.您的受教育水平？*

小学 初中 高中 大学本科 硕士 博士 博士以上

6.您是否了解葡萄酒？*

非常了解 一般了解 知道一点点 完全不了解

7.您是否买过葡萄酒？*

经常买 偶尔买 从未买过

8.您多久会饮用一次进口葡萄酒？（不包括白兰地等烈酒）*

每天 一周几次 一个月几次 一年几次 从未

9.您偏爱哪一类型的葡萄酒？（可多选）*

白葡萄酒 红葡萄酒 玫瑰红葡萄酒 发泡酒/香槟 无所谓

10.您认为葡萄酒属于哪类型饮品？*

健康饮品 休闲饮品 奢侈饮品 普通饮料 社交工具 其它

11.您从何渠道了解葡萄酒？*

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网络 电视广告 报刊杂志 朋友亲戚介绍 其他 不了解

12.您通常在什么场合饮用葡萄酒？*

家里休息 朋友/商务派对 酒吧夜店 中餐厅 西餐厅 从不

13.您如何挑选并购买葡萄酒？*

我很清楚我自己喜欢哪种酒，而且我能选出这类酒 我选择我以前尝过或朋友亲戚推荐的 主

要基于价格 主要基于外观（包装，标签） 主要基于品牌 主要基于产地 主要基于年

份 主要基于购买方便程度 我选择经常在广告里看到的葡萄酒 身边人普遍饮用 该品

牌可显出地位身份层次 销售员推荐 无所谓，随便买

14.您大多在何处购买葡萄酒？*

超市 百货商场 葡萄酒专卖店 网上订购 从未购买过

15.您偏好国产葡萄酒还是进口葡萄酒？*

国产葡萄酒 进口葡萄酒

16.您经常购买进口葡萄酒吗？*

经常买 偶尔买 从未

17.如您选择进口葡萄酒，您偏好哪个地区产的葡萄酒*

法国 西班牙 意大利 美国 澳大利亚 其他

18.对于进口葡萄酒来说，您可以接受哪个范围的价格？*

20-50 元 51-100 元 101-200 元 200 元-1000 元 1000 元以上

19.您经常为哪种目的去买进口葡萄酒？（可多选）*

自己平时喝 家里特别的日子/节假日，招待客人 特别的商务社交场合 送礼 可显

示身份地位 收藏 从未购买

20.您认为最能让您记住一个葡萄酒品牌的因素有哪些？（可多选）*

口味 包装 广告 促销活动 亲戚朋友推荐 其他

21.您是否了解法国葡萄酒？*

非常了解 一般了解 知道一点点 完全不了解

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SIJING XU: FRENCH WINE MARKETING IN CHINA

22.如您了解法国葡萄酒，你知道以下哪些法国葡萄酒产地？（可多选；如完全不了解，可不选）*

波尔多 Bordeaux 阿尔萨斯 Alsace 勃艮第 Burgundy 香槟大区 Champagne 卢

瓦尔河流域 Val de loire 罗讷河谷地 Val de Rhône 无

23.通过哪种方式会让您购买进口葡萄酒？（可多选）*

买一送一 打折 礼品赠送 参与活动 网络/电视宣传广告 销售员推荐

24.提到法国葡萄酒，第一时间出现在您脑海里的词是什么？（可以是一个品牌，一个产地，一种酒的类型， 或其他）*

25.您对某一/些题的回答补充。（题号：回答）*

26.您对此问卷调查的意见或建议，或对此话题想说的话。*

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SIJING XU: FRENCH WINE MARKETING IN CHINA

Questionnaire survey about French wine Number of Question：26 1. What is your age？*

0-18 19-30 31-40 40-50 Above50

2. What is your gender？*

Male Female

2. What is your profession?*

Student Teacher Doctor/Nurse self-employed Technician Civil servants

Businessman Freelancers Other

4. What is your salary per month (CNY) ？*

0 1000-2000 2001-3000 3001-5000 5000-10000 More than 10000

5. What is your education background？*

Primary school Middle School High school Bachelor Master PHD After

PHD

6. Do you know about wine？*

Very well Generally A little Nothing

7. Do you buy wine frequently？*

Frequently Occasionally Never

8. How often do you drink imported grape wine*

Everyday Several times per week Several times per month Several times per year

Never

9. Which kind of wine do you prefer?*

White wine Red wine Rosé Sparkling wine/ Champagne I don’t care

10. Which beverage do you think the wine belong to ？*

Healthy drink Leisure drink Luxury drink Normal drink Social tool other

11. Through which channel do you learn about wine？*

Internet TV Newspaper/Magazine Family/Friend recommendation other I have no idea

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SIJING XU: FRENCH WINE MARKETING IN CHINA

12. In what occasion do you drink wine usually？*

At home Friend/Business Party Bar/Club Chinese restaurant Western restaurant

Never

13. How do you choose a wine？*

I know what I like and I can find it I choose what I drunk before or depends friends advice

Depend on price Depend on packaging Depend on brand Depend on origin Depend on year Depend on convenience of purchase Depend on convenience of purchase Depend on others choice For show the social status sales’ recommendation I don’t care

14. Where do you buy wine usually？*

Supermarket Department store Wine shop Online Never

15. Do you prefer imported wine or domestic wine？*

Domestic wine Imported wine

16. Do you buy imported wine frequently？*

Frequently Occasionally Never

17. Which country of origin do you prefer for imported wine?*

France Spain Italy USA Australia Other

18. What price would you accept for imported wine？*

20-50 Yuan 51-100 Yuan 101-200 Yuan 200 元-1000 Yuan More than1000 Yuan

19. For what object do you buy imported wine？*

Self-drinking Entertainment Business socializing Gift Show status Collection

Never

20. What factor makes you remember a wine brand?*

Taste Packaging Advertisement Promotion Recommendation Other

21. Do you know about French wine？*

Vey well Generally A little Totally not

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SIJING XU: FRENCH WINE MARKETING IN CHINA

22. Which region do you know about French wine*

Bordeaux Alsace Burgundy Champagne Val de Loire Val de Rhône

None 23. Which sales method could motivate you buy a French wine？*

Buy one give one Discount Reward Promotion Internet/TV advertisement

Sales’ recommendation 24. What come to your mind when someone mentions French wine? *

25. Your supplement answer for any questions*

26. Your comments for this questionnaire.*

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