Innovation, Diversity, and Premiumization: Chilean Wine’s Journey to China
The influence of Chilean wine within the Chinese import market cannot be overlooked – especially during the first quarter of 2021 when Chilean wine imports increased by over 40% to become the second-largest source of imported wine in China. Of course, there are a variety of factors contributing to this growth, from the impact of the recent governmental policies set against Australian wine, to the effects of the pandemic and the subsequent revival of consumption habits. However, in the end, the rise of Chilean wines in China can also be viewed as the inevitable result of long-term investment.
In Shanghai, we sat with Nicolai Samsing, Asia Director of Wines of Chile, who shared Chile’s action plans to further deepen its reach in China’s wine market, including efforts to grow Chilean wine brands based in the country and aid in crafting sound business decisions to capture more consumers.
Governmental policies pay dividends
Since the 2005 signing of the free trade agreement between China and Chile, China has gradually decreased tariffs on all Chilean wines imported into the country. In 2015, Chile became the second country to enjoy zero-tariff status on its wine exports to China (following New Zealand in 2012), and ever since, the popularity and import volumes of Chilean wines have skyrocketed – China also became the number one destination for Chilean bottled wine exports in 2015, and Chile stays amongst the top three largest sources of imported wines in the Chinese market.
A dynamic trade arena
Although its production regions are located across the globe from China, Chilean brands still hold the Chinese market as a primary focus. Today, as one of the largest markets for Chilean wines, China imports products from over 200 Chilean wineries – 10% of which have even established branches or offices in China. Measures such as these help to grow the brands to China and allow for precise and timely business decisions that are better aligned with the Chinese market and Chinese consumers.
China imports products from over 200 Chilean wineries – 10% of which have even established branches or offices in China.
Chinese wine companies have also been keeping a close eye on many Chilean production regions. In 2017, the Changyu Pioneer Wine Company acquired an 85% stake in Chilean winemaker Indomita, eighth on the list of Chilean wineries. Following the acquisition, backed by a strong push from Changyu, sales of Indomita wines in China increased by 400% in just one year.
The following year, the Jiangsu Yanghe Brewery acquired a 12.5% stake in VSPT, the second largest Chilean wine group, and established a local distribution network and services to ensure the availability of high-quality sources of wine for Chinese consumers.
Overall, Chilean wines enjoy a solid distribution network in China. According to Wines of Chile, there are currently more than 6,000 Chilean wine importers located throughout China, distributing to markets of all sizes throughout every region of the country. With the dedication brought by these distributors and the wineries that supply them, Chilean wines have been able to gain widespread consumer awareness in China.
A diverse range of products
Chilean vineyards and wineries are well-established in their procedures and techniques for growing grapes and fermenting their wines, which leads to consistent, high-quality products. And, because labor costs in the country are relatively low, Chilean wine also enjoys a very low price-performance ratio. Chilean winemakers show no fear of straying from tradition, nor do they simply follow trends and fads; this innovation has led to the rich diversity now seen among Chilean wines, and has created an industry that aligns perfectly with the modern Chinese consumer market.
Chilean winemakers show no fear of straying from tradition, nor do they simply follow trends and fads; this innovation has led to the rich diversity now seen among Chilean wines, and has created an industry that aligns perfectly with the modern Chinese consumer market.
As the Chinese market gradually stabilizes, the wine industry is now faced with an entirely new set of challenges. On top of the influence of last year’s pandemic, when many of the traditional wine consumption scenarios disappeared, consumer inclinations, taste preferences, and even the market structure itself have all undergone drastic changes. Chilean wine is not immune to the impact of this new landscape and must continue to adapt and grow.
Profiting from low prices
Chilean wines broke into the Chinese market by offering high-quality products at reasonable prices, and as recent data has shown, the average price-per-liter of Chilean wine is lower than the average price-per-liter of Chinese wine imports as a whole. As long as the Chinese market remains in the early stages of its development, Chilean wines can use this lower pricing scheme to secure market share. Long-term operations at these low prices, however, will lead to weakened channel profitability and does not promote sustainable operation, development, or brand establishment. In addition, it will become increasingly difficult to satisfy the maturing tastes and increasing demands of consumers in the market.
Creating brand image
Another consequence of low-price operations is lowered brand positioning. In reality, Chile represents the highest quality of New World wines, and the country includes many premium production regions and offers a number of revolutionary products. However, due to the limited scope of many of Chile’s high-end wineries, it has proven difficult to establish any significant brand image or awareness in China. Additional investments into the Chinese market will go a long way toward improving the Chilean production region’s status as a premium wine producer in the eyes of Chinese consumers.
Enhancing the image of Chilean production regions
France, the representative region for Old World wines, includes many renowned and beloved production regions. The development of the Australian wine import market, on the other hand, was driven primarily by the popularity of one brand: Penfolds. Although Chile offers a multitude of wine products, its various production regions and styles are not yet distinguishable for the majority of Chinese consumers. This is especially true for those regions lacking the influence of a leading brand; without a well-known brand, the landscape of the wine industry remains hazy and it is impossible to realize any kind of brand effect.
Over the past few years, the combined efforts of wineries, distributors, and associations have led to increased success in the promotion of Chilean wines in China, and we have been glad to see how the entire Chilean wine industry has embraced the digital era by utilizing social media and e-commerce platforms to further its growth and development.Mr. Nicolai Samsing, Asia Director of Wines of Chile
Over the past few years, the combined efforts of wineries, distributors, and associations have led to increased success in the promotion of Chilean wines in China, and we have been glad to see how the entire Chilean wine industry has embraced the digital era by utilizing social media and e-commerce platforms to further its growth and development. Now, looking at the Asian market as a whole, Chilean wines have already become the top imported wine in both Japan and South Korea. With this in mind, we trust that Chilean wines have a very bright future in the Chinese market as well.
Wine to Asia 2021
Wines of Chile is among confirmed organizations to join the highly-anticipated 2021 Wine to Asia Shenzhen International Wine & Spirits Fair on August 12-14.
Guests can take the opportunity to get a taste of Chilean wines straight from winemakers who will be present in the event happening at the Shenzhen World Exhibition & Convention Center.