Four China Market Predictions in 2017

In the early months of 2016, insiders were optimistic seeing 30% increase in sales value, but soon detected the weak basis after growth rate falling back in June. It’s impossible for wine industry to develop alone in the atmosphere of economic depression and consumption stagnation, from which we witnessed that wine companies has suffered great loss in fierce pricing competition. Meanwhile, there wasn’t any help for their profit gaining. 

 

However, it should be noted that imports value of bottled wine has increased 18.3% and reached USD1.97 billion (¥13.54 billion) in November, running faster than the growth of GDP. 

 

I am not the predicator anyway, but a wine market observer exactly. I concluded four trends in the brand new 2017 after analysis from many reports and talks with numerous importers, distributors and retailers.
 

 

1 “VCE War” Came to an End

 

Intensified “price war” broke out and became even fiercely throughout 2016. It’s easy to buy VCE wine at the retail price of RMB 12-13 (€1.6-1.77) in almost all channels, some well-known brands have joint the battle with their cheap wines priced at around RMB 18 (€2.45), which has brought big profit loss to wine merchants. But cost rise of bulk wine and wine package cooled it down in 2017 as well,  vintners had to handle with VCE wine's short “ready to drink” period and large wine stock, this must be annoying even frustrating.

 

I can deduce from above factors that reduction sale is sure to happen among a few vintners in 2017. Don't be scared by the coming breathtaking scene. 

 

2 Market Share Increased in Wines Priced at RMB 60-100 

 

Since consumers are probably willing to buy better valued wine after professional wine knowledge from wine educator and critics. On the other hand, many wine companies are seeking breakthrough for new sales and profit increase, so medium priced wine will likely to be the winner. Wines priced at RMB 60-100 (€8.18-13.63) in retail ranged from table wine to Chateau wine with relative more space for wine merchants and excellent price value for consumers.

 

3 Influence Varied by Countries and Regions 

 

The biggest uncertainty in 2017 is the change of foreign trade pattern. Will wines be the victim in the conflict of EU and China photovoltaic products? In order to prevent capital flight, tighter restrictions will be implemented in foreign investment.

 

New rules carried out by people’s bank of China indicated that influence of exchange rate cannot be underestimated in the future. Wine imported from the US, Chile and South Africa is confronted with cost rise when settled in USD, then more and more importers will raise the price obviously or privately to cover increase.

 

4 Some Vintners will be Kicked out from B2B Field 

 

B2B, is it a new internet concept or just shelter for traditional wine companies? E-commerce enterprises are rushed from B2C (Business to Customer) into B2B (Business to Business) field in profit grabbing. Most E-commerce enterprises have committed to the battlefield of price war, who will be more competent?Based on this occurrence, I suppose one or two online vintner will go bankrupted and be kicked out in 2017.

 

Just wait and see...

 

Writer | Jeff Yang