Marketing assignment study help online on: Chinese Wine Market

China is currently Asia ‘second largest food and beverage market. The economy has been consistently growing and opening a wide horizon for the other countries from across the globe. There are several potentials to tap upon by the Australian wine manufacturers as the future figures tend to suggest that the demand is set to increase drastically in the coming years. The drivers of this increased demand for Australian wine are its strong economic growth and rising per capita income. The major hubs for the potential markets comprises of Beijing, Shanghai, and Guangzhou. The report below aims to provide information related to the Chinese wine market and the growth prospects for the manufacturers from the Australian context (Wine Companion 2012).Formalities to enter the Chinese Wine market

Like any other country there are several rules and regulations which needs to be adhered and followed for companies which look to enter the Chinese market and supply imported wine. There are several industrial norms, investment rules of the country, a different political environment, stringent government regulations, transportation, distribution, as well as several trade restrictions. Some of the major formalities have been discussed below: (SMM 2012)

Establishing a company or tying up with an existing company: The Australian wine companies have to establish their own trading company in China to start importing and distributing the wine. The options that are available for the Australian brands to enter the country are wholly foreign owned enterprise and Joint Ventures with a local player. Moreover in case the Australian player wishes to purchase an existing company in the country the Chinese authorities permit that as well. However this process of acquiring an existing company would be time consuming and involve a lot of paperwork for the interested importer.
Importing and Distributing: In order to import wine in China there are no licenses which the European countries require. However there are some legal formalities for other countries such as Australia to finish in order entering the market. For instance in case the Chinese subsidiary intends to manage the customs themselves then they have to register as the Foreign Trader operator after their establishment. In case that is not possible it would require appointing an import agent to carry out the entire import process. Wine being a product from the food and beverage industry needs to undergo strict administration as per the Chinese food safety law along with other relevant regulations. The importers from Australia would have to apply for food distribution permit at the local Administration of Industry and Commerce. Additionally to that companies would have to file at local commercial authorities. Moreover the other regulations include the mention of the word “retail’’ in the business scope of the company’s license.

Companies globally are no using the means of ecommerce to sell their products. The same is possible for the importers to sell wine online to the Chinese customers. However there are some rules and distribution policies which they need to adhere by. First of all creating a stand-alone site for dedicated companies and selling wines online may be difficult for these companies as the Chinese authorities do not allow the same easily. But they could adopt the strategy of the European sellers which have tied up with Taobao Mall and ALibaba to sell their products online within China. For more on this manufacturers could check the comprehensive guide which is published by the EU SME Centre.Labelling the wine: Another thing which the importers need to take care of is the CIQ (China Entry-Exit Inspection and Quarantine Bureau). Here they categorize wine in production batches where each of them requires separate labeling. They view wine from different harvest as a totally different product irrespective of the similarity they have among the products.

Customs: The main challenge for the importers in the customs process is labelling. There are a few things if the companies take into consideration then the custom clearance process would be much simplified. One of those could be using importers or local companies who are well versed with the customs authorities and shipping rules. The other suggestion would be to stick to a single port which the importer gets familiarized with. Importers should also try to send a small batch of their products to the port for inspection and retain all relevant documentation of the shipment before they actually send the entire shipment.

· Tariffs: Since its entry in the WTO China has reduced the overall average tariff for the agricultural products from 21.2% to 15.3%. But till now the tariffs have been comparatively high as much as 65% on some key products of interest to Australia. As per the Australia – China Free Trade negotiations there has been quite a progress in the tariff rate quotas, standards and technical regulations. The latest development in these negotiations could be viewed at Trade policy- Australian Department of Foreign Affairs and Trade (Canberra Times 2012).

PEST Analysis of the Import market of Wine in China

Political Environment

The wine industry in China has been receiving continuous boost from the part of the government. Making norms stringent yet promoting the import of quality products by the government over the years have been the positives of the sector.

Economic Environment

The Chinese market has never been as lucrative as today. The increased purchasing power and the rapid speed of development have increased the number of people who could afford purchasing imported wine. Currently the market figures suggest that there has been a big jump of over 106% in the last five years in terms of wine consumption. The total wine market of imported wine comprises of just the 20% of the entire market. Moreover it has been established that only 60% of the potential market has been tapped by both the local and international players. This can be much clearer from the discussion below for the next 5 years of the economy of China (China Daily 2012).

Social

Traditionally Chinese have never been in the habit of drinking wine. However, with the openness to adopt the western culture and increased drinking of wine in both social and business events has facilitated in the increase of wine consumption in these societies.

Technological

Technologically Chinese wineries have advanced a great deal over the years. They are providing stiff competition to the imported wines. However a pretty good market share demands imported wines from countries like Australia and other European Unions.

SWOT analysis of Chinese wine market

Evaluating the strengths, weaknesses, Opportunities and Threats associated with the wine market in China would give a clearer picture and assist the importers from Australia to enter the Chinese market. Summarized below is the SWOT of the Chines Wine market as seen from the Australian perspective: (BRW 2012)

Strengths

Chinese economy is growing dynamically with higher GDP numbers each year. The population size is also consistently increasing which provides a large base for customers.
The government is supporting the wine sector as well as the wine market.
The society norms are open to the wine culture.
The society is progressively accepting the Western Trends and fashion waves.
They have a natural way of health care, nature friendly products which play an important role among the Chines consumers.
All the wine drinkers have a positive as well as a sophisticated personality picture.
Wine is an essential element in the social as well as business life.
As per tradition goes Chinese people do not drink wine
The Chinese people are not much aware of the wine and wine culture
The symbolic role of Wine is more important rather than its pleasure value
Wine culture along with education levels is quite low
Chinese markets are not uniform as they have significant regional differences
The domestic distribution is also very complicated
The law in the Chines wine markets does not impede the production of low quality products
Importing of wine is very expensive due to high customs and taxes
China is a good market in the remote cities as well
The main cities of the country have huge population resulting in huge demands
Prices of import wines are decreasing
In order to popularize wine health care projects a good market
Each year the number of wine shops opening in the country are constantly increasing
In China it is possible for bottling imported bulk wine through local wineries and sell them at lower prices to the consumers (Hospitality Magazine 2012)
The increased quality of Chinese wines are a threat to the imported wines
Laws for the product is not complex enough and can be counterfeited
The market demands huge marketing costs
Sales and Distribution channels are very complex and have a pretty different way of business thinking
Businesses in China have a very short term way for thinking which has been pretty problematic for establishing long term business for the importers.
Chinese customers usually have the habit of not trusting imported products easily especially manufactured by unknown brands (ABC 2012).
Entry Barriers: Chinese country has some entry barriers for companies who wish to enter the country and import wine. In case a company wishes to enter the market it needs to conduct a lot of paper work and formalities. For example if a company wishes to sell its wine in the local market it would need to appoint its own import agent to carry out the operations. Also if that is not possible the company would have to create its own subsidiary in the country to start the trade process (Google n.d).
Degree of Rivalry: Presently the imported wine market is dominated by European countries. The local manufacturers are also great competition to the new players as well as the old brands. The increased demand has attracted several brands from across the world. So the level rivalry is pretty high in the region (Watoday 2009).
Power of buyers: This could also be said to be pretty high with numerous options available to the buyers. Both local and international players seem to have flooded the market.
Threat from Substitutes:The chines market is full of beverage options. Beer being one of the other substitutes which dominates the market as against wine. The threat levels are moderate as wine drinkers are less likely to shift to other forms of beverages.
Bargaining power of the suppliers: With huge suppliers present and many new ones entering the market the bargaining power is pretty high.Weaknesses

Opportunities

Threats

Porters 5 forces of the Chinese Wine Market

Chinese Wine Market potential in the next 5 years

The Chinese wine market has seen an increased demand and consumption of the imported wine from different countries of the world. Australia is one of those countries which are among the leading suppliers for imported wine in China. Currently the figures have revealed that the Chinese wine consumption has reached 96.5 million 9-litre cases which is equivalent to 1.2 billion bottles. This is a whopping increase of 104% since the year 2005. The future trends show that there is a potential for this market to expand further and grow by more than 19.6% which would reach 127 million 9-litre cases by the year 2014. This would make China as the 6^th largest wine consumer in the world. While checking out the import figures it shows a big market for the importers across the world. The total import was 286 million litres of wine which was approximately valued at USD 798 million at the end of 2010. When compared with year on year figures it shows an increase of 67% whereby it accounted for 20% supply of the entire market (Szie 2011).Discussing the legal per capita income the figures stand at a litre per year which is way below when compared to the top 10 consumer countries which is around 30-40 litres. However the Chinese market holds an enormous potential and seems to be a very attractive market for the Australian wine producers. Also the competition is increasing at an enormous rate with so many companies heading towards the Chinese market in the rush to supply wine. Currently the market in China has 1,500 imported wine brands and around 24,000 wine importers. Primary market for these imported wines is Beijing, Guangzhou, and Shanghai. The recent industry reports have estimated that about 23 million adults within the range of 18 to 50 years have the economic power to afford these imported wines. The actual consumption is about 14 million which leaves a large market of to tap with 9 million potential customers (EU SME 2009).In order to succeed in the Chinese markets wine exporters from Australia would need to master their branding, distribution channels, and conduct a thorough research for targeted marketing. Over the years it has been seen that the Australian manufacturers have been continuously trying to import wine to establish its image as manufacturer of good product but at a much cheaper price as compared to the other countries. The average price of an Australian brand ranges between the price ranges of CNY 200-400 which quite competitive against the prices by other importing countries (Adelaide 2011).

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