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China the final frontier for Aussie wine

August 4, 2010

http://www.theage.com.au/entertainment/restaurants-and-bars/china-the-final-frontier-for-aussie-wine-20100801-1118f.html

China has 200 million wine drinkers.  As such, it is an attractive market to Australia’s wine industry.  Yet despite Australian wine being of generally high quality and with China being relatively close geographically, “local Chinese production still accounts for 80-90 per cent of all wine consumed, despite its sometimes dubious quality.”

However, change is afoot in China.  The Chinese middle class is growing, its tastes in wine are becoming more internationally focused, the population is becoming more urban, and Chinese disposable income is expanding. The Australian industry is trying to take advantage of this shift in the overall consumer market by setting up offices in Beijing, Shanghai and Hong Kong.  Industry groups recently showcased 10 Australian brands at an expo in Shanghai.  The industry’s “strategy will focus on promoting Australia’s individual wine regions and also repositioning Australian wine as products of high quality.”

However, there are challenges.  “The vast majority of drinkers continue to look to local products, particularly Baijiu, a distilled liquor with a high alcohol content that is often referred to as a white wine.”  And Chinese typically drink at meals and local consumer tastes often sees wine as going poorly with such food.

The key, says industry insiders, is to understand the potential Chinese wine consumer. Says one, “If you don’t understand what’s driving that (the market), it doesn’t matter what we do in the wineries and the vineyards, we’re not going to connect with those consumers.”

  1. How does growth in Chinese disposable income affect the demand for Australian wine?
  2. How is Chinese ‘demand price elasticity’ for Australian wine changing?
  3. What factors, economic and otherwise, affect this elasticity?
  4. What ‘cross-price elasticities’ are important to Chinese demand for Australian wine?
  5. Why does the Australian wine industry think that a focus on superior ‘quality’ will increase Chinese demand for its products?
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