Damien Wilson, Professor at the ESC Dijon, talks us through the gap between the European perception of the Chinese wine market and the reality

1. How wrong we are
on Wine China?
Selling European wines in Asia

2. Inspiration
China has our wine attention
 It's big
 Surface Area: 9,706,961
 Population: 1,35 Billion (est.
Worldbank 2013)
 It's wealthy
 Economic growth – 3X 2006
 67% in poverty in 1996, 19%
today (and 1% - 31%)
 In concentrated areas
 It's drinking wine
 Increasing at CAGR of 20%
(Rabobank 2013)
 58,7% increase in per capita
consumption 2008-2011
"Further import demand will likely be required
to meet the rising consumption gap"
7 février 2014
Contexte de la présentation : convention, cours, réunion
2

3. Concentration of wealth
7 février 2014
Contexte de la présentation : convention, cours, réunion
3

4. So, everyone is madly wine supplying
China
China's wine stats
 Consumes
approximately 6,5% of
world wine
 Produces
approximately 7,5% of
the world's wine
Europe is heavily
leveraged in China
This is what we don't
want to see…
February 7, 2014 - page 4

5. How wrong are we on Wine China?
THE JOURNEY

6. What has happened so far…
The Crisis…
The False Recovery
The wine boom of the 60s and
70s led to peak wine
 From almost 30 billion
litres (OIV 2011)
 Down to 23 billion Litres
by the early 90s (Demeter
and OIV 2013)
From the early 90s to now
 Has remained more or
less static in aggregate
 With New market growth
picking up European
declines
Wine has gone from being more
local to more global
 Wine market volume from
24 to 28 billion litres
between '98 and '12.
 Real value from US$274
to US$312 billion in
US$2012.
 That's a slight fall from
US$11,42 to US$11,14 per
litre.
In that same period, global wine
imports increased by 50%
(CBA and OIV 2011)
7 février 2014
Contexte de la présentation : convention, cours, réunion
6

7. And, there are less economies of scale
7 février 2014
Contexte de la présentation : convention, cours, réunion
7

8. So….
In a static market
Where the growth has
come from a change
from heavy to new
consumers
Who need a
 Basic
 Consistent, and
 Enjoyable product
And are loyal to wines
that satisfy these
criteria
7 février 2014
We've increased competition
 In number of producers
 And increased trade
between markets
And the costs of admin and
management
 Systems of region and
quality control (More
AOCs, DOs, shows, etc..)
And further fragmented the
offer through new
products
Contexte de la présentation : convention, cours, réunion
8

9. The problem…
What they want
To enjoy a glass of French
red wine – a pleasure
What we're giving them
Instructions
Rules
Constraints
Condescension
We're offering – a bottle of small
parcel, of hand-managed,
historically practiced, rigorously
controlled, expensively distributed,
and non-adapted, unfamiliar, plot-ofland-labeled beverage of unknown
quality
And we're telling them they have to
learn about it to enjoy it
7 février 2014
Contexte de la présentation : convention, cours, réunion
9

10. In summary, we've been messing up
Europe has been going the wrong way
for decades
Great European wines are still great
 They attract attention, but don't sell
themselves
Europe can't hold onto the glory days
of the 60s and 70s
 eg. Fr: 10% VDQPS in 60s v ~70% of
wine is AOC today (ONIVINS 2007)
What worked then doesn't work now
Need a better balance between quality
tiers and demand
7 février 2014
Contexte de la présentation : convention, cours, réunion
10

11. And China knows it
So has carefully planned an
entry to the wine sector
Which is easier with
leadership that isn't
affected by distractions
They're managing growth
 Production
 Quality/Price tiers
 Perceptions
With selective adaptation in
their own industry
7 février 2014
In the same period as
the previous slide
The wine market in
China has gone from
 69 to 255 billion
2012RMB
 1,2 to 4,3 billion
Litres
From 57,5 to 59,3
2012RMB/Litre
They're going up…
Contexte de la présentation : convention, cours, réunion
11

12. Europe is heavily leveraged in wine China
A bulk of wine import
volume comes from
Europe
 France has 47,8% of
wine imports by
volume
 Spain and Italy
making up most of
the remaining
European
And the forecasts are
for continued growth
7 février 2014
But with China now
the world's fifth
largest wine
producer (and
growing)…
What's going to
happen to Western
Europe's golden
wine market?
Is this a major cause
for concern?
Contexte de la présentation : convention, cours, réunion
12

13. Actually, no.
In fact, Europe is in pole
position here
Market dominance
means
 Market advantages
 Influence
perceptions
 Customers for life
It's all about how this
situation is managed
7 février 2014
Contexte de la présentation : convention, cours, réunion
13

14. The wine sector needs to learn from
its mistakes
And work with China
Tastes are different
Packaging is different
The consumption
occasion is different
Motivation to drink wine
is different
Business relationships
are different
7 février 2014
Contexte de la présentation : convention, cours, réunion
14

15. Try adapting to the needs of wine China
Packaging is different
Consumption around
meals is ill-suited
Motivation is often to
respect the guest's
value, or celebrate an
event for all
Business relationships
are about slowly
building up trust…
7 février 2014
Contexte de la présentation : convention, cours, réunion
15

16. And then …
The Chinese market will
be a source of pride
instead of fear
Compare what China is
doing to adapt
 Your offer
 Communications
 Wine tourism
 Planned production
And look to those making
it work there…
7 février 2014
Contexte de la présentation : convention, cours, réunion
16

17. For your enjoyment…
So let's move onto a great
case of wine success in
China…
7 février 2014
Contexte de la présentation : convention, cours, réunion
17