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Wineries selling wines to China might have a problem: Chinese consumers are not drinking enough imported wines, and more often than not, they are reaching for a bottle of domestically produced Chinese wine.

Wineries selling wines to China might have a problem: Chinese consumers are not drinking enough imported wines, and more often than not, they are reaching for a bottle of domestically produced Chinese wine.

Unlike the past where the wine market is dominated by imported wines, the recent Chinese New Year shopping season shows China’s domestic wines are taking over with a rapid growth at the end of 2021 under the influence of “Guochao”, a consumer favoritism towards domestic designs, brands and culture.

Legacy Peak, a family-owned winery in China’s premier wine region Ningxia, reported brisk sales leading up to Chinese New Year on February 1. Speaking to Vino Joy News, the winery says its wine sales from last December to this January grew by 118% compared with the same period last year. E-commerce sales performance was particularly encouraging, soaring 838%.

Similarly, Kanaan Winery, a leading winery in Ningxia, also recorded strong sales during the period. Winery founder Wang Fang revealed to Vino Joy News that Kanaan sold roughly 20,000 bottles of wines leading up to Chinese New Year, which is a 40% increase over last CNY.

Encouragingly, she notes growths in e-commerce and private clients as well as in export markets.

According to Chinese media reports, Xige Estate, the largest winery in Ningxia, reportedly achieved RMB 200 million (US$32 million) in wine sales in 2021, doubling its sales revenue compared to the previous year. The winery has successfully sold out all 1.2 million bottles of its inaugural 2017 vintage last year.

Unlike the past where consumers turned into imported fine wines for giftings or enjoyment, a compilation of different factors have gradually shifted consumers’ preferences when picking wines.

Apart from tightening import regulations and harsh tariffs on certain countries of origin, consumers’ changing incentives to favour quality domestic produce and Chinese wine’s international renown are fueling the growth.

“Guochao” boosting domestic wine market

Millennials in China who grew up witnessing China's growth and wealth are more proud and confident in homegrown products. (pic: iStock)

Millennials in China who grew up witnessing China’s growth and wealth are more proud and confident in homegrown products. (pic: iStock)

Young consumers’ preference towards moderate drinking and the uprising “she economy” in China are driving the growth of no- and low-alcohol, as well as high quality domestic wine, as a replacement for other strong traditional drinks like baijiu or huangjiu.

But another conspicuous trend contributing to domestic wine growth is “Guochao” or “national tide”, a term that can be roughly translated as “China chic” where younger generations of consumers are opting for domestic products that incorporate Chinese traditions and culture.

According to an investment strategy report published by Guolian Securities, China’s economic growth has greatly fostered the development of the nation’s consumer industry and “cultural self-confidence”. Domestic products are gaining more appreciation and recognition from Chinese consumers, causing the rapid growth of domestic brands.

The main followers of domestic brands are millennials born between 1980 and 1995 and the younger Gen-Z born during between 1995-2010, according to a report jointly released by Baidu and the Research Institute of People.cn last year.

Different from the older generation who are more attached to western brands, these youngsters grew up witnessing China’s economic growth and wealth, thus having stronger confidence in their national identity and traditional culture. In order to appeal to the young consumer groups, domestic brands are upgrading their research, product quality and marketing strategies.

One of the most iconic examples would be China’s homegrown sportswear brand Li-Ning, which was founded in 1989. Since 2011, the brand has suffered three consecutive unprofitable years, but it was revived with 20% revenue growth in 2018 after embedding traditional Chinese culture elements and trendy designs on its products in the 2018 New York Fashion Week.

McKinsey & Company’s report pointed out that “Guochao” is emerging in various sectors other than fashion, such as in beauty and automotive, and this is one of the trends shaping the next decade of growth in China.

Wine is no exception, and Chinese wineries that are more savvy in incorporating Chinese cultural elements and philosophy into packaging, design and winemaking usually enjoy better reception among consumers.