Marketing International China Wine

II) Market targeted: China

A) Analysis of the Chinese market (Social / economical / cultural / political)

- Economical environment

All the westerns are impressed by the figures of China. It is a country which counts more than 1300 million of people. It has a great global growth ( 7.2 % in 2009) (1). The total of the importations is superior to $1.13 trillion f.o.b. (2008) and it increases by more than 30% by year («Main import partners Japan 13.3%, EU 11.7%, South Korea 10.9%, Taiwan 9.1%, US 7.2%»).

Nevertheless, the GDP is decreasing compare to 2007 and 2008 (it was about 10%). The worldwide crisis with the financial crisis has slow down the growth and the development of the Chinese economy. We can also add that the inflation rate is increasing since 2006 (2008, +4,8%; 2009, +5,90%). The average of incomes decreases since the beginning of the year to reach 430 dollars by month. The population below the poverty line is about 10% (2004). The main wealth is situated in the big cities (more developed than the rural areas).(2)

- Political and legislation environment

The current regime is communist with a government run by Hu Jintao. It is one political movement (communist) which has a specific view (influenced by the Confucianism) about the world (more pragmatic than before but still different compare to the capitalist countries). They were really closed to the world until 1990 but since the end of the twenty century, China opened its country to the foreign companies but it is still a particular place where you have to take in count and be aware of a lot of elements.

The communism is still the main ideology but today, the government tries to make a mix between the two ideas in order to follow the world evolution in term of development. The regime is still a dictatorship without freedom of speech (e.g : Chinese Google) and the government is present in all the processes of the economy (and above all for the foreign companies). There is an important corruption in the administration at all the levels. A high level of knowledge and local contacts is required for entering in this market. (5)

- Social and cultural environment

China is an Empire which has more than five thousand years of history and culture. The Confucianism is a key for understanding this country.

"To Confucius, a person becomes noble not by birth but by developing the five virtues of humanity or benevolence (ren), righteousness (yi), proper conduct (li), wisdom (zhi), and trustworthiness (xin). The most important Confucian virtue is filial piety (xiao), the respect and obedience of children toward their parents ---- for when all relationships between family members are in order, then society will also be orderly" (reflected on their purchasing behaviors). (3)

The society is strictly organized and the population needs to think about group and not individual. This characteristic is changing and Chinese people begin to be more capitalist and materialist.

China is unequally developed according to the areas. The wealth and the level of incomes changed between the regions. There are three main categories:

1) The ones who live in the rural area - they are peasants and live with their own cultivation - there is actually a huge crisis and a starvation (the rural population depends only on the cultivation and the harvest.

2) Since about 10 years, we notice a move of this first category for the cities - they are the new urbanized - they are not rich and try to find jobs in the plant (mainly production and basic tasks because for the main ones, they don't have a high level of education)

3) The last one is the most urbanized - they live in cities such as Shanghai, Guangzhou, etc... - they are mainly executives in Chinese or foreign companies - they are influenced by the way of occidental living - they have a higher level of incomes (like their social status) - they spent a lot of money in products (e.g : consumers of luxury brands), they are more educated and informed than the average population.

B) Analysis of the wines of the Chinese market

1) Overview

The world consumption of wine is increasing but not enough to absorb the world production. We can explain that by the arrival of new competitors which increase the size of their vineyards (for instance, China which developed its vineyard surface and raise above the United States one).

China became the place where you should be invest when you are in a wine business. With its 1,3 billion of potential consumers, it's the future market for all the companies. The wine doesn't be exempt of this new trend. 9% growth each year for China wine consumption. If you look closely the world figures, you could see only 1% growth.

The part of importation of French food products is about 2.5% each year and the Chinese expenditures concerning the French food products are increasing to 9% by year (since 2004). The market segments which are the most successful are the already cooked courses ("cassolette"), frozen food, cereal and bakery / pastry products.

France is number one in term of wine importation (that represents 29% in 2005) with a growth of 9% by year. With the membership of China to the OMC, the customs concerning the foreign wine has been decreased (more favorable for the exchange) and you can work with foreign importers (before you had to pass by the government). The main places which sell wine are the restaurants, the hotels, the supermarkets and the specialized shops.

In the last few years, the business was paralyzed by the political story of the Olympic flame but I think it would be not a long term crisis. Today, the market of wine in China is increasing (...). We can add also that the Chinese Government did a big plan of communication about the benefit of the European wines compare to the other alcohols and alcoholic local beverages. The Chinese people suffers of diseases linked to the consumption of local liquors (e.g : the rice wine has a high potency compare to the European wine).

Each year (since 2005), a wine show (Vinexpo Asia-Pacific) is organized at Hong Kong with more than 700 exhibitors (there are already competitors on the market which developed their business).

2) The production of wine in China

China produces several alcoholic beverages such rice wine, beer and also wine. There