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China’s Fruit Wine Market

According to ECdataway, in 2018, the sales value of pre-mixed wine/fruit wine on Tmall and Taobao platforms increased by 154% compared with 2017. The products currently circulating in China’s fruit wine market lack differentiation. It is estimated that more than 90% of domestic fruit wine is produced by OEM. Due to a lack of brand recognition of domestic fruit wine, imported fruit wine is the first choice for Chinese consumers. Although the primary consumers of alcohol are still those born in the 60s and 70s, Gen Z consumers are the fastest-growing consumer group.

Fundamental Problem in China's Fruit Wine Market: No Well-known Brands

In 2016, there was a question on Zhihu*: Why is there no market leader in China's fruit wine sector? [1] Although it has been four years, the problem still haunts China's fruit wine industry. Consumers may immediately think of Maotai (茅台) and Wuliangye (五粮液) when talking about liquor and mention Qingdao (青岛) and Xuehua (雪花) when discussing beer. However, when it comes to fruit wine, it seems hard to think of a representative brand.

*Zhihu: a knowledge share and discussion platform in China.

Current Market Situation in China

According to ECdataway [2], in 2018, the sales value of pre-mixed wine/fruit wine on Tmall and Taobao platforms increased by 154% compared with 2017 figures. Despite the growth rate slowing in 2019, it still maintained 45% YOY. The fruit wine market is undergoing a period of rapid growth, but it is still facing numerous issues.

  • Domestic Issues

  1. Quality

    Compared to its global competitors, China's domestic enterprises lack key technical capacities. In China, there is a lack of a mature system for the cultivation and brewing of raw materials, which leads to the uneven quality of fruit wine. In recent years, some head players from the grape wine sector have entered the fruit wine market, but these companies have not invested heavily in the sector and their entry into the market has failed to translate to an increase in the number of high quality or innovative products. For example, in 2015, Maotai launched blueberry wine. The sales value reached 240 million RMB ($36million) in the first year, but sales declined in the second year due to consumers not liking the taste [3]

    fruit-wine-1.jpg

  2. Homogenization

    Although e-commerce platforms have witnessed the emergence of many domestic fruit wine brands, lack of product differentiation is a major issue. It is estimated that more than 90% of local fruit wine is produced by OEM[2]. Most products are not innovative, and fail to gain any major traction amongst consumers.

  3. Positioning

    Some brands target niche markets, specifically targeting females or advertising the health benefits of their products.

  • Dominant Overseas Brands

The the foreign fruit wine industry developed earlier and has formed a lot of representative categories, including cider from France, plum from Japan, and Germany (Berentzen), kirsch from Kirschlikor, the green mist from the US, and so on. There have been numerous new entrants into China na of fruit wine products from Japan, South Korea, Europe, and American. For Chinese consumers, imported fruit wine is the first choice.

Target Consumers

  • Gen Z has great potential

According to the Tmall report in 2018[2], the main consumers of alcohol were still those born in the 60s and 70s, but the sales value attributable to Gen Z consumers grew the fastest. Young people preferred imported fruit wine, pushing the sales value up by 50%.

  • Female consumers are a key target.

China's female consumer market will reach $4.5 trillion in 2019[2]. Among them, the proportion of female alcohol consumption increased, and the growth rate was much higher than that of males [2].

Product Positioning

  1. Low alcohol

    According to data [2], alcohol consumption among young people is focused on low-alcohol products. It is mainly because young people today find it challenging to adapt to higher alcohol content products.

  2. Multiple taste options

    Fruity beer and fruity liquor have emerged in the market to meet the diversified taste demands of consumers.

  3. Emotional appeal

    Young consumers crave products that appeal to them and are engaging. Wine consumption scenarios have also changed in China, with individuals drinking alone becoming increasingly popular.

Market Trends

  • KOL

    With the development of live-streaming e-commerce, the importance of online influencers/KOL's is rising. These people are close to consumers and can promote consumption. According to McKinsey, KOLs generate nearly twice as many sales as traditional paid advertising and has 35% more customer retention [2].

  • To a large extent, the revival of Chinese fruit wine has benefited from the promotion of KOLs. For example, Li Ziqi always makes fruit wine in her videos (as shown below), in which she uses raspberry, strawberry, yellow peach, and other fruits. Another KOL, Austin Li, once cooperated with a Chinese brand and sold 200k bottles of green plum wine during a live streaming session [4]

fruit-wine-2.jpg

  • Channels

    The products available on traditional offline sales channels lack differentiation, and there is a high degree of concentration. In contrast, online channels are more open, leaving ample development space for emerging brands. In the Tmall 55 promotion campaign [2], the sales of fruit wine increased by more than 400%, among which plum wine sales increased by more than 1000%. During this activity, some new brands such as Meijian (梅见) and Miss Berry performed extremely well using their digital-first strategy [4].

Effective Market Strategies

  • Brand Recognition

Unique product features help consumers remember a brand. For example, Strongbow, a British cider brand that makes 80% of Britain's Cider [2], has expanded its product portfolio to include several berries and other fruit-flavored ciders. 

fruit-wine-3.jpg

  • Brand Image

Some new fruit wine brands, such as Miss Berry, Zhixun (知醺, shown below), etc., appeal to modern aesthetics by using fresh packaging and appealing graphic design. At the same time, they also carry out publicity through live-streaming, KOL recommendation, etc. Once during Austin Li’s live streaming show, Miss Berry's sales volume reached more than 50k bottles [4]. Some other emerging brands launched new co-branded products to quickly establish brand recognition. 

fruit-wine-4.jpg

  • Branding advice

  1. Many fruit wines brands underline that the product is designed for females. This may restrict long-term development.

  2. Create appropriate consumption scenarios. For instance, Bingqingqing Plum Wine (冰青青梅酒, shown below), has designed different products for different consumption scenarios, such as for dating and weddings.

fruit-wine-5.jpg

Regulatory Compliance

According to the No. 15 Notification issued by the Ministry of Industry and Information Technology (MIIT) on 24 Apr [5], General Technical Requirements for Fruit Wines will be implemented on 1 Oct. 2020.

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