Last week I attended an interesting wine tasting in Beijing with 18 Chinese Millennials between the ages of 21 and 34. It was a tasting of the top 20 wines in the Beijing market priced between 200 – 350 RMB ($30 – 55 US).
My friend Qin, a wine professor at the Chinese Agriculture University, organized the tasting as part of a research project. The Chinese Millennials were wine buyers, sommeliers, and wine educators working in Beijing. She is also planning on conducting a similar tasting with a group of consumers and comparing the results in order to understand why certain brands are so successful in the market.
The wines were all red, as the Chinese drink 90% red wines, and we tasted them blind providing a score for each wine. Next we tasted and scored the wines again, but this time with knowledge of the brand and grape varietal. Qin plans to compare how the scores differed when tasted blind compared to when the Chinese know the brand.
The Wines Revealed
It was fascinating to see the brands when revealed. They included 4 wines each from France, Australia, and Chile, 3 from China, and 1 from Spain. There were no wines from California, Argentina, or Italy. I was dismayed to discover that I had scored 2 of the 3 Chinese wines very low, finding one extremely thin and green, and the other oxidized. The third was enjoyable with simple, red berry fruit and reminded me of Beaujolais. I was surprised to find it was a Great Wall Cabernet Sauvignon. My favorite wine of the tasting was the one from Spain, which was the Torres Gran Sangre de Torres.
Reasons Wine Buyers Select Wine in China
Next was a facilitated discussion regarding reasons the wine buyers select these wines for their shops and restaurants. A primary reason was distribution – that it was available from their distributor who recommended it. Other reasons included brand image and the name of the wine – especially if it included the term “Chateau.” Promotions, or discounts, were perceived positively as long as the brand was known. They said they were suspicious of discounts on unknown brands, because it was assumed the wine was poor quality. A small distributor from Spain confirmed this the next day when she told me her wines were not well received when she first entered the Beijing market because they were priced too low.
Wine Mark-ups in Beijing
In terms of pricing, I knew the mark-up was high, but was surprised at how high. Wines that sell in the US market for $12 to $15 are double or triple in Beijing. I was informed that the tax on wine is 48%. Then the distributor will multiple that by 1.5 and the restaurant by another 1.5. Wine shops mark-up are less. The example I was given was if the wine costs 100 RMB ($15US), the tax will make it 148 RMB, then the distributor will take it to 222 RMB, and the restaurant will price it at 333 RMB or higher. In general, restaurant mark-ups are 300% and wine shops 200%.
Interestingly two shop owners told me they sell most of their wine to private clients or through their wine clubs. They said there is very little drop in traffic in most Beijing wine shops. One owner also mentioned that Chinese customers always ask for a discount. She said this is common with wine sales, and therefore it forces her to increase her mark-up.