Eve posted posted about China and the growth of the luxury market, including wine about two years ago. According to the luxury lifestyle blog Luxuo, “China is expected to be the world’s seventh largest wine consumer by 2013 as the nation’s thirst for vintages continues to grow amid an economic boom.”

A new challenge has presented itself in the past few months. After over 15 years experience on the web, I though I’d solved a lot of problems, but we have never had a reason to attempt to serve content into China until recently. After a Chinese-language site opened, we were getting reports of loading times so slow the sites were completely unusable. We visited Shanghai in May 2010, and it’s true that almost everything you look at it is abysmally slow from the average DSL connection. A site that uses Flash and video is not likely to load enough to be seen.

Recently, I did some tests in this area and found more complexity than I expected. The Internet in China, I’m told by one Chinese company, is not interconnected in the same way (peering) that most other countries employ. This means that even if you have hosting in Hong Kong (which you know is considered to be outside the mainland Internet) or in a single city like Shanghai, it still does not ensure decent delivery into other Chinese provinces.

Content Delivery Networks (CDN) exist for this reason, so we did more tests with 4 different CDN and found they all worked very well indeed – except in China! We tested Amazon Cloudfront CDN in Singapore and found it was no better than their US-based servers in delivery to China. There are specialized CDN for Mainland China (Akamai, ChinaCache, but these can be very costly. Most of our smaller producers whose wines are distributed in China will not be able to afford a five-digit monthly invoice to be present there. Even the less modest ones gasp when apprised of the costs involved.

We’re currently working on assembling specialized resources as a solution to this very real problem: Getting a wine web site to be not only visible, but usable. Even non-Flash, non-video heavy sites have a serious speed problem in Shanghai and other provinces, even if they show decent performance in, say, Hong Kong. Other complexities include licensing from the Chinese government, Chinese domain names (.cn,.com.cn), Chinese DNS and a presence of some kind at an address in China. We expect prices to drop significantly in the next two years, but until then, getting your web content into China will be tough going.

French wines are still the benchmark for China: they’re the best. Unfortunately, they’re very expensive: the high taxes are an important part of the outrageous prices.

Fortunately, some restaurants are ready to give their customers the opportunity to taste our greatest wines by the glass. And when I say the greatest, I’m not exaggerating: Château Palmer, Château Haut-Brion, Château d’Yquem, Clarendelle and many others are on the wine list.

The restaurant is M. and Mrs. Bund, owned by the French Paul Pairet. In the middle of the dining room, several Enomatic wine dispensers attract the attention.

Enomatic systems dispense wine directly from the bottle using  inert gas preservation. The flavors and characteristics of the wine remain intact for more than three weeks, as if the bottle had just been opened. This technology allows M. and Mrs. Bund restaurant to offer the  wines at a very decent price. The consumer can enjoy a glass of a wine he can’t really afford by the bottle.

M. and Ms. Bund Restaurant made its reputation thanks to this “wine by the glass” strategy. Of course, the food is deliciously French and the customers mostly Westerners, but it is a very original feature that is appreciated by many people. In this city where everything goes fast, evolves rapidly and everybody is improving skills and competences, a creative strategy based on a technical innovation is the best way to attract new consumers. In fact, most people in the restaurant were young business people, not afraid of a rather high price tag for a meal and nice wines. Shanghaï and its inhabitants are on the way up to success and a nice lifestyle – in contrast.

In 1999, the Web was still considered an innovation in Europe. In France, 11,6% were connected; 100,000 adventurous people are managing their bank accounts on line; e-commerce brings 200,000 euros! It was also the time of the Internet boom: start-ups are getting millions from angels and investors. After two years of euphoria and craziness, it is the krach. But, in spite of that, one third of the French population was connected – mostly by cable. Amazon.com and ebay.com opened their French site. A healthy sign of confidence in the new economy! In 2004, 12 million French were on line, more than 50% connected by cable or high-speed. Apple launched its iTunes platform in France. In 2005, two years after the US, French people became addicted to blogs. 2 million French bloggers appeared almost over night! In 2006, advertising on line brought several million euros. In 2007, the iPhone became available in France. In 2009, over 32 million French people were connected; they were aware of Facebook and discovering Twitter.

Of course, France is not the most Internet friendly country. Regulation is the keyword for the French administration on connectivity, privacy, wine, advertising, e-commerce. In spite of all the restrictions, France is opening up to the 21st century. To look at the future, one has to look at the US. In the last ten years, I saw tremendous innovations coming from the US in the wine industry: services for wineries such as VinoVisit.com, search engine specifically tailored to wine like ablegrape.com, think tanks like VinTank.com, on line wineries such as Crushpad, new packaging. I also saw some innovations coming from Europe, like the unique code designed by adegga.com in Portugal.

New consumers generated new marketing strategies and new trends: women and Millennials, emerging countries. China and India became the new powers – first by the exponential number of wine consumers but mainly by their potential production.

Let’s not forget the incredible wine communities spread all over the Internet in already existing communities: wine groups in LinkedIn.com, pages or groups on Facebook, networks on Twitter now helped by the search. Individuals became leaders and carry the new trends to new countries and new consumers. It would be incredibly long and difficult to mention all the innovations but i’m really amazed by what happened on the Net in ten years.

I look forward to witnessing and being a modest part of the formidable innovations that will take place in the next ten years. Welcome to 2010!

Are you located in a country where wine is considered a danger to your health, banned from everyday life and highly taxed? Consider moving to Hong Kong where wine is promoted as being good for your well-being and heart!

Imported wines are a huge success in Hong Kong, especially since the removal of the duty band. because of it, Hong Kong is becoming the getaway to the other Asian markets (mainland China, South Korea and Taiwan) and the fine wine trading hub of this part of the world. Wine imports rose 88% in 2008 while wine consumption is on the rise. According to Wendy Cheung, Assistant Secretary for Commerce and Economic Development, wine sales should double in Asia by 2012 due to the economic growth of mainland China.

Who is buying wine in China? Ten years ago, consumers were mostly expatriates. Now they are Chinese buying for pleasure but also for investment. Wine is also status related: it is chic and fashionable. Wine clubs and tastings are on the rise.

Convinced? Ready to move?

Continental China is the Eldorado for the Western wine industry. At least, that’s what you would think when reading various studies and articles recently published. The main reason of this renewed or continued interest is the switch of the Chinese consumer from hard drinks to wine.

The French Castel Group is one of the leading wine companies, being the owner of the Nicolas chain of wine stores and until recently, of Oddbins as well as the new owner of the Bordeaux negociant Oenoalliance. In France, their brands, Baron de Lestac (Bordeaux) and Roche Mazet (Languedoc) have a lot of success and sell very well in supermarkets for under 5 euros.

Established in China since 1998, Castel owns a wine estate called Chateau Changyu Castel, and a bottling center in partnership with Changyu, the country’s biggest wine company in the country. “Castel saw its sales volume reach 5.5m bottles in 2008, double that of 2007. The company expects a further rise of 18%, or 6.5m bottles, in 2009″, wrote Jane Anson in Decanter.

The French are not the only one looking at the growing consumption of wine in China. The makers of high-end Italian wines from Tuscany are now turning their eyes towards continental China. Enoteca Italiana, makers of famous Tuscan red Chianti, its upmarket cousins Nobile di Montepulciano and Brunello di Montalcino opened The House of Tuscan Wine in Shanghai in July to promote their wines. At first, they were targeting the 40 to 60 year-old consumers as having the best disposable income. “Our new target is in a range of 20-35 years old: graduates with stable jobs, well-paid and with a Western model of lifestyle and food habits,” said Alessandro Mugnaioli, head of foreign relations at Italy’s wine promotion body Enoteca Italiana, to Reuters correspondent Svetlana Kovalyova.

Italian wine exports to China remain tiny at about $20 million in 2007 compared but they jumped 64 percent last year, making Italy the fourth-biggest wine exporter there after France, Chile and Australia.

The bet of most Western winemakers is that, even if the financial crisis affects China in 2009, the wine consumption will keep increasing and open new doors to receding traditional markets, such as the US or Japan.

China – like India – is most likely to be see as a huge potential consumers’ market. But it is also becoming a main producer. Dynasty, Changyu and Great Wall, the three major wine companies, control about half of China’s market for grape-based wines. Grape wines are still a minority on the Chinese market when rice wine and yellow still account for almost two-thirds of the consumption.

The increase of international corporations’ take in Chinese wineries might change the game: the French wine and spirits company Rémy Cointreau owns a 27 percent stake of Dynasty. An other factor is the rising quality of the Chinese wine production and their very competitive prices – around $3 for a bottle.

I would be very curious to taste some Chinese wines. I’m sure they must be as interesting as the Thai wines I tasted a few weeks ago.

Tomorrow we’ll talk on emerging markets for the wine industry. I happen to find a rather interesting article by one of my colleagues, Uché Okwonko, author of Luxury Fashion Branding on luxury and emerging markets.

On her website, Uché created an online magazine on luxury. Her latest article, “Separating the Facts from the Fiction of the Emerging Luxury Markets”, is related to emerging markets and I do think that a lot of her ideas are quite pertinent for the wine market:

“Before looking at the main features of each of the emerging markets, it is important to note that the emerging markets have unique characteristics that make it unrealistic for them to act as benchmarks for one another. For example, the socio-cultural attributes of China and Russia are so starkly different that it would be impossible to use the same parameters in their measurement. One thing the emerging markets have in common however is their current robust economies and the future promises this holds for luxury companies.”

After she presented the main differences between the four emerging markets (Brazil, Russia, India and China), she concludes:

“The emerging luxury markets collectively hold promising futures for the luxury business but entry and successful business in each of these markets remains challenging as it ought to be approached through a sound set of strategies developed following an evaluation of the market’s specificities.”

It seems to be my “brand” week. I read carefully the thread started by Hoke Harden on Open Wine Consortium on the subject and all the comments he inspired. Too many brands? Of course, in the US only, there are over 7,000 wine brands on the market. Overwhelmed? Of course, I’m overwhelmed: I usually buy my wine after consulting my friends or my wine retailers. I never buy wine in a supermarket because I can’t get any advice. Need to educate the consumer? Of course, but it’s an impossible task. The debate is still open and I’ll add to the confusion with a little post on one of my favorite brands, Clarendelle.

Clarendelle is the brand created by Robert of Luxembourg, the VP of Château Haut-Brion in Bordeaux and one of the owners. Clarendelle wants to be the answer of the Old World to the New World wines. A good thread for the group on the European Community in Open Wine Consortium! What does it mean? Haut-Brion is one of the oldest wine estate in Bordeaux, the smallest and the oldest of the First Classified Growths (along with Margaux, Laffite, Latour and Mouton). It has a tradition of excellence. Robert launched Clarendelle as an expression of the best of Bordeaux but easily drinkable and at a very fair price. The wine is available in red, white and pink and tastes wonderful.

Classical but contemporary, Clarendelle is considered a super premium wine. As such it is very much in demand in China where the tastes are evolving. As Cynthia Sin-Yi Cheng stated in her CondeNastPortfolio.com article, “Shanghai is leading Chinese tastes in wine”:

“The wine scene here is abuzz with excitement and possibility. The number of premium-wine importers has jumped from three in 1999 to more than a hundred today. Two years ago, there was nary a shop offering tastings; now a dozen retailers hold such events. New wine bars abound. As of 2006, there was a Shanghai chapter of the highbrow Commanderie de Bordeaux, and the mostly trade-and-expat Shanghai Wine Society was founded in 2005.”

Because of this continued interest in wine among the most fortunate Shanghai inhabitants and expatriates, new comers on the professional wine scene invent new events, new venues and create new excitement. The former chief sommelier of Jean Georges Shanghai, Yvonne Chiong, is working on a wine-buying program for Wang Hui Ming, a restaurant group with more than 20 establishments in Shanghai. Chiong is now pairing local cuisine with premium, imported wines—roasted pigeon, say, with a 2003 Clarendelle! Q.E.D.!

News from various sources confirms the rise of consumption and production of wine in China. I wrote several pages on the new Chinese consumer in Wine Brands but the phenomenon seems to be increasing. Here is the update on the subject, from the newsletter of Meininger’s Wine Business International:

“Chinese wine consumption is predicted to increase by 70% by 2011, with China being the eighth biggest consumer of wine in the world by 2012, surpassing Russia. According to the China Wines Information Site, the Chinese wine industry developed at a rapid clip through 2006, with production up 14.1% to 495.1 thousand kilolitres in volume over the previous year. Sales were also up by slightly more than 25%, to total 12.952b yuan ($1.8b/€1.18b). In the first three months of 2007, profits were up 33% over the same period the year before, with the China Wines Information Site (wines-info.com) predicting that output and consumption of Chinese wine will remain high.”

Also called “Millennials” or “Generation Why”, this group is widely represented in a lot of countries and constitutes a major target for local and global brands. In the US, there are 70 million people under 30; in Vietnam, they represent 50% of the 90 million people; in China, they are 200 million strong and there are 367 million people under the age of 18, a huge potential market for this growing economy. In South Africa, they account for 35% of the population.

In countries where their number is not as significant, they are different from the Baby Boomers: in East European countries, the Millennials are the first post-communist generation and in Southern Europe, the first post-dictatorship generation. In emerging countries (South Korea, Russia), they are the first generation growing in a stabilized social environment.

The generation Y was born with Internet and finds it easy to interact with each other and then with the world. Forums, blogs, Facebook, iTunes and many other community sites are their favorite places to express themselves, share their ideas, tastes and distastes. Those young people think they can make life fit their specific needs and wants. Brands have to get used to engage in a two-way conversation with those potential consumers. Their favorite US brands, Trader Joe’s, Ben and Jerry’s and Whole Foods (to take into account only the brands connected to the wine and food business) communicate to their customers in a very personal and socially aware style. It’s not so much what they communicate that how they do: Millennials like style, a real voice, and a bit of attitude. They love to blend personal and professional life: their workplace, the marketplace and the lifestyle have to stay connected in a meaningful way.

What does it mean for wine brands? In the US, the percentage of Millennials who consume wine has increased from 10% in 2004 to 17% in 2006. Even more interesting, Millennials and GenXers are more inclined to drink wine than beer.

How did they become interested in wine? For some of them, their parents drank wine and they grew up with wine on the table. “My parents are both big into wine”, said 22-year-old Jennifer Hammons to journalist Deborah Pankey, Daily Herald Food Editor on November 30, 2005. ”At first I didn’t like it, but then it grew on me.”

There is much the same scenario for young people in France: wine is a food always on the family table. Young children are encouraged to taste a drop of champagne or wine during family gatherings. Later in their teens, they are given a third of a glass of wine or champagne with their meal. Why do they then reject wine to go on to beer, cocktails or liquors? Very often, as sociologist Céline Simonnet-Toussaint explains in her book Le Vin sur le Divan, young people under 25 reject wine because it is the symbol of the family. Young people want to experiment with their freedom, but they come back to wine at around 25, when they get their first job, their first “real” apartment and start settling into their new life.

Others discover wine by themselves – during a trip to a wine country, like Napa in the USA, Burgundy in France, Tuscany in Italy, Priorato in Spain or Porto in Portugal. They get interested, go to wine classes or tastings, join a wine club and explore wine stores to get good advice. Mostly, like the women, they listen to their peers, surf the Internet to read about wine and discuss their new passion in forums.

The wine industry is aware of the need of young people for more knowledge. At the same time, this new generation of wine drinkers is very different from preceding generations. It is the “coca cola generation”: they have a much sweeter tooth, they are “zappers”, having known TV and the Internet all their lives, and they are used to getting what they want and paying a high price for it. After all, they pay $3.50 for their daily Starbucks cappuccino and download their songs for $1 or their movies for $5 every day on their iPod or MP3. They know that everything has a price and usually a high price.

Taking these parameters into account, some wine makers considered designing wines specifically targeted at Millennials and GenXers: fun labels, fruity forward wines and a high price. Millennials do not hesitate to pay up to $20 for a bottle of wine! Indeed, they do not yet have any big financial burdens: no children, often a two-income household, no parents to take care of, a good salary and a large disposable income. Unfortunately for the wine industry, they rarely buy the same bottle twice, because there is such a huge choice of brands. They want to be the first to discover a new brand or a new trend, the first to try them and share them with their peers.

Nonetheless, major groups have designed brands for Millennials as they have for women. Constellation designed 3 Blind Moose, Four Emus, Monkey Bay and other “fun” brands. There is no talk of terroir or winemaking on the packaging. The label does not tell a wine story, but a story of having a good time and fun with your friends. Those brands sell well. Gary Glass, former Vice-President of Marketing for Constellation’s Centerra Wine Company, estimates that 3 Blind Moose sold 175,000 cases in 18 months on the market.

At the same time, young people are not as comfortable as their elders when they buy wine. They can be adventurous, but they also seek quality and certainty. Whether they are American, European or Japanese, they will rely on a classic wine from Europe or a well known luxury brand from the New World. Wine is still a little intimidating for Millennials. It is the wine industry’s responsibility to help the young generation to appreciate wine.