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Developing Markets in China: The Case of Wine

China is increasingly developing a middle class looking to act according to its status. The symbols it is looking for include the accoutrements of their position, such as a car and brand goods, but also the appropriate behavior. One case in point for how this plays out in competitive markets in China is wine.

During banquets, predominantly a male affair, beer and clear spirits are still preferred; but wine, especially red wine, is seen as higher-class. Also, health properties of red wine have been widely publicized. Predictions claim that along with economic and income growth, consumption of wine will grow.

As a recent case study concerning the promotion of Chilean wine shows, advertising in China can still have great effect in a market segment. The marketing campaign in question is credited with having elevated Chile from fifth to fourth place among wine exporters to China.

Two opposing trends representative of developing markets in China are at work here:

Potentially less discerning customers who want to show that they have joined the ranks of those drinking wine will simply go for what is available and affordable to them. These are predominantly the domestically-produced wines of Changyu, Dynasty and Great Wall, which are sold through both on-trade and off-trade channels (e.g., restaurants and supermarkets, respectively). Currently, these three companies together hold a 50% market share and gain two-thirds of the Chinese wine industry’s profit. All three are working to improve their products’ quality and (international) brand standing.

Imported wines, like so many foreign brand goods, still exert an aura of quality and may thus be preferred by higher-class customers. However, knowledge of brands and producers is limited (an obstacle the Chilean wine campaign set out to overcome). Thus, purchasing decisions are based either on common knowledge (e.g. associating France with wine), or simply by looking at the price tag (with higher prices an indication of quality, and “giving more face”).

These newly affluent consumers in the middle class form part of a group (together with many of the young generation) that relies heavily on the Web 2.0 (social networking) for entertainment and for gathering and sharing information about products. Thus, the marketing campaign (developed by Ogilvy China) used online videos, a “digital wine book” and blogging to educate potential consumers about the quality of Chilean wine in a way that was fun and engaging, ensuring word would be spread. An effective approach to advertising in China, indeed.

Thus, it is not only important for companies wanting to partner with Chinese businesses and developing markets in China that they have an online presence in Chinese (as formerly pointed out), but also instrumental for companies in China to develop their brand in ways that speak to the modern Chinese consumer eager to experiment and share experiences with new products.

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