DFJ Vinhos: Wines in China, A promising but difficult market

Hence, besides being a new big trend considering the growth of the middle class and a new
consumption mentality, imported wine has many substitutes in China and the Chinese
producers are becoming stronger every year.
Bargaining power of suppliers Low
For DFJ Vinhos it is easy to have power over its suppliers. Many wine producers would rather
have its production sells guaranteed than to lose their money without selling anything. Thus,
many times small producers end up selling their entire production for a low price. To avoid
these situations producers make partnerships with companies like DFJ Vinhos. José Neiva
Correia is a consultant for many vineyards that supply him.
Competitive rivalry within the industry: Medium
It is a highly competitive market in every way, from high end wines to low end. However, few
producers can reach the high-end band. Moreover, only 25% [exhibit 9] of the Chinese wine
consumers focus on the price when considering imported wines, giving some flexibility to wine
companies to set their rates. Imported wine means status and sophistication in China, being
mainly consumed in social and formal occasions [exhibit 8], which makes it a distinct product.
Concluding, although there are many players in the Chinese market, the wine is still a distinct
product for the Chinese consumer and the price has little weight. Thus, competitive rivalry
within the industry is medium. The price weight also varies with company´s positioning and so
does the competitive rivalry.
Chinese wine market Trends:
• China:
i. GDP grew 7,8% in 2012 and is expected to grow at a reasonable rate in the next
few years [exhibit 3].
ii. Population has been growing at a slow rate of 0,47%, due to the one-child policy –
Ageing trend;
iii.
iv.
Middle class is expected to triple in the next 15 years – In addition the government
will raise the minimum wage by 13% in 2015;
New consumption mentality in what regards imported products – Young
Generation of consumers: “By 2025 urban households in China will make up one of
the largest consumer markets in the world, spending about 20 trillion RMB
44