When China’s wine market was hit by low consumption and imports during the pandemic in 2021, the country’s biggest winery Changyu had its best year yet by revising its sales strategy and promoting its domestic premium brands.
Founded in 1892, Changyu Pioneer Wine Company is China’s biggest and oldest winery specialises on wine and brandies. Owning more than 100 brands, the Shandong-based company’s market reach spans from high to low-tier consumers across the country. Some of its most famous brands are Changyu AFIP, Changyu Moser XV and Koya Brandy XO.
The moderate growth of the market leader in 2021 was seen as a glimpse of hope when China’s wine market is experiencing a downturn in terms of domestic production and wine imports.
In 2021, China’s wine production fell 9.9% in value to RMB 9.027 billion (US$1.37 billion), according to China Alcoholic Drinks Association. The country’s wine import value also dipped by 8.2% to RMB 9.27 billion (US$1.4 billion).
Despite the headwinds, Changyu recorded a revenue growth of 16.42% to RMB 3.95 billion (US$598 million) in 2021, its latest annual financial report shows.
In particular, it recorded a revenue growth of 16.9% in wine, totalling RMB 2.834 billion (US$429 million), while its revenue in brandy grew 18.09% to RMB 1.036 billion (US$157 million).
The net profit attributed to its shareholders was up by 6.21% to RMB 500 million (US$75.5 million). The amount reached RMB 472 million (US$71.4 million) after deducting non-recurring profits and losses, a 18.76% growth from 2020.
As a result, its market share in the national wine market expanded to 43.8% in 2021, up from 35% in 2019, which further strengthened its leading position in China’s wine industry.
Reform in sales strategy
One of the driving forces behind Changyu’s growth was its direct selling strategy. The historical winery actively leveraged new digital tools such as livestreaming and e-commerce stores to reach its young and tech-savvy consumers directly.
In 2021, Changyu’s revenue from direct sale recorded a notable growth of 53.4% from the previous year, totalling RMB 689 million (US$104 million), according to its financial report.
Changyu also underwent a range of strategic reform which was deemed as “the biggest reform in ten years” among the industry. Previously, it had a long practice of distributing its products through province-level distributors, in which its strategic brands and new products often failed to stand out from the wide range of brands.
To distribute its wine products effectively, the company set up six sales division systems for its four flagship products, imported products and online sales respectively.
With the emergence of new distributing models in China, such as group-buying and cross-industry models, the new divisions can explore the optimal distribution channel in respective of their core brands.
Promotion on domestic brands
Another important force was Changyu’s emphasis on its Chinese identity amid the emerging “Guochao” in China, a phenomenon where youngsters in China opt for domestic products that incorporate Chinese traditions and culture.
According to an investment strategy report published by Guolian Securities, China’s economic growth has fostered the development of the nation’s “cultural self-confidence”, resulting in more appreciation and recognition towards domestic brands in China.
Acknowledging the prevalence of Guochao, Changyu created a new label for its grand vin Chateau Changyu Moser XV called Longyu (龙谕) last year. “Long”(龙) means dragon, which is a symbol of Chinese culture and national spirit. “Yu” (谕) means telling the world, showing Changyu’s dedication in putting high-quality Chinese wine on the world’s map.
In its spring promotional event last year, Changyu introduced wine pairing combinations with down-to-earth Sichuan, Shandong and Huaiyang cuisine to boost its wine sales and promote Chinese wine’s image on the dining table.