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The Chinese wine market: A market segmentation study

Authors:
The Chinese wine market:
a market segmentation study
Hong Bo Liu, Breda McCarthy and Tingzhen Chen
School of Business, James Cook University, Townsville, Australia
Shu Guo
Asia-Australia Business College, Liaoning University, Shenyang, China, and
Xuguang Song
Institute of National Accounts, Beijing Normal University, Beijing, China
Abstract
Purpose – The purpose of this paper is to examine how the Chinese wine market can be meaningfully
segmented and to explore marketing implications for the Australian wine sector.
Design/methodology/approach – The research is descriptive in nature, using an online survey to
collect quantitative data on wine consumer behaviour. A total of 407 responses were obtained.
Data analysis included descriptive analysis (frequency distributions) and cluster analysis.
Findings – The research identifies three clusters of wine consumers: “the extrinsic attribute-seeking
customers”, “the intrinsic attribute-seeking customers” and “the alcohol level attribute-seeking
customers”. These groups of consumers were categorised using a behavioural (benefit) segmentation base.
Research limitations/implications – The use of an internet survey and convenience sample
limits generalisation of the findings. The adoption of a behavioural basis in conducting the
segmentation is a limitation. The use of more complex segmentation bases, such as psychographics,
may yield a richer understanding of the Chinese wine consumer in future studies.
Practical implications – The customer profiles provide Australian wine marketers with an insight
into Chinese wine consumer behaviour. Brand positioning can be improved by ensuring that the brand
emphasises certain product attributes which the segments value when choosing wine.
Originality/value – Little previous research on market segmentation has been conducted in
mainland China. For Australian wine marketers, this study provides a baseline study into market
segmentation and may assist with targeting and brand positioning decisions.
Keywords Market segmentation, Consumer behaviour, Chinese wine market,
Product/brand positioning
Paper type Research paper
1. Introduction
Marketing is designed to facilitate exchange to satisfy human needs and wants and
market segmentation lies at the heart of international marketing. Firms have to
understand the similarities and differences between customers in international
markets in order to meet their needs (Kotabe et al., 2011). The focus of this paper is on
exploring key segments in the Chinese wine market and consequently drawing
conclusions for Australian wine exporters. China is the focus of this paper because:
first, Australia is a major wine exporter to this country; second, China is one of the
fastest growing wine markets in recent years; and third, it has great potential for
continued growth.
The current issue and full text archive of this journal is available at
www.emeraldinsight.com/1355-5855.htm
Received 29 July 2013
Revised 18 December 2013
Accepted 18 January 2014
Asia Pacific Journal of Marketing and
Logistics
Vol. 26 No. 3, 2014
pp. 450-471
rEmerald Group Publishing Limited
1355-5855
DOI 10.1108/APJML-07-2013-0089
This research was supported by a grant from the Faculty of Law, Business and Creative Arts,
James Cook University. Professor Zhou, in the School of Business, James Cook University, is
thanked for his assistance in the development of the questionnaire and for acting as a mentor.
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Australian wine exports to China have grown strongly over recent years, albeit from
a low base. In 2010-2011, Australian wine exports to China were worth $181 million.
Red wine accounts for about 88 per cent of the total value of Australian table wine
exported to China (ABARES, 2012a). Australian wine remains subject to import tariffs
by China but this may change in the future if a Free Trade Agreement is negotiated.
The most significant challenge facing Australia is the fiercely competitive nature of
the imported wine market in China, notably in the high-end, premium segment. Key
competitors are France, the USA, Italy and New Zealand (ABARES, 2012b). As
industry growth is constrained by oversupply and weak prices, the wine industry’s
hopes are tied to rising demand in Asian markets. However, Australia’s reputation for
producing fine wines needs to be improved in emerging markets (IBIS World, 2013).
China is now the third largest red wine consuming nation in the world after France
and Italy (International Wine and Spirit Research, 2013), the eighth largest wine
producer in the world and a major player in international markets (Vinexpo, 2013).
Although per capita wine consumption in China is low, at 1.15 litres per person
a year compared to the world average of 3.47 (Wine Institute, 2011), there is plenty of
room for more growth. Trade reports show that the red wine sector is showing robust
growth in China (IWRS, 2012; Euromonitor International, 2013). The wine market is
said to be growing at an annual rate of 25-30 per cent (China Daily, 2012). In fact, the
Old World/New World dichotomy in wine geography is now flawed; China, along with
other low-cost wine producing countries, is predicted to become a major player in the
global industry (Banks and Overton, 2010). It is predicted that average annual growth
rates will be 13 per cent. The consumption of wine in China is miniscule compared
with the consumption of beer and spirits (mainly baijiu[1]), but there had been a shift
from strong liquor consumption to wine in recent years (Zhou et al., 2011). Grape wine
is expected to replace baijiu among the developing middle class in particular among
younger generations who are influenced by western lifestyles and who are health
conscious ( Jourdan, 2013). The increase in red wine consumption is due to several
factors, such as the rise in per capita income (Pan et al., 2006); the association of red
wine with good health (Pettigrew and Charters, 2010; Rabobank International, 2010);
connotations of status, prestige, cosmopolitanism and affluent western lifestyles
(Chan and He, 2012) and the reduction in tariffs for imported bottled wine (ABARES,
2012a). Most wine is consumed in the east coast of China in large, tier 1 cities (such
Shanghai and Beijing) where the economy is more developed and where there are more
opportunities to taste wine (Yu et al., 2009; CN Wine News, 2009).
As a result of the upsurge in consumer demand, conventional retail outlets such
as supermarkets, including online retailers, have added wines to their portfolio. Wine
conferences, festivals, fairs and wine tasting events are becoming more common.
Consumers are becoming more knowledgeable and a wine culture is emerging (Wine
China, 2012). As the market matures, it becomes increasingly important to gain an
insight into the various segments in the wine market in China. While China is a
promising wine market, it is a country characterised by great diversity in terms of
culture, food and economic development levels (Yu et al., 2009). Although a large
number of studies have been conducted in different countries on consumers and wine,
empirical studies on red wine consumption in China are sparse (Liu and Murphy,
2007; Hu et al., 2008; Jenster and Cheng, 2008; Li et al., 2011; Camillo, 2012).
Consumer decision making is quite complex, with novice and experienced consumers
having different preferences and region of origin interacts with other wine
attributes such as commercial brand, level of price, type of bottler and grape variety
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(Perrouty et al., 2006). Wine exporters cannot assume that Chinese wine buyers are
novice, low-involvement consumers. With the increase in per capita wine consumption
in China, a better understanding of consumer decision making and market
segmentation is required. This will give wine marketers a much better framework
for making product, pricing, distribution and marketing communications decisions.
The objective of this research is to identify key market segments in China, by
identifying the demographic characteristics of the wine buyer in China, the wine
attribute preferences of consumers, sources of information and outlets used in the
decision-making process.
2. Literature review – market segmentation
Market segmentation is defined as the division of the total market into homogenous
segments of consumers with similar needs and wants and the segmentation process
addresses the needs of each subgroup more efficiently (Marshall and Johnston, 2010).
Marketing researchers have long recognised differences between groups of consumers
as opportunities in the market (Raaij and Verhallen, 1994); for instance, a niche market
for organic wine has been exploited by wine marketers in recent times. Although
markets can be segmented in several ways, one way is to segment according to seven
categories, namely, demographic factors (age, income, sex, etc.), socio-economic factors
(social class, stage in family life cycle stage), geographic factors, psychological factors
(personality traits, lifestyle), consumption patterns (heavy, moderate and light users),
perceptual factors (benefit segmentation, perceptual mapping) and brand loyalty
patterns ( Jain et al., 2012). It has been posited that consumer personalities, values and
lifestyles are important indicators of brand association because when consumers
evaluate brand image or make a decision about a product, they also associate the brand
image or the brand personality with their own (Aaker, 1997). According to Kotler
(1988), market segmentation is a three-step, sequential process, entailing market
segmentation, market targeting and positioning. Segmentation is the process of
identifying the potential consumer(s) for a specific product or service, examining the
most effective base(s) to describe consumers and developing the segment description
(Kotler and Keller, 2008; Hooley et al., 2008). This is followed with the targeting step,
which is to evaluate and select the most attractive segment(s) from a list of groups
identified earlier (Hooley et al., 2008). Finally, with a clear target market, positioning
can then take place. Positioning is the “act of designing the company’s offering
and image to occupy a distinctive place in the minds of the target market” (Kotler and
Keller, 2008, p. 308). A successful positioning strategy is achieved by using marketing
mix variables, especially design and marketing communications ( Jain et al., 2012).
Successful positioning means that the target market understands the company’s brand
values and is loyal to the brand (Kotler and Keller, 2008).
The segmentation bases for wine appear to rely on multiple dimensions such as
benefits sought from products, usage occasion, demographics, values and lifestyles
of consumers. According to Bruwer et al. (2002), wine markets have been segmented
using all of the bases identified above. Numerous studies on market segmentation
have been conducted in the western world (McKinna, 1986; Johnson et al., 1991;
Dubow, 1992; Hall and Winchester, 2000; Johnson and Bruwer, 2003; Hall et al., 2004;
Thatch and Olsen, 2004; Geraghty and Torres, 2009; Brunner and Siegrist, 2011;
Fountain and Lamb, 2011). According to Spawton’s (1991) seminal lifestyle study,
the majority of wine buyers are risk sensitive and wine purchasing is governed by
various factors such as need for self-esteem, occasion (i.e. celebratory), situation
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(i.e. complimentary to a meal and to enhance taste) and price. A variety of risk
reduction strategies are used such as relying on brand name, word-of-mouth, retail
assistance, wine education classes and using price as a cue for quality. Spawton (1991)
describes four key segments: the wine connoisseur, the aspirational wine drinker,
the beverage wine drinker and the new wine drinker. Consumers are distinguished by
their degree of knowledge and interest in wine, degree of price sensitivity, attitudes to
branding and where they consume wine. Although the literature on wine market
segmentation is well established, market segmentation studies of the Chinese wine
market are difficult to find in the academic literature. While several western-oriented
studies employ the psychographic segmentation base, it is more abstract and less
concrete than the behavioural base and it is more difficult to measure responses
and their link with behaviour. Employing a behavioural segmentation base has its
benefits as it is not overly difficult, it enables the market to be split into meaningful
and actionable segments (Geraghty and Torres, 2009) and behaviour has been found to
be a viable method for examining a wine market (Thomas and Pickering, 2003). The
following section reviews the literature on demographics and benefit segmentation in
the context of the Chinese wine market.
2.1 Demographic segmentation
The factors influencing wine consumption are complex and culture-bound.
Felzensztein et al. (2004) performed a literature review of early contributions to wine
consumer behaviour. It was found that well educated, high income and geographically
concentrated in urban areas were some of the main characteristics of the heaviest user
of wine. Some studies see wine as a feminine product (Spawton, 1991) but others argue
that wine buying is associated with overtly masculine behaviour and men use wine to
foster business relationships and deliberately display wine knowledge to demonstrate
cultural capital and elitism (Richie, 2007). Age and family life cycle stage is associated
with wine involvement. In a western context, wine involvement is associated with older
consumers and with empty nesters as they have the disposable income and time to go
to life-style-related events such as wine shows and wine clubs (Charters and Pettigrew,
2006; Osadebamwen and Bruwer, 2013).
As the wine market in China grows, some natural questions arise: who is buying
wine? One study of university students found that females were more knowledgeable
about wine and expressed more positive interest in future wine drinking than males
(Li et al., 2011). However, a qualitative study (Liu and Murphy, 2007) found that wine
buying was seen as the man’s role and wine is perceived to be more masculine than
feminine (Bretherton and Carswell, 2001). Chinese wine consumers are usually well
educated and well off. Previous studies on wine consumption report that Chinese wine
consumers are in the higher income and education categorisations (Gong et al., 2004;
Balestrini and Gamble, 2006). Camillo (2012) found that the Chinese wine consumer
was aged between 19 and 35 years of age and salary, position, profession, wine
knowledge and participation in wine-related activities have significant impact on
consumption volumes. Somogyi et al. (2010) suggest that extended residency overseas
causes Chinese consumers to become more westernised and discard Chinese traits,
such as mixing wine with lemonade or other soft drinks to make it sweeter or less
intense in flavour (Pettigrew and Charters, 2010). While a limited number of studies
provide insight into Chinese consumer demographics, the results fail to paint
a consistent picture of the “typical” red wine consumer. Due to the lack of data in the
literature, the aim is to develop a behavioural profile of the Chinese wine consumer.
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2.2 Benefits sought and behavioural segmentation
There is a general consensus on that wine is a complex product and multiple attributes
are used in wine buying behaviour, including taste, alcohol content, age of wine, colour,
brand, label/package and region of origin (Hall, 2001; Geraghty and Torres, 2009;
Goodman, 2009; King et al., 2012). Sutanonpaiboon and Atkin (2011) have provided
a review of the literature on the impact of country-of-origin (COO) on consumer
decision making and found that it is a risk-reduction strategy or coping mechanism in
several countries. It is common practice for retailers to categorise bottled wine on the
shelves by COO.
In China, red wine is popular because of its health connotations and the symbolic
associations of the red colour with happiness and celebration in Chinese society
( Jenster and Cheng, 2008). Wine is much lower in alcohol than the popular Chinese
spirits and this is perceived to confer a health benefit (Liu and Murphy, 2007). In
a culture that favours self-control and moderation (Pettigrew and Charters, 2010), the
lower alcohol content of red wine in comparison to spirits is an advantage. Red wine is
also linked to blood circulation and traditional Chinese medicine (Somogyi et al., 2010).
There is some evidence that moderate consumption of wine delivers health benefits,
such as cardiovascular effects, for adults (Finkel, 1996; Troncoso et al., 2001) but the
scientific evidence to confirm this is lacking.
In the literature on Chinese wine consumption, taste, COO, quality and price are
influential factors and price has a significant relationship with salary (Camillo,
2012). COO was found to be the most significant factor influencing wine purchase
and its effect is critical when Chinese consumers buy wine for special occasions
(Balestrini and Gamble, 2006; Hu et al., 2008). However, Bang and Du (2010) argue
that educated buyers are less influenced by national stereotypes. Yan (1994)
suggests that Chinese consumers rely on reputable brands due to high levels of risk
avoidance. This is linked to the collectivistic nature of Asian society and the focus
on the development of the social self rather than on the private self (Kindel, 1982).
Furthermore, wine is a “credence” good because many of the attributes that
consumers may consider important are not obvious or easily verified – in other
words simply looking at the product does not give the consumer any idea of how it
was produced. The relevance of credence attributes underlines the considerable role
played by extrinsic cues (attributes that are not physically part of the product) such
as brand name or price. Yu et al. (2009) found Chinese buyers give a high rating to
brand name and origin but also to an intrinsic cue such as having tasted the wine
previously. They are also price sensitive. The price of imported wine is high due to
various tax rates, transportation costs and channel fees and price is an important
purchasing criterion for Chinese consumers. A recent study found that the average
price of foreign wine was 94 yuan a bottle, more than double the price of domestic
wine (Lee et al., 2009).
Wine is a social product and is consumed in a variety of settings and bought as
a gift. However, the Chinese, in general they do not entertain at home. It is rare for
Hong Kong Chinese to take a bottle of wine with them when invited to somebody’s
home (Dewald, 2007). Wine consumption has been linked to business banquets,
gift-giving and special occasions such as Chinese new year (an official holiday of about
two weeks), spring festival or mid-autumn festival (Liu and Murphy, 2007; Jenster and
Cheng, 2008). Low involvement consumers tend to be those who only drink wine on
special occasions (Yu et al., 2009). Status-seeking has been linked to the public
consumption of wine (Richie, 2007). The rapid economic success of China has led to
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wine-drinking, a luxury good, being seen as a symbol of one’s social status and
sophistication (Fan, 2007; Liu and Murphy, 2007). The giving of gifts in China has
a particular cultural significance and consumers tend to buy the more expensive,
imported wines for special occasions and other wines for daily use (Balestrini and
Gamble, 2006; Liu and Murphy, 2007; Yu et al., 2009; Camillo, 2012). High price is
associated with giving “good face” (mianzi in Mandarin) and shows politeness and
respect to the receivers (Yu et al., 2009) as well as gaining “good face” such as
admiration for one’s economic success (Anderson and He, 1998). In fact, one study of
wine consumers in Hong Kong found that product symbolism dominates taste
considerations (Pettigrew and Charters, 2010). It is argued that values such as “face”
constitute the deepest level of culture and are the most difficult to change
(Hofstede, 1980).
This study was interested in ascertaining the product attribute preferences of
Chinese wine consumers; based on the literature review, status, taste, health, COO,
price, quality and brand name, are all key purchasing motives.
3. Research methods
A survey was developed which consisted of 16 questions. Included in the survey were
questions designed to elicit socio-demographic information, purchase outlets used,
price paid per wine bottle, wine attributes sought, frequency of wine consumption,
sources of information used and so forth. The survey was informed by the literature
and it was pilot tested on a convenience sample. Based on feedback from the
participants, some questions were reworded to avoid ambiguity.
An online survey was conducted on 26 October 2012 and data collection finished
on 14 December 2012. A total of 407 consumers responded to the survey. The only
inclusion criterion was previous consumption of red wine. The researcher approached
potential respondents in a face-to-face manner and invited them to participate in the
study by visiting the survey’s web site. Participants in MBA courses held in various
regions of China were initially targeted as they matched the profile of red wine
consumers in China. In addition, the postgraduate student population has been
targeted before in studies on wine drinking behaviour (Li et al., 2011; Yu et al., 2009).
Confidentiality was guaranteed and the data were non-identifiable. The researcher’s
professional networks were initially used in order to overcome the low response rates
associated with surveys in general, including mail surveys, e-mail and online surveys.
The snowball sampling technique was then used as it helps reduce search costs and
helps reveal hidden populations (Dragan and Isaie-Maniu, 2012). Snowballing, or
targeting colleagues and friends of the researcher, as a stepping stone to finding
other suitable respondents, is a common practice in Chinese studies (Liu and Murphy,
2007) and in qualitative studies in general (Frankel and Devers, 2000). In a high-context
and collectivistic society like China, characterised by strong kinship ties and
interdependence, guanxi (relationship building) is critical when doing business (Gong
et al., 2012). No incentives were to solicit participation due to budget constraints as well
as the risk of introducing some form of bias into the results. In addition, with the rapid
advancement of internet technology, online surveys are becoming a viable method of
data collection in research. Internet research is appealing because it is a cost- and
time-efficient way of accessing a large number of participants (Sue and Ritter, 2007).
Furthermore, China’s usage rate of the internet is growing rapidly (McKinsey Global
Institute, 2013) and internet surveys are a useful way of recruiting a wine sample from
the well-educated, high-income echelons of society. Online surveys help counteract
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potential obstacles relating to the collection of sensitive data (age, income, frequency
of wine consumption) in a culture characterised by high “face” consciousness.
A non-probability, convenience sampling method was adopted. A flaw in such research
on China-centric topics is to treat China as a homogenous market when consumers
from different regions, different generations and different ethnic backgrounds exhibit
different types of behaviour (Ouyang et al., 2000). Efforts were made to ensure
a representative sample by targeting wine consumers in a range of regions across
China. Analysis of results showed that respondents came from diverse regions in
mainland China, such as the Southeast coast, centred on the Pearl River Delta; along
the East coast, centred on the lower Yangtze River; in the Beijing-Tianjian-Hebei
region; in the Liaoning-Heilongjiang-Jilin region. A small percentage of the sample
(7.4 per cent) came from overseas regions such as Hong Kong, Macau and Taiwan.
All statistical analyses were conducted using SPSS statistical package. As regards
product attribute preferences, a seven-point Likert scale items ranging from 1 (very
important) to 7 (very unimportant) was used. These items were drawn from the literature
(Hall, 2001; Geraghty and Torres, 2009; Goodman, 2009; King et al., 2012). Cluster
analysis was used to identify groups of wine buyers that are relatively homogenous in
terms of the attributes they seek from wine and their information search patterns.
A hierarchical cluster analysis approach was used as a preliminary to the k-means
cluster technique to determine the number of clusters. This approach has been used by
Johnson and Bruwer (2003) in their study of segments in the Australian wine market.
The dendrogram, Ward linkage method and squared Euclidian distance measure were
employed (Malhotra and Birks, 2000). The advantages of hierarchical methods include
simplicity, availability of a wide variety of applicable similarity measures and speed
(Hair et al., 2006). The disadvantages of cluster analysis include the possibility of lack of
clear results or distinct groups and sensitivity to outliers (i.e. an entity that does not fall
within the general region of any cluster), although the k-means cluster technique is less
affected by outliers. Usually, the major decision as to whether the cluster analysis has
been successful should depend on whether the results make intuitive sense (Afifi et al.,
2004). Furthermore, the researcher must also consider general market segmentation
criteria such as homogeneity, size and measurability (Kotler and Keller, 2008). This was
the approach taken in this study.
4. Findings
The following section reports basic descriptive analysis.
4.1 Demographics
Table I gives a demographic profile of respondents. Females were slightly over-represented
in the survey, with 54 per cent of females in the sample compared to 46 per cent males.
The Chinese census data show more males (51.3 per cent) than females (48.7) in the general
population (National Bureau of Statistics on China, 2013). A gender bias may be due to the
recruitment process or to females being more interested in the topic than men.
Income was classified into six categories. According to Chinese census data, the
annual per capita disposable income of urban households was 24,565 yuan in 2012.
This sample was skewed slightly towards the lower income categories. Only 4.1 of
the sample were in the 20-30,000 RMB income bracket with the largest number
(24.9 per cent) falling into the 10-20,000 RMB income bracket (which is roughly
equivalent to AU$1,526-AU$3,053). In contrast to Chinese census data, which shows
that 69.2 per cent of the population fall into the 15-59 age bracket, this sample consisted
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mostly of young people. This is due to the fact that it a wine sample and not a general
population sample. Over half of all respondents were educated up to postgraduate level
and 39 per cent were educated up to undergraduate level. Analysis of statistical data
show that 27 per cent of the population of tertiary age were in tertiary education
in 2011 (UNESCO, 2013) so this sample is more educated than the general population.
The main occupations were as follows: manager and administrator (15 per cent),
professional (15 per cent), clerical and service (20 per cent), teacher (22 per cent) and
university student (10.6 per cent).
4.2 Consumer decision-making process and factors influencing wine purchase
A one-way ANOVA was used to examine the influence of gender on the frequency
of wine purchase and a significant difference was found (see Table II). The most
common purchase frequency for males was between once a month to twice a quarter
(coded 3) and once a quarter to twice a year (coded 4). The most common purchase
Variables %
Gender
Male 46
Female 54
Age
18-24 10
25-34 50
35-44 32
45-54 7
Over 55 1
Education
Primary 0.3
Senior high school 2
Technical/vocational 0.8
Junior colleges 7
Undergraduate 39.4
Post-graduate 50
Other 0.5
Marital status
Yes 67
No 33
Married with children
Yes 51
No 49
Household income
o3,000 RMB 9.4
3,001-5,000 RMB 16
5,001-8,000 RMB 19
8,001-10,000 RMB 12
10,001-20,000 RMB 25
20,001-30,000 RMB 9
30,001-50,000 RMB 5.3
More than 50,000 RMB 4.3
Overseas experience (lived or worked overseas)
Yes 30
No 70
Tabl e I.
Demographics of
red wine consumers
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frequency for females was once a quarter to twice a year (coded 4). Despite reaching
statistical significance, the actual difference in mean scores between the genders
was quite small.
The vast majority of people (79 per cent) bought wine from the supermarket, with
17 per cent buying it from alcohol and tobacco outlets and 14 per cent buying it
online. Almost a tenth of the sample bought wine from a specialised wine store or
winery/agent. There was a low level of purchase frequency. Over a third (35 per cent) of
the sample buy wine once a quarter, 25 per cent buy wine once a year and 18 per cent
buy wine once a month.
The majority of people (73.7 per cent) buy wine for private consumption, followed
by 52.6 per cent who buy wine as a gift and half of the sample (49.6 per cent) buy it for a
special occasion or special celebration.
The respondents are willing to pay high prices for wine, but cannot afford to
pay exorbitant prices (see Table II). The price range of 101-300 RMB (equivalent to
AU$15-AU$46) was the most common choice for private consumption, closely followed
by 50-100 RMB. For gift-giving and special occasions, the most common choice was
50-100 RMB for wine (Table III).
Important sources of information were recommendation by others, product
review, wine tastings, wine education classes/wine trade show, product labels and
social media sites.
From a list of 14 wine attributes, Chinese consumers attached importance to
high quality, taste, health, brand name, value for money and origin/comes from
a respected, foreign wine growing region (see Figure 1). Despite Australia’s
Male mean Female mean FSig.
Wine consumption frequency 3.92 4.28 8.825 0.003
Notes: Frequency of wine consumption was coded into six categories, where 1 ¼“more than once a
week”; 2 ¼“once a week to twice a month”; 3 ¼“once a month to twice a quarter”; 4 ¼“once a quarter
to twice a year”; 5 ¼“once a year to once every two years” and 6 ¼“less than once every two years”
Table II.
Impact of gender
on frequency of
wine consumption
Price range
Price range for private
consumption, % (n¼296)
As a gift, %
(n¼237)
Special occasion or
celebration, % (n¼236)
Other, %
(n¼113)
Below 50
RMB 9.5 4.2 19.5 36.3
50-100 RMB 38.5 44.7 51.7 33.6
101-300
RMB 41.6 27.8 19.1 15.0
301-500
RMB 7.1 11.4 5.1 5.3
501-800
RMB 1.4 7.6 3.4 6.2
801-1,500
RMB 1.0 3.0 0.8 1.8
Above
1,500 RMB 1.0 1.3 0.4 1.8
Table III.
Price range compared
for purchase occasion
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international reputation for wine, there was a low level of awareness of Australian
brands. Over a third of the sample (38 per cent) claimed that they did not know of any
Australian brands.
4.3 Key market segments
The technique of cluster analysis was carried out on two sets of wine-related variables:
wine attributes and wine information sources. Wine attributes consists of different
aspects of wine, such as taste, alcohol level and wine colour; and the information
sources variables cover a wide range of sources, from the traditional newspaper
advertisements to the new social media networks; all the attributes and sources of
information were placed randomly in the questionnaire. The respondents were asked to
rate both sets of variables on a seven-point importance scale.
(a) Wine attribute factors. Based on their responses to the importance level of
the 14 wine attributes, the Chinese wine consumers could be clustered into
three segments (please refer to Tables IV and V for the cluster analysis results).
A three-cluster solution was proposed after a visual assessment of the dendrogram.
The dendrogram, or tree graph, is typically used to display results. The vertical
lines represent clusters that are joined together; the position of the line of the scale
indicates the distances at which clusters were joined and this information is useful
in deciding on the number of clusters (Malhotra and Birks, 2000). Three segments
were revealed based on product benefits sought. These segments were: first, the
extrinsic attribute-seeking customers; second, the intrinsic attribute-seeking
customers; and third, the alcohol level attribute-seeking customers. After the
clusters were identified, the next step was to run one-way ANOVA analysis
to determine which variables significantly differentiated between the clusters.
Four variables were found to be significant: age, marital status, income and
1234567
Produced in a Foreign Country
Brand Name
Value for Money
Tastes good – sweet and fruity
Health Benefit
Is Red in Colour
High Alcohol Level
Award Winning Product
Older, Mature Age Wine
High Quality
Produced in China
Grape Variety
Design of Package
Respected, foreign wine growing region
Figure 1.
Importance given
to wine attributes
by red wine buyers
Segments Wine attributes
Extrinsic attributes-seeking
consumers (n¼329)
Comes from a respected, foreign wine growing region; produced in a
foreign country; is red in colour; award-winning products; older,
mature-age wine; grape variety; design of package
Intrinsic attributes-seeking
consumers (n¼28)
Value for money; taste good – sweet and fruity; offer a health benefit;
high quality; brand name
Traditional consumers (n¼50) High alcohol level; produced in China
Tabl e IV.
Clustering Chinese
wine consumers based
on wine attributes
459
Chinese wine
market
frequency of wine consumption (see Table V). With regard to age, it was found that
the 25-34 age category dominates all three clusters; however more respondents fall
into the 35-44 group in the extrinsic (30.4 per cent) and traditional (34.7 per cent)
clusters, while there are more 18-24 respondents in the intrinsic group (26.9 per cent).
In terms of marital status, people who are married are more likely to be in the
extrinsic (65.0 per cent) and traditional (67.3 per cent) clusters; while the intrinsic
cluster is dominated by respondents who are not married (61.5 per cent). For the
household income variable, it is interesting to find that people with less income
(o5,000 RMB per month) are more likely to seek intrinsic attributes, while people
whose incomes are within the middle range (5,001-10,000 RMB and 10,001-30,000
RMB per month) are more extrinsic or traditional-attribute seekers. Frequency
of wine consumption also influences the type of attributes sought by consumers.
The statistics in Table V indicate that the more frequently people consume wine the
more likely they are to fall into the extrinsic and traditional clusters.
Clusters
Variables
Extrinsic cluster
(n¼329)
Intrinsic cluster
(n¼28)
Traditional
(n¼50) w
2
Gender
Male 146 11 28 2.936
Female 183 15 21 Sig. ¼0.230
Age
18-24 38 7 5 17.888
25-34 165 15 22 Sig. ¼0.013*
35-44 100 2 17
45-54 24 2 2
Over 55 2 0 3
Education
No attempt university 32 5 8 3.800
Undergraduate 131 12 20 Sig. ¼0.434
Post-graduate 166 11 22
Marital status
Yes 214 10 33 7.693
No 115 16 16 Sig. ¼0.021*
Married with children
Yes 153 6 21 5.769
No 176 20 27 Sig. ¼0.068
Household income
o5,000 RMB 89 16 12 15.567
5,001-10,000 RMB 101 5 17 Sig. ¼0.013*
10,001-30,000 RMB 109 4 14
More than 30,000 RMB 28 1 6
Overseas experience
Yes 100 4 10 4.359
No 229 22 39 Sig. ¼0.113
Frequent wine consumption
Yes 205 0 32 41.970
No 124 28 18 Sig. ¼0.000*
Note: *Significant level at po0.05
Tabl e V.
Clustering Chinese
wine consumers based
on wine attributes,
demographics and
consumption frequency
460
APJML
26,3
(b) Information sources. Tables VI and VII show that the Chinese wine market
consists of three segments based on consumer preferences for sourcing wine
information. These three segments are:
(1) the traditional word-of-mouth sourcing customers;
Segments Information sources
Traditional word-of-mouth sourcing
customers (n¼259)
Product reviews; recommendations by others
Traditional media information sourcing
customers (n¼120)
Print advertisements; TV advertising; product labels
New media/social network information
sourcing customers (n¼28)
Websites; social networking sites; wine tasting, wine
education classes or wine trade show
Table VI.
Clustering Chinese wine
consumers based on
information sources
Clusters
Variables
Traditional WOM
(n¼259)
Traditional media
(n¼120)
New media
(n¼28) w
2
Gender
Male 115 59 11 1.017
Female 144 60 15 Sig. ¼0.601
Age
18-24 32 11 7 15.265
25-34 123 64 15 Sig. ¼0.038*
35-44 86 31 2
45-54 16 10 2
Over 55 2 3 0
Education
No attempt
university 28 12 5 3.264
Undergraduate 98 53 12 Sig. ¼0.515
Post-graduate 133 55 11
Marital status
Yes 169 78 10 7.598
No 90 41 16 Sig. ¼0.022*
Married with children
Yes 120 54 6 5.283
No 138 65 20 Sig. ¼0.071
Household income
o5,000 RMB 64 37 16 17.862
5,001-10,000 79 39 5 Sig. ¼0.007*
10,001-30,000 90 33 4
More than 30,000
RMB 26 8 1
Overseas experience
Yes 80 30 4 3.557
No 179 89 22 Sig. ¼0.169
Frequent wine consumption
Yes 167 70 70 43.192
No 92 50 28 Sig. ¼0.000*
Note: *Significant level at po0.05
Table VII.
Clustering Chinese wine
consumers based on
information sources,
demographics and
frequency of consumption
461
Chinese wine
market
(2) the traditional media information sourcing customers; and
(3) the new media/social network information sourcing customers.
A one-way between groups ANOVA was performed to explore the differences between
the clusters (see Table VII). Four variables – age, marital status, income and frequency
of wine consumption – were found to be significant. The age group of 25-34 dominates
all three clusters, except respondents within 35-44 are more likely to look for wine
information from WOM (33.2 per cent) and traditional media (26.1 per cent) sources,
while the youngest group (18-24) are more likely to turn to new media/social
networking (26.9 per cent). In terms of marital status, people who are married tend to
rely more on the traditional information sources, i.e. WOM and traditional media; and
people who are not married are more likely to go to new media/social networking for
wine information. Household income level also influences the way the consumers look
for wine information. Respondents with less household income (o5,000 RMB per
month) are more likely to look for information from new media/social networking
(61.5 per cent), while the traditional WOM cluster is dominated by respondents in
the 10,001-30,000 RMB per month income group (34.7 per cent), and respondents in the
traditional media cluster lie in the 5,001-10,000 RMB per month income category
(33.3 per cent). People who consume wine more frequently depend more on information
sourced from WOM and traditional media.
5. Discussion
The results for this study show that the frequency of wine consumption is affected by
gender. The literature in the western world suggests that wine purchasing, once seen
as male behaviour, has changed due to the sale of wine in supermarkets (Beverland,
2003). However, a recent study by Forbes (2012) concluded that gender is not a useful
variable for segmenting the global wine market. One study of Chinese university
students found that females were more knowledgeable about wine and expressed
more positive interest in future wine drinking than males (Li et al., 2011). However,
a qualitative study (Liu and Murphy, 2007) found that wine buying was seen as the
man interest in future Asian markets, wine is perceived to be more masculine than
feminine (Bretherton and Carswell, 2001) and the Chinese have a male dominant
drinking culture and tradition of swallowing alcohol quickly to calls of “gambei”
when toasting (Heathcoth and Barlow, 2007). These conflicting findings suggest
that more research is needed to explore the impact of gender on wine purchasing
behaviour in China.
Approximately 67 per cent of the sample was married and approximately half of
thesamplehadchildrenlivinginthehousehold. Older age and later stages of the
family life cycle have been associated with wine drinking in the western world
(Charters and Pettigrew, 2006; Osadebamwen and Bruwer, 2013). This sample
suggests that wine consumers are in the early stages of the family life cycle. In China,
young professionals appear to be the target of wine marketing campaigns and the
product is seen as a symbol of wealth and sophistication (Liu and Murphy, 2007;
Jenster and Cheng, 2008). The sample was not predominantly drawn from the
high-income earners category, which was surprising, but it must be noted that wine
is not bought on a regular basis. Income is an important predictor of wine
involvement as consumers need to have the financial resources to support their
interest in wine (Osadebamwen and Bruwer, 2013). Findings show that the wine
consumer is well educated which confirms previous research. Wine enthusiasts and
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experimenters are mainly educated consumers ( Johnson and Bruwer, 2003) and they
can apply their education to gain access to information that helps them meet their
wine needs (Osadebamwen and Bruwer, 2013).
The study revealed interesting insight into the consumer behaviour decision-making
process. The survey findings are in accordance with the literature which shows that
Chinese wine buyers are occasional buyers of wine (Liu and Murphy, 2007; Li et al.,
2011). The survey found that the vast majority of people (79 per cent) bought wine from
the supermarket. Research shows that supermarkets are important in making wine
accessible to the mainstream market (Richie, 2007) and the retail channel becomes
important when consumption starts to transfer to the home or as “bring-along” bottles
in restaurants ( Jenster and Cheng, 2008). The findings on purchase occasion are in
accordance with the literature where it was found that wine is consumed by Chinese
consumers predominantly in the home (Li et al., 2011), followed by hotels and
restaurants. Wine is perceived to be unsuitable for pubs or a nightclub environment
(Li et al., 2011; Richie, 2007). The survey suggests that Chinese wine buyers seek value
for money when buying wine as a gift. While the majority of wine purchasers
select the low-price range (between 50 and 300 RMB), there is a sizeable number of
consumers that are willing to pay more for premium wine (over 300 RMB or AU$55),
particularly when buying wine for personal consumption. Buying expensive wines as a
gift is not new (Liu and Murphy, 2007); however, the fact that Chinese consumers are
buying expensive wines for private consumption is interesting. The intrinsic
attributes-seeking behaviour identified can possibly explain this phenomenon, that is,
the Chinese wine market is getting more mature, where price and COO is not
necessarily seen as the main indicator of wine quality. It is possible that all wine gifting
generates mianzi (face or respect). Chinese consumers are willing to spend around
$7-$15 on wine bought as a gift, which is still a lot of money given the monthly per
capita disposable income of urban households was 2,047 yuan in 2012 (National
Bureau of Statistics on China, 2013). Awareness of Australian brands was low, which is
in line with trade reports. While Australian wine is considered to be appealing and of
good quality, consumers generally do not have a strong awareness of Australian wine
compared with French wine (Rabobank International, 2010). The survey found that
consumers do not rate themselves as being knowledgeable about wine. This finding
is not surprising. In China, a wine culture is lacking and many Chinese consumers
are novice wine buyers. It is common to mix fruit juice with wine (Ch’ng, 2004; Baker,
2005) although this practice is anathema to wine connoisseurs. Chinese have low
awareness of wine growing regions around the world (such as Napa Valley),
grape varietals or food matching ( Jenster and Cheng, 2008). Consequently, wine
tastings and education are an important part of wine marketing activities.
This study revealed three segments: intrinsic, extrinsic and traditional segments.
As mentioned earlier in the literature, the Chinese wine consumers have limited
wine knowledge and they tend to favour wines from prestigious wine-producing
regions; for them, red wine that is foreign is likely to be a symbol of face and status.
Our results here confirm that there is one segment that seeks extrinsic attributes. This
segment is similar in some ways to the “basic wine drinker” identified by Johnson and
Bruwer (2003) and Bruwer et al. (2002). The basic wine drinkers have a number of safe
brands from which they choose their wine and seek little information about their
purchase; they are comparatively well-educated relative to the general population.
They also have little time for the rituals and image that surround the drinking of wine.
The “extrinsic” cluster identified in this study shares the risk reduction tendencies of
463
Chinese wine
market
the basic wine drinker, although it is not possible to comment on the other wine-related
lifestyle variables.
Our results also indicate that there is another group of Chinese wine consumers that
seeks more intrinsic attributes. For this group, the taste and quality of the wine is more
important than the provenance of the wine. Likewise, a study of US consumers
identified a new category, the emerging wine learner, who are making a transition from
novice to wine enthusiast and are becoming more interested in certain aspects of wine
such as the year produced (vintage), where it comes from and how the wine was made
(Barber et al., 2012). Bang and Du (2010) found that location (area of production within
a country) creates customer loyalty in China as educated buyers are less influenced
by national stereotypes or COO cues. In terms of reasons for wine consumption,
this segment resembles, to a slight degree, the “connoisseur” segment identified by
both McKinna (1986) and Spawton (1991) and confirmed by Hall and Winchester.
The “connoisseur” segment enjoys wine and drinks it as part of their daily routine;
the segment is also characterised by an ostentatious display of their wine knowledge
and a ritualistic approach to wine. Lockshin and Rhodus (1993) found that expert wine
tasters and wine salespeople are more likely to use the intrinsic taste of wine in their
assessment of quality. Although there is not a great fit between our study and previous
studies, discrepancies may be due to differences in segmentation methods used. This
study examined behaviour (wine attributes sought) but did not take into account the
underlying motivations and drivers of consumer behaviour.
The fact that wine consumption habits are changing in China is not surprising.
With the rapid development of wine market in China, consumers are more frequently
exposed to, and more educated about, wine, resulting in more mature customers.
According to Thatch (2008) the actual tasting of wine helps consumers to develop an
educated palate and leads to brand recognition; consequently, patrons are motivated to
select a specific wine in a restaurant. The implication for wine businesses is that they
will not be successful if they only concentrate on extrinsic wine attributes. It is
worthwhile to note that there is another group of Chinese wine consumers who seek
concrete attributes such as high alcohol level. Traditionally, Chinese spirits carry
a very high level of alcohol. To this group, drinking wine means drinking a high level
of alcohol, and people within this group tend to be in the older age group (Yu et al.,
2009). A segmentation study of Irish wine drinkers identified the “value seeking wine
buyer”; for this group, alcohol level and price are the most important attributes in
choosing wine (Geraghty and Torres, 2009).
The study sought to segment the wine market based on information channels
used by Chinese consumers. Seeking, and being provided with, information is
a risk-reduction strategy associated with wine purchase and consumption. It has been
found that older groups, over 35, place less importance on risk reduction and are less
likely to seek advice from salespeople, waiters, samples and in-house displays
(Hall et al., 2004). Important sources of information were recommendation by others,
product review, wine tastings, wine education classes/wine trade show, product labels
and social media sites. These findings corroborate those found in the literature
(Camillo, 2012). With a collective culture, the Chinese consumers place high trust in
people with whom they are familiar, such as families and friends (Yau, 1988). The
survey results showed that there is a segment of Chinese wine consumers who seek
out product reviews and recommendations from families and friends – labelled the
“traditional word-of-mouth sourcing” customers. However, traditional media is still
important in the context of wine marketing; the results indicate there is a group of wine
464
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consumers who seek wine information from print advertisements, TV as well as
product labels. It is significant to point out the importance of new media and social
networking sites as emerging sources of the wine information. There has been
a dramatic growth in the use of social media in China and China is said to be one of the
world’s most wired retail markets (McKinsey Global Institute, 2013). Our results
highlight this emerging group seeking information on wine from new social media and
networking sites. A similar emphasis is placed on wine tasting and education classes
as important information sources.
6. Conclusions and recommendations
This study is an exploratory one that attempts to identify and describe various wine
consumer segments in China, which is an important and emerging wine market for
Australian wineries. Market segmentation is designed to improve understanding of
consumers’ needs, achieve effective resource allocation and help identify opportunities
in the market (Kotler et al., 2009). The study revealed three segments based on benefit
segmentation: first, “the extrinsic attribute-seeking customers”; second, “the intrinsic
attribute-seeking customers”; and third, “the alcohol level attribute-seeking
customers”. In addition, the market can be segmented according to preferred sources
of information: first, “the traditional word-of-mouth sourcing customers”; second, “the
traditional media information sourcing customers”; and third, “the new media/social
network information sourcing customers”. Wine marketers need to emphasise high
quality, taste, health, brand name, value for money and origin such as coming from a
respected, foreign wine-growing region in promotional activities. Although extrinsic
cues are important to consumers, this study suggests that a new segment is emerging.
As Chinese consumers become more experienced wine buyers, they rely more on
intrinsic cues, such as taste and quality, and seek out value-for-money wines for
regular consumption. Price is a difficult variable to control given the power of
distributors in China, but one way to exert more control over marketing strategy is to
establish joint ventures or local bottling facilities in China. Providing factual
information and scientific evidence (if available) on red wine’s health benefits would be
advantageous. In addition, use of social media marketing along with wine-tasting
initiatives will be critical in influencing consumer decision making. There was a very
low level of familiarity with Australian brands. As there were some gaps in
respondents’ knowledge of Australian wine, exporters could attract more customers by
providing information on the brand. Traditional media advertising, social media
marketing and events such as wine fairs, supermarket in-store tastings and wine
tasting nights in restaurants, could be held to communicate with consumers and
educate them about wine brands and regional wine appellations.
7. Limitations of study
This study had a number of limitations such as the use of a convenience sample.
The sample was self-selected and therefore may not be representative of all wine
buyers in China. A sample size of 407 is comparable in size to many other studies,
but it cannot plausibly claim to be representative of all wine purchasers across all
regions in China; nevertheless the sample is large enough to answer the exploratory
questions posed in this study. Several concerns exist regarding the use of
internet-based surveys. First, coverage bias (the fact that some people do not have
access to, or choose not to use the internet) and lack of familiarity with internet
tools (Solomon, 2001). The online survey method may have precluded other potential
465
Chinese wine
market
participants such as light online users, older consumers and those with a low
technology acceptance level. Cluster analysis requires the judgement of the
researcher and “formal procedures for assessing the reliability and validity of
clustering solutions are complex and not fully defensible” (Malhotra and Birks,
2000, p. 612). Further research is needed to substantiate and enrich academic
understanding of major market segments in the Chinese wine market. Finally, the use
of more complex segmentation bases, such as personality, lifestyle and values, may
yield a deeper insight into the Chinese wine consumer in future studies.
Note
1. Baijiu is a Chinese white spirit distilled from sorghum, wheat or rice.
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About the authors
Dr Hong Bo Liu is currently a Lecturer in Economics at the School of Business. Previously she
had worked in the Australian Meat and Livestock Industry. She specialises in Resource and
Environmental Economics, Health Economics and Welfare Economics, with particular interests
in Food Consumption and its Impacts, Tourism and Economic Development. Her recent research
applies her economics expertise to the analysis of a few issues in Gerontology. Dr Liu has led, and
participated in projects, in both Australia and China. She is also a Journal Referee for the
Australian Journal of Agricultural and Resource Economics and China Agricultural Economic
Review.
Dr Breda McCarthy is a Lecturer in Marketing at the School of Business, James Cook
University. Her research interests include Wine Consumption in Emerging Markets, Strategic
Marketing Activities of Small to Medium-Sized Enterprises, Organic Food Consumption
and Alternative Agro-Food Networks. Dr Breda McCarthy is the corresponding author and can
be contacted at: breda.mccarthy@jcu.edu.au
Dr Tingzhen Chen is a Lecturer in Tourism at the School of Business, James Cook University.
Her research interests include Seasonality Patterns in Asian Tourism and Event Tourism.
Dr Shu Guo provided Research Assistance for the Study and is a Staff Member of the
Liaoning University, China.
Professor Xuguang Song provided Research Assistance for the Study and is a Staff Member
of the Beijing Normal University.
To purchase reprints of this article please e-mail: reprints@emeraldinsight.com
Or visit our web site for further details: www.emeraldinsight.com/reprints
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This study investigates the factors influencing consumer acceptance of certain types of innovation in handicraft products. Another aim of the article is construct/scale development applicable to handicrafts because our study collected scale items from other studies and tried to develop constructs applicable to handicraft products. The descriptive analysis through a quantitative cross-sectional consumer survey was applied along with cluster analysis for consumer market segmentation following the acceptance of certain types of innovations. Eight factors were discovered through EFA. The construct scores for authenticity innovation, packaging innovation, value-adding, product improvement, product design innovation, alternative/new materials, quality materials, and technological innovations were used in the cluster analysis. The results show that most consumers are open to accepting innovation in handicrafts. Particularly, consumers prefer those innovations that do not modify the traditional features and characteristics of products, such as authenticity, packaging, and quality-related innovations. However, consumers considered technological innovations as more skeptical. The comparison of socio-demographic profile of consumer segments with their acceptance of innovation indicates that the younger generation and well-educated consumers are more willing to accept innovation in handicraft products. Contrarily, the old-age consumers were unwilling to accept the innovation and prefer to purchase authentic and quality products. Additionally, as income increases, people like more authentic and quality products. This study focused on an emerging topic for handicraft industry, that is, innovation considered controversial, challenging, and received less attention from scholars in past. Further, this study is the first of its kind to explore the consumer acceptance of innovation in handicraft products.
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