Consumers opt for cheaper wine amid weaker economy

A wine industry publication recently published a look at demand within regions in China which are less-impacted due to Covid-related lockdowns. This provided some interesting anecdotes about how the restaurant industry is being affected and consumers’ willingness to pay for more expensive discretionary food and beverage items amid the slowing economy.

Wine sellers in Wuhan generally noted declining sales, with several mentioning drops of 30% y/y. Reasons cited for this were consumers reducing discretionary spending, issues with broken supply chains, and an inability for professionals to engage in business travel. While some vendors surveyed noted increased sales of 10-20%, many more noted declines of 30-50% y/y.

One vendor in Chengdu noted their overall sales were down 30% and that their sales to one restaurant group in the city had decline 90%. Another noted that, even in the absence of a large Covid outbreak or lockdown, occupancy rates in some restaurants in Chongqing had dropped by over 60% and restaurant owners had to cut employee hours.

Lastly, merchants in the survey noted a ‘consumption downgrade’ among consumers, with more consumers opting for cheaper bottles prices around 100 yuan ($15 USD). This is near the bottom of the price range for most wines given China’s high import taxes. Reductions in discretionary spending, consumption downgrades, and the sharp reduction in domestic business travel are all issues which will continue to weigh on food and beverage demand within China.