The Financial Times published an interesting article yesterday on the luxury-goods market in China – a country which accounted for a quarter of new entrants to this year’s Forbes billionaires list, and is the key driver behind current fine-wine price growth. According to the article, a report by management consulting firm McKinsey has forecast that luxury-goods spending in China will grow by 18 per cent per year to 2015, thus outpacing Japan to become the world’s largest luxury market. Other analysts predict that the growth rate will be even more spectacular, with Aaron Fischer of Hong Kong-based brokerage CLSA estimating that the market will expand by 25 per cent annually to account for 44 per cent of global sales by 2020. (FT subscribers can view the full article here.)
As well as the exponential growth that is anticipated, the article highlights essential features of Chinese spending – many of which bode well for fine wine.
- Luxury items are choice gifts for “relationship-building”. (It has already been widely reported that Lafite is particularly popular in gift giving.)
- Men account for a higher proportion of luxury spending than women. This may be good news for the fine-wine market, which has a male-dominated consumer base.
- Frugality is hardly prized in China, with even those on lower incomes forking out extravagant sums to sport luxury brands. (One interviewee claimed that spending two to three months’ salary on a designer bag was not unusual.)
- Folklore and history are strong selling points. This is certainly propitious, as family history and tradition play an important role in the marketing of many top Bordeaux chateaux.
- European products are perceived to be “classy”, so much so that the region’s brands fill all 10 positions in the Hurun Research Institute’s list of China’s best-loved luxury brands. (Clearly a positive for Old World producers.)