China’s growing thirst for foreign wine

Tuesday, 2 March, 2004
MCM Wines
Imported wines are considered to be of better quality than local product.
With China’s rapid growth and increased domestic wealth, Chinese consumers are developing a taste for imported wines.

According to statistics compiled by China’s General Administration of Customs (GAC), the country imported 32.3 million litres of wine worth US$32.3 million up to September last year. These figures grew a massive 39.2 percent and 45.5 percent respectively compared with 2002.

The top wine exporter to China is Chile, exporting mostly large volumes of bulk wines. Second is France followed by Australia, the US, Argentina, Italy and Spain. South African producer and exporters are lagging their international peers in expanding sales into China. Recently quoted in the China Business Weekly, Geng Zhaolin of the China Brewery Industry Association states ‘the consumption of beer and liquor has largely decreased in the past decade, while more people are turning to wine.’

Imported wines are considered to be of better quality than local product. Most domestic producers are usually state-owned enterprises or small private companies. Local players are now seeking to forge joint ventures with foreign wineries in order to obtain better vines and winemaking technology. In the local wine industry, there are few established quality standards that producers need to adhere to. Thus the perception of quality of local wine is lacking within the upper-income group urban marketplace.

Wine consumption in China is still at a very low level. Taste is also developing with most Chinese consumers preferring fruity wines rather than dry/tannic variants. With the possible exception of advanced cities such as Shanghai and Guangzhou, there is no established ‘wine culture’ in China. Foreign trade commissions are doing a lot to introduce their wines to the Chinese market. Australian, French, and Italian trade commissions are regularly hosting marketing events and wine seminars in China’s urban centres. Australia is even promoting wine tourism to its country to advertise its brands to well-to-do Chinese consumers. Wine imports are growing at a rapid rate despite high import tariffs on foreign produce that currently stand at 37.5 percent.

China has, however, indicated that it will reduce the direct tariff to 14 percent later this year. But this will not automatically result in a price decrease of foreign wine in the marketplace.

Don St Pierre of importer ASC Fine Wines says, ‘Import duty is not the only factor affecting prices. The consumption and value-added taxes have not been reduced, and the cost of registering imported wine for sale in China has increased substantially.’ Combined, these account for approx. 50 percent of retail price. Imported wine retails at an average of RMB 150 (US$18). Most imported wine is sold at luxury hotels, bars and restaurants and foreign-owned supermarket chains.

South African producers are starting to see the vast wine market that is developing in China. At present, limited quantities of produce are being exported to China. However, with increased knowledge and marketing efforts in the country, exports to China are bound to increase in the coming years.

MCM Wines