Make mine grape wine

Friday, 23 July, 2004
Distell News Service
Increased affluence and wine consumption are always linked, and no more so than in China's upwardly mobile and increasingly westernized population.

Fancy a Cabernet Sauvignon on the rocks? Maybe Merlot and lemonade? If you do, chances are you're in China, where even revered icons like Château Lafite are supposed to be chased with coke or lemonade. Strange but true. Although stories involving such vinous luminaries are probably little more than urban legend, mixing wines with sweet, carbonated beverages is a routine practice.

Whether neat, spritzed or sweetened, wine consumption is definitely on the up in China, as the hipness of Westernization takes hold in a rapidly growing economy that is fuelling the middle class with even Ferrari entering the market. We're talking grape wine here or putaojiu, as it is called in Mandarin, not to be confused with rice wine.

Wine is not new to China. As early as the second century BC, vines were planted here and the country even boasts an indigenous wine grape that grows wild north of Shanghai. However, rice wine and wines made from other grains have always predominated, forming an integral part of Chinese life, from the highest rituals to the everyday. There is even a theory that the practice of cellaring wine may have originated in China, because of the tradition of burying receptacles of wine at the birth of a girl and then unearthing them to celebrate her wedding.

More than a century ago, a reasonably sized wine industry existed in China to cater mainly to foreign communities resident in the country. But the Cultural Revolution in the mid-1960s forced many immigrants to leave and wine production declined to almost nothing. By the end of the Cultural Revolution in 1976, production started up again but gradually. Today there are around 225 000 ha cultivated to vines, some through Sino-foreign joint ventures, and mostly in the provinces north of the Yangtze River. By 1999 grape wine production totalled 400 000 tons, a figure that is expected to more than double to 900 000 tons by 2015.

Last year, according to Beijing customs authorities, wine imports grew 50% on 2002 to over $US32m. Now although this is a miniscule figure, given China's population of 1,26 billion, the rate of growth in wine imports has accelerated every year since the turn of this century and shows no signs of subsiding as import tariffs shrink.

Before the accession to the World Trade Organization, tariffs were as high as 65%. Now at 37,5%, they are set to drop to 14% later this year. This will bring prices down. But there are still the consumption and value-added taxes to consider, along with the cost to register an imported wine for sale. Together these account for 50% of the retail price.

The current average price for a bottle of imported wine is $10, although some producers are bottling wine in China to bring down their prices. Most imported wine comes from Chile, followed by France and then Australia.  

You can pay anywhere from US$2 to $4 for a local wine, whereas a beer sets you back just 60 US cents (which explains why China is the largest beer-drinking country in the world).

Nevertheless, wine marks you as a sophisticate. It is also served at State banquets. And it's considered healthy to drink, especially red wine. Not that such claims can be advertised. Chinese legislation forbids the use of medicinal terms when describing wines or any other alcoholic beverages for that matter.

Even if it's not a regular thing among any consumer segment just yet, wine has enormous potential in sheer numerical terms. Just taking into account the 300 million upwardly mobile youth of the major cities (less than one third of a total population of 880 million people of drinking age) and the fact that they increasingly take their social cues from the West, you are talking about a lot of people with the potential to switch onto wine. Add to that an official move to curb consumption of high-alcohol drinks, both because excess alcohol intake is antithetical to a healthy lifestyle and because the production of spirits consumes a lot of grain that could otherwise be used to feed the population. And you could be talking big numbers.
  
White wines account for nearly 65% of consumption, down from 84% eight years ago. But red wine is what you want when you are dining, and increased sales of red wine have coincided with more and more eating out, especially Western-style food.

A market analysis entitled Wine in China by Access Asia, proclaims that 'expensive bottles of red wine have become the latest 'trophy drink' of the Chinese new rich, who like to drink such wines when out eating, in order to show they have both the money and the good taste to be wine drinkers.' It has even replaced cognac in some circles.

And where's it all happening? In the cities, as you would expect - Guangzhou, Shanghai, Beijing, Tianjin and Fujian are the place, in restaurants, bars and clubs.
  
But the country is vast, population dispersed and much more investment is required in the still embryonic distribution networks and in transportation infrastructure to ensure wine is not spoiled in transit. Then there's the issue of consumer and trade education that must be tackled before wine takes off in the mega-quantities anticipated.

Andy Mallett, who is responsible for the sale of Distell products in Asia, says its early days but already Chinese tourists are being courted in the region given their growing spending power. With increased affluence and wine consumption always linked he sees a brand like Two Oceans gaining ground. 'Industrial development won't make wine affordable to the broad-based population for a long time but increasing westernization is making wine more appealing to consumers in the major cities like Shanghai, Beijing and Guangzhou.  Promotional and educational drives like gift packaging for retail and on-consumption outlets during key holidays like the Autumn Festival, Chinese New Year, Spring Festival and getting people to taste wine on its own and with food is growing the market.

'Two Oceans is a brand people here can identify with. It signifies Western fashionability. Its packaging is attractive and the fruity flavours of the wines make them desirable in their own right.

'And there is growing awareness of South Africa, particularly now that the country will host the 2010 Soccer World Cup. All these developments bode well.'


Ancient Chinese temple
Ancient Chinese temple

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