Monday, April 4, 2011

China wine market

04 April 2011 at 17:30 

Global rush to emerge top in growing China wine market

BEIJING (Commodity Online): China has become a hot destination for global players in the wine industry with demand growing in excess of 20% annually for the past five years to around 1, 480.6 mn litres, according to Rabobank Wine Quarterly.

Among imported wines, Australian and US wines are increasingly being replaced by French wines as imported wine market growth has tirpled to 146.3 mn litres or 10% of the overall table wine market, Rabobank Wine Quarterly said.

French wine has now occupied a commanding position, having formed deep distribution channel partnerships and strong consumer associations with their products owing to their pioneering efforts since the early 1980s.With a landed value of around USD 655.7 million, the Chinese market for imported bottled wines is also a relatively high-value market dominated by red wine and the HORECA channel.

Chinese wine companies, some of which have strong ties to notable French companies, have themselves reinforced perceptions in trade and consumer circles that French wine is the epitome of wine. While Chinese wines by and large populate the bottom end of the market, wine styles, packaging and branding all closely follow the Bordeaux example in an attempt to convey an idea of quality.

With the general level of consumer appreciation of wine at an elementary level, distributors play a critical ‘gatekeeper’ role in influencing what consumers purchase and how they perceive value. With wine consumption still predominantly based around customary entertaining and gift-giving occasions, Chinese consumers are primarily interested in making a ‘safe’ purchase that can confidently convey a suitable level of prestige, status and respect. More often than not, this means French. Spain, Australia, USA are major exporters of wine to China but French wine occupies a prime position in China, the report said.

"Despite the favourable positioning of their wines, Australian producers have in fact surrendered significant share in recent years, as have US producers. It is also the case that most Old World producers have been far less successful than the French in convincing Chinese distributors of their wine pedigree. Of those nations depicted above, Italy is the only country which has lowered its average import price since 2005, while Spain occupies the lowest average price point of all."

Chinese wine companies themselves have ambitions to consolidate their already significant standing in the market. With strong provincial government ties, sound profitability and ample capital resources, many domestic suppliers are seeking to improve the profile of their products, as well as to benefit from the growth in demand for foreign wines. This dynamic presents opportunities for those foreign wine suppliers that are able to position themselves to supply industry expertise in exchange for access to distribution.

The widespread practice among Chinese wine companies to blend imported bulk wine into domestic products has driven the flow of bulk wine into China (see Figure 3). The volume and volatility of trade indicates the highly variable volume and limited quality of domestic wine production. In fact, it is estimated that only roughly 10% of China’s 450,000 ha vineyard estate is dedicated to vinifera varietals. Price determines who supplies the bulk market from year to year, and while Chile and Australia have historically supplied large volumes, Spain and Italy met the market in 2010.

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