Analysis: key things to know about Chinese wine market

The Chinese wine market has experienced impressive growth in the past ten years, but few would doubt that it remains anything over than an emerging market, according to Rabobank, which has just produced a report into China’s wine market:

However, it is a market that is evolving, from one that was over-reliant on business and government expenditure, to one where young, educated retail consumers are accounting for an increasing share of the market.

This is good news for foreign wine companies, as this is just the demographic who have a preference for imported wines.   By the end of this year, Rabobank estimates that imported wines will represent roughly a third of the 150 million cases of still wines sold in 2016.

The slow down in its economic growth, and the austerity measures the Chinese government imposed on party officials in 2012, saw demand for wine particularly affected in 2013 and 2014 when the growth in still bottled wine imports nearly slowed to a standstill.  However, demand has quickly bounced back in recent years, as retail customers become a much larger part of the market.

By the end of 2015, Chinese import volumes had surged to being a third higher than in the Canadian market, which only five years ago was the bigger market by around 20%.

But still bottled wine imports have experienced a noticeable shift down market since 2013 as competition has intensified and demand has moved towards a much more price sensitive and value-orientated retail customer.

Lower price wines have been experiencing higher growth, which has resulted in suppliers from Spain, Chile and Italy establishing a strong presence in the market.

Average annual growth in import volumes has slowed in recent years, but they remain at an elevated level, especially for a market of this size.

Domestic wine production in China is significant, though the area that is dedicated to wine production is only around 15% of the total areas planted with vines. The vast majority of grape growing is dedicated to table grape and raisin production.

The key wine producing regions including Ningxia and Xinjiang, where both large and small wine companies have established themselves, have significant potential to produce quality wines, though each still has shortcomings that increase vintage variability and make the cost of production higher than levels usual in the world’s leading wine regions.

In many ways the leading regions would be better suited to white wine production, but the market bias towards red wine means producers are cultivating later ripening red grape varietals, which exacerbate production risks.

China’s leading wine companies continue to rely heavily on foreign sourced wines to bled into their products in order to deliver the volume and quality required in the market.

As Chinese wine companies are very price sensitive, they typically source from whatever country has excess stock of the required standard at any given time.   Therefore there are still significant shifts from year to year in the country profile of China’s bulk wine imports.

However, Chile and Australia have been increasing in importance over the past two years, having the added advantage of reduced import tariffs, due to their respective free trade agreements with China.

Increasingly, Chinese wine companies are investing in wineries abroad to secure their bulk wine needs.     This has traditinonally been sourced from the global bulk wine market.

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Neville Blech
 

Qualified as a chartered accountant in 1959 and became passionate about food and wine whilst working in Italy in the early sixties.

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