Vin de China

Wine sales are on the increase

Vin de China

Chinese drinkers are no longer mere dabblers in the world of fine wine.

Despite a tendency to turn as ruby-hued as the claret they are tippling, the country’s wine consumers are becoming a major market for global producers. A growing middle class – conscious of wine’s sophisticated image and purported health benefits – have made grape wines increasingly popular.

In 2008, wine sales reached $2.8 billion, an increase of 20% year-on-year. Industry experts forecast that by 2011, Chinese drinkers will down more than 1.1 billion bottles, according to the China Daily.

Some buyers, however, are motivated by the potential investment returns as much as the enjoyment of tasting a celebrated vintage.

Take Zuochang Cheng, who has been importing wines from Australia, Italy, and South Africa for many years, but who recently pulled off the coup of becoming the first Chinese owner of a French vineyard.

In January last year, Cheng bought the esteemed Chateau Latour-Laguens label, whose vineyards lie in the heart of Bordeaux, France’s winemaking capital.

Chateau Latour-Laguens has been in business for over 500 years. But the Chinese themselves have been making wine for a while too.

Grape wine is not new to China – archaeologists have found traces of viniculture in Shandong that date back thousands of years. But traditionally, the most popular drink in China was baijiu (white spirits). But thanks to the country’s expanding taste for a more bourgeois tipple, that is beginning to change.

Charles Delamalle, former wine manager at Carrefour’s China headquarters, says: “More and more Chinese, both old and young, and from different lines of business, come to buy foreign wines. They buy the wines to give to friends as gifts or to drink by themselves.”

Among the imports, French wines remain the most popular, followed by those from Australia, the US and Chile. Together, foreign brands account for 15% of domestic wine sales.

But the majority of market share is still held by the medium and low quality domestic grape wines produced in China itself. Already the sixth largest wine producer globally, China has over 300 wineries. The top three local wine makers, Changyu, Great Wall and Dynasty, together control 40% of the industry’s market share.

Dynasty – which has just released its 2008 results – sold 55.1 million bottles of wine last year, a 12.9% increase on 2007. In the second half of the year it plans to expand capacity to 93.3 million bottles. The vineyard sells its wine for an average price of $3 per bottle; but in supermarkets the consumer could pay up to $7 for a bottle of Dynasty wine.

Jenny Zhang, a savvy wine drinker in Beijing, comments: “Many Chinese people buy cheap Chinese wines to boost the atmosphere at parties or during festivals. But those who buy for taste usually prefer foreign wines.”

“China has the vineyards, but not the technical expertise,” says the Future of Wine Report, a study drawn up by leading wine merchant Berry Brothers and Rudd. “However, if good people from wine-producing countries think there is an opportunity to make wine in China, they will go there and invest.”

And, true enough, many famous winemakers are taking an interest in China’s growing wine market, excited by the prospect of a large and increasingly sophisticated consumer base.

One of the latest to announce its ambitions for a China venture is the famed French vineyard, Domaines Barons de Rothschild. The French company – it owns Chateau Lafite – has recently announced plans to invest in over 60 acres of vines on the peninsula of Penglai in Shandong province – a region roughly on the same latitude as Bordeaux (see WiC9).

Berry Brothers and Rudd remain hopeful that, as the quality of local wines improves, along with huge rises in consumption and in cooperation between Chinese and foreign wine-makers, China will produce high quality wine that will “rival the best of Bordeaux within 50 years.”

Good wines are supposed to be worth the wait, after all.

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