Enter the Dragon

April 24, 2011 12:38 pm - Posted by Jody in Learn, Travel

How will the emergence of China as a world player in the world of wine affect the drink we all love so much?

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. That makes China a significant player in the wine industry.

And so with China’s elite investing in Bordeaux chateaus and setting new records for rare and collectible wines at auction, it’s no wonder that the wine industry is paying close attention to happenings in the middle kingdom. But what about wine drinkers?  Are we giving enough thought as to how the newly minted middle and wealthy classes in China will change the world of wine?  I don’t think so, but fortunately our editorial team is here to help.

First off, let’s put China’s foray into the wine industry into perspective. China is already the world’s leading market for luxury goods, and fine wines are no exception. China, including Hong Kong, became the world’s largest consumer of Bordeaux wines in 2010, importing some 33.5-million bottles at a cost of $475-million. The country now imports more than $1-billion worth of wine annually, a number that has quadrupled from about $250-million in 2004.

French wine occupies a commanding position in the Chinese market. The French have a significant market share and mind share lead over other regions. Partly this is because of their storied reputation and strong marketing, but French producers have also worked to form deep distribution partnerships since the early 1980s. And this matters since business in China is a patient endeavor and requires investing in long term relationships. This is something the French have done exceedingly well and so their dominant position isn’t likely to change anytime soon.

So with this in mind we wine drinkers can expect a few ripples on our side of the world. First off French wine and collectible wine will probably continue to set new records at auction in both Hong Kong and London. After all the industry is globally interconnected.  Next, we can expect additional Chinese investment in Bordeaux and other French regions. This will divert more French product from North American shelves onto Chinese ones and will probably result in modest price increases here at home. This will most likely lead to a small decrease in the North American market share for French wine which should open up opportunities for other producers. And that’s probably good news for Spanish, German and Austrian winemakers.

In the years to come China will continue to change the world of wine and we will continue to bring you our thoughts on how this will affect you.  We are stoked at the significant growth in the Chinese wine market and we think this is a very positive trend. So stay tuned because there’ll be more updates on this very dynamic region.

In the meantime what are your thoughts on how China will change the world of wine?

2 Responses to “Enter the Dragon”

  1. Alex on Fire says:

    I think China’s new found love of wine will have two other consequences. Good quality wins from places like South Africa or Canada should get more attention and this will actually bring their prices down. More production should mean economies of scale.

    And then I also think Chinese wine makers will soon make a dent in the export market. And with a decent quality, cost-effective Chinese wine in the States, it’ll make Chile have to do better and look at their pricing. Some Chileans are getting quite dear.

  2. Parisian by design says:

    I live in Paris and work for a wine distributor. You have a nice insight into the Sino-France connection. And you are the first person to explain that the relationship is deeper than just the Chinese being willing to pay for French brands because they don’t know any better. If this was the case wouldn’t Napa figure prominently in China. Or what about the super Tuscans?

    No the relationship is deeper and thinking the Chinese don’t know what they’re doing is the mistake the Americans have made in cracking the market. Chinese wine drinkers want wines they like and wines they can trust. Consistency from year to year is key. Remember Chinese food is complex and you want to pair wines that always deliver a similar compliment. New world wines are sold to be different from year to year. That doesn’t make sense in the Chinese context. They’re sophisticated, the rest of the world just hasn’t figured this out. So the French will continue to dominate the market in China.