Definition: chine 1

Consumption patterns:

It is difficult to estimate wine consumption in China, as there is no clear definition of what constitutes wine. Similarly, undeclared products imported from Hong Kong and elsewhere are sold on the black market, making the task even more difficult. However, it is estimated that this market corresponds to approximately 6 million hectolitres. Wine consumption in China has been growing steadily since the late 1990s. According to Chinese customs, wine consumption in China increased from 0.19% in 1997 to 0.29% in 2002, representing a growth of 53%. Wine consumption is also influenced by holidays, during which consumers drink more wine. In general, wine consumers are people with high purchasing power and higher education. In addition, more men drink wine than women, and 60.5% of consumers are between the ages of 25 and 44.

When foreign wines first appeared on the Chinese market, they were associated with snobbery and unaffordable prices. Since then, they have become much less of a status symbol, and Chinese consumers have become more cautious about what they buy. Currently, foreign wines face two major obstacles: a lack of visibility and high retail prices. While imported wines hold a dominant position in the quality wine category, foreign wines are not yet popular in the Chinese restaurant sector. On the other hand, Chinese consumers are very familiar with domestic brands.

Points of sale:

Wine sales in China have also changed dramatically in recent years, particularly since the arrival of supermarket chains and the development of hard discounters. Approximately 65% of wine sold in China is distributed through supermarkets, while less than 1% is sold by specialised shops. Although foreign wines can be found on the shelves of supermarkets and specialised shops in large cities, the majority of imported wines are sold in restaurants and nightclubs.

Distribution networks:

Wine has always entered China through the following two networks:

The China National Cereals, Oils and Foodstuffs Import and Export Corporation (SCNCOA), a state-owned company that holds a monopoly as a wholesaler and distributor of alcoholic beverages; joint ventures and hotels owned by foreign interests; and duty-free shops operated by China Travel Service (CTS). However, this network has its limitations, as the products it handles cannot be sold through general distribution networks.

In addition to the two import networks, there is a so-called "parallel channel" in Hong Kong and Guangzhou, which allows importers to avoid high duties and taxes. However, the sharp decline in customs duties and the government's intention to enforce customs regulations more rigorously have led to a drop in the volume of smuggled products. Domestic distribution networks for imported wine are still underdeveloped. Most importers or brand owners must participate directly in sales operations by appointing a team to work with the local distributor. For a complex product such as wine, it is difficult to convince a distributor to invest its own resources in improving the knowledge of its representatives. As a result, some of the major wine importers and distributors now handle all aspects of domestic sales and marketing, including climate-controlled storage, product knowledge training for sales representatives, sales promotion, sales and delivery.

Duty free:

The distribution of duty-free shops in China is controlled by a monopoly, the China Duty Free Group (CDFG), a state-owned company based in Beijing. It controls more than 150 outlets in China, including 24 in Guangdong province, 3 in Shanghai and 3 in Beijing (excluding airports). Duty-free purchases can be made either on arrival in China or on departure, with the latter currently accounting for the majority of sales. The breakdown of wine and spirits sales is as follows: more than 70% brandy (including cognac, which ranks first in spirits sales), 20% whisky, with the remaining 10% consisting mainly of other spirits, including Chinese grain alcohol, imported spirits and wine, the latter remaining very marginal in terms of sales, accounting for 5% of the total wine and spirits sector. The share of wine has been growing slightly for several years. French wines account for 70% of wine sales in CDFG stores. Geographical proximity, particular sensitivity to internationally renowned brands and the notion of souvenir gifts, which is strong in Asia, explain why the customer base consists mainly of businessmen and Asian tourists from other countries. The SARS crisis in spring 2003 had a significant impact on duty-free sales, which are closely linked to the tourism sector. In the medium term, CDFG could consider strengthening its range by including more imported wines, including high-end French wines, but for the time being, the group, aware of the immaturity of the wine market in China, prefers to remain cautious. CDFG forecasts a 30% increase in sales of wines and spirits over the next five years.

Products:

The Chinese market is mainly composed of local wines produced in the west of the country and imported wines. However, only three brands are distributed throughout the country: Changyu, Dynasty and Great Wall. These three brands alone account for more than 50% of the Chinese market. In terms of volume, domestic wines account for 85% of consumption. The Chinese prefer red wine to white (80% to 20%). The preferred wine varies from region to region. Dry red wine is the most popular category among Chinese consumers (68%), followed by sweet red wine (23%), dry white wine (8%) and others (1%).

Price:

In China, most wines are sold for more than US$4.80 per bottle, while the average Chinese consumer generally buys wine for less than US$3.60. Consumers often consider local wines sold for between 40 and 55 yen to be of better quality than imported wines sold for 75 to 95 yen. However, imported wines are likely to become more competitive, as on 1 January 2004, the Chinese government reduced the tax on imported bottles by 14%. This figure has fallen steadily since 2001, when it stood at 44.6%.

Main brands:

The following wine prices at retailers in Beijing are representative of current market prices (May 2003). The approximate exchange rate for the yuan (CNY), the official Chinese currency, is 9.93 CNY to the euro.

Retail prices for wine in China:

750 ml bottle Price (CNY)

Red wines (Chinese)

Dragon Seal Cabernet Sauvignon 55

Dragon Seal Dry Red 33

Dragon Seal Gamay 56

Dynasty Extra Dry Red 34

Great Wall Dry Red 30

Red wines (imported)

Château Saint Pierre, dry red (USA) 45

Jacobs Creek, red (Australia) 109

Calvet, red (France) 118

Cabernet Sauvignon de Gaston (France) 88

Valpolicella de Zonin (Italy) 72

Sauvignon BIN 555 (Australia) 156

White wines (Chinese)

Extra Dry from Dynasty 28

Great Wall Dry 22

Dragon Seal Dry 29

Chardonnay from Dragon Seal 46

White wines (imported)

Bin 222 from Wyndham Estate (Australia) 156

Sauve from Zonin (Italy) 68

Chardonnay from Gaston 95

Jacob's Creek Chardonnay (Australia) 109

Château Saint-Pierre (USA) 42

Château du Maine (France) 137

Bois de Graves (France) 119

Bulk wine:

Bulk wine dominates Chinese wine imports, with Chile as the leading supplier in 2001, following the decline in Spanish exports. Most bulk wine is blended with Chinese brands and is therefore not sold as imported wine.

Still bottled wine:

France is the leader in this category with over 40% of the market. However, the image of French wines has been tarnished by scandal. In 1999, the Chinese learned that cow's blood was used to thicken certain French wines. Part of the population ended up associating French wines and foreign wines in general with mad cow disease. Then, a rumour spread that certain Bordeaux brands were counterfeit, damaging the image of foreign wines in general.

Sparkling wines:

The sparkling wine market remains limited compared to that of still wines and bulk wines. Ninety-nine per cent of sparkling wines consumed in China are produced locally. These are generally inexpensive products, available in 1.5-litre bottles.

Conclusion:

China is a relatively young market and difficult to assess. Many observers agree that wine stocks in China are too high. However, according to the Wine Institute, even if only 8.3% of the Chinese population can sell wine, this figure corresponds to 100 million people. In addition, more and more women are starting to drink wine and the Chinese are attracted by the notion of wine and health.

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