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Chinese wine market keeps falling

CHINESE wine market, the fifth largest in the world, further slowed down last year in a big recession starting from 2013 after a decade of uninterrupted growth, which deeply and badly affects domestic wines, according to an industry report yesterday.

In 2015, the Chinese consumed 131.9 million cases of red wine, 7.24 million cases less than in 2014, said the survey of world wine and spirits consumption by Vinexpo, world’s biggest wine exhibition.

Guillaume Deglise, CEO at Vinexpo, explains that its China’s overall economic growth rate slowed sharply in 2015, compared to former growth rates of 6.8 percent, government’s anti-corruption policy and the Shanghai stock exchange collapsed in last August lead to such dropping.

Chinese wine is heavily hit. The survey shows that local wines, accounted for over 80 percent of volumes for a decade, is now in decline.

Lu Mengxi, the owner of a winery in Ningxia Hui Autonomous Region, west China, known as “Chinese Bordeaux,” attributes local wines sold badly to their high prices.

“Many profit driven Chinese wineries, trying to be paid back quickly, sell wines to distributers in an unreasonably high price although the cost of making wine in China is much lower than Bordeaux,” said Lu.

For example, a bottle of Zhihuiyuanshi (a winery in Ningxia) is sold to distributer at 200 yuan. Retail price of a normal Bordeaux AOC is sold at 100 yuan on Yesmywine, China’s biggest e-commerce provider.

Stephen Li, one of the most respected wine educators in China attributes the market failure to the changing of consumers.

“Formerly, Chinese consumers blindly follow domestic wines since they cannot read French or English labels on imported bottles. However, when young and well-educated middle-class becomes the major wine buying power in China, many Chinese wines are found increasingly hard to compete with valuable imported bottles,” said Li.

Paradoxically, the reputation of Chinese wine in the world is getting higher during the recent three years, said Charles Guo, founder of Winemaster House, a wine marketing consulting company. Guo had ten years experience in Pernod Ricard, world’s largest wine and spirit distributer.

“Lack of communication with consumers may also explain domestic wines’ failure,” Guo added.

The survey shows that imported wines are far from negative, with growth by 3.3 percent in volume between 2013 and 2014. French wines account for 42 percent of consumption in China. Australian wine holds the second place with 4 million cases consumed.

Spain is a new star, being the top performer in China in 2015 in terms of volume increase. Imports were up 55.6 percent between January and May compared to the same period in 2014.

In terms of wine style, Champagne, not affected by anti-corruption campaign, rises against the trend, with volume doubling to 135,000 cases between 2010 and 2014.

“The market is still largely concentrated in first-tier cities, a category with little exposure to gifting and banquets,” said the report.

“Most of the champagnes are consumed by young people in night clubs,” said educator Li.

Vinexpo predicts that the wine market outlook is bright to 2019. But Wang Zuming, secretary general at China Alcoholic Drinks Association says it’s too early to talk about recovery.




 

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