Chinese Wine Marketing Conference Highlights Advantages & Issues in China's Wine Industry
August 24, 2007
At the recent International Conference on the Wine Market in China, held Aug. 8-11, 2007 in Beijing, participants were impressed at how much progress has been made in the Chinese wine industry in the past 2 years. At the same time, there are still some issues that China needs to tackle in order for wine to continue to gain acceptance in national and global markets.
Advantages for China's Wine Industry
As the largest country in the world with 1.3 billion people, the Chinese wine industry has a huge advantage in selling wine to its domestic market. This is supported by a government which is friendly towards wine, and is encouraging people to drink more grape wine for its reputed health benefits.
Another advantage has to do with the fact that more Chinese people are adopting wine -- especially amongst the young urban professionals and business people in the main cities of Shanghai and Beijing. Wine is seen as classy and sophisticated. It is appearing more often in the popular media -- in magazine articles, lifestyle sections of newspaper, movies, and the Internet. Though still small at .35 liters per capita, if this trend continues, some experts are predicting that China, with its large population, may eventually surpass the U.S. in becoming the largest wine-consuming nation in the world.
Sales trends also show that Chinese wine is growing. According to Euromonitor statistics, wine sales in China have grown by more than 68% from 2001 to 2006, with a forecasted volume growth of 40% through 2011. The large Chinese wineries are helping to support this by pouring thousands of dollars into television ads for wine.
Another advantage is that China is a country, which is rich in culinary culture and can adapt wine to its myriad of mouth-watering meals. Though many Western experts recommend lighter white wines such as Riesling or gewürztraminer as the best match for Asian food, the Chinese continue to prefer red wine, at a 90% consumption rate. Therefore, it is not uncommon to see both red and white wine on the turnaround, which rotates around the middle of a Chinese dinner table, holding the collection of tempting food dishes.
A final advantage of the Chinese wine market is the recent reduction of import tariffs and taxes. This action has caused several foreign wineries to revaluate their wine export strategy and to either begin or increase exports to China.
On the issues side, one of the most concerning areas is the lack of regulations regarding Chinese wine production. They have not agreed to adopt OIV standards, as many other countries have, and instead have stated that they will begin discussion in 2008 regarding the type of regulations they plan to implement. This lack of regulations has led to much confusion. For example, since the Chinese believe that the older a wine is, the higher quality, they will often put a vintage that is considered to be good luck, such as 1988, on the bottle to help sell the wine -- even though it may be from a 2004 vintage. (Note: The number 8 is very lucky. This is why the Beijing Olympics will start on 8/08/08 - Aug. 8, 2008.)
In many cases vintage is not included on the bottle, because they may blend wine from different vintages, or different countries. At the conference, participants tasted an excellent Chinese cabernet sauvignon, only to learn that 40% of it had come from Chile -- though this was not listed on the bottle.
In the past fruit juices had been blended with grape wine, but they now no longer call this "wine" -- which is positive news. However, there is no regulation regarding the minimum amount of grape varietal, which must be in the bottle. Therefore, a wine that says Cabernet Sauvignon may in fact be only 60% cabernet sauvignon, with the rest a blend of other grapes. Finally, China does not yet have an appellation system -- though they often include the province from which the wine originates on the label. When they do set-up such a system, it will also be necessary to create a regulation about the minimum amount of wine, which must come from that appellation (province). Many other countries subscribe to standards, which mandate a minimum of 85% of wine from the appellation, grape, and vintage. China will need to resolve these issues in order to take its rightful place in the global wine market. This is especially important because of food safety issues that have already occurred in China. If they were to have a safety issue with wine, it could seriously harm this fledgling industry.
A second issue has to do with inadequate distribution infrastructure. Though there are reported to be more than 300 distributors in China and more than 1000 importers, with some parties playing both roles, it is still complicated to get imported wine to a retail establishment. This mainly has to do with lack of temperature-controlled trucks to transport wine, as well as temperature controlled facilities in which to store or sell it. Even if the wine is delivered in a refrigerated ship container, it may sit for a couple of days at the dock in very hot or cold temperatures. A few of the larger distributors and retailers have taken it upon themselves to purchase the appropriate equipment and facilities, but this has caused their overhead to be quite high -- requiring them to increase their percentage mark-ups. This in turn causes imported wine prices to be even higher. An interesting take on this issue is that one small winery in China started giving their best customers small wine refrigerators as a gift -- just to insure that their wine was stored at the proper temperature.
A third issue has to do with the fact that rice wine is deeply ingrained in the Chinese culture, but not grape wine. Therefore, the Chinese are still learning about it and have difficulty distinguishing quality levels. This is exacerbated by the national practice of toasting with rice wine and then draining the glass. The term used to describe this practice is "gam bei," which means "dry glass," and it is considered rude not to participate. Now many Chinese business people are using grape wine, instead of rice wine for this practice -- because grape wine has less alcohol and is perceived as more healthy. One distributor described a business dinner in which they "gam beied" two bottles of Chateau Lafite. He said it was very frustrating not to be able to sip such a great wine and enjoy it. Instead he had to "shoot" it like a tequila shot. Because of this practice, the Chinese do not have much experience in analyzing the quality of a wine. Another winery owner who makes ultra-premium wine in China reported that they don't worry about this practice. "To us, wine is to make you happy. If sipping it makes you happy, then sip. If "gam beiing" it makes you happy, then "gam bei." This seems to be a good solution.
A fourth issue has to do with language and translation issues. Unfortunately the term "wine" is even confusing. This is because traditionally "wine" can mean any kind of alcoholic drink ranging from the high proof rice wines, to the lower proof yellow wines, grape wine, and in some cases even beer. Therefore, in China, it is often necessary to clarify by saying "grape wine." When it comes to varietal names, it gets even more confusing, as some will translate phonetically whereas others will translate conceptually. For example, pinot noir may be pronounced as "hay pinot" with "hay" meaning "black," or as "fruit pearl." On the other hand, China has many native grape varietals that have not yet been translated into English. It appears that until someone creates a wine terminology and translation book in Chinese that this will continue to be an issue.
A final issue has to do with a potential backlash on advertising the health benefits of wine. According to industry experts this could have a negative impact on wine, because if the Chinese begin viewing wine as a medicine, they will believe it is suppose to taste bad. Since they don't have much wine knowledge and currently can't differentiate from poor and good quality wine, they may assume all wine should taste bad in order to be healthy. Though still a minor issue, it could become a problem if not handled correctly.
Chinese Wine Tasting Highlights
As an emerging wine industry, the quality and taste of Chinese wine is not consistent, but of the 30 Chinese wines tasted, the following stood out as offering good quality and/or a unique style.
• Great Wall Chateau Level Cabernet Gernischt NV -- a light red colored wine of medium body tasting of dark red fruit, earth and herbs. Similar to a Loire Cabernet Franc. The Gernischt grape is believed to be a clone of carmenere or Cabernet Franc.
• Great Wall Chateau Level Dragon's Eye NV -- a pale straw colored wine with a light floral nose, high acidity and a sweet-tart candy finish. Very unique tasting. The Dragon's Eye grape is also known as Longyan.
• Sino-French Marselan 2005 -- a dark red-purple colored wine of medium body. Jammy nose and palate, soft tannins, medium acid. Very fruity -- similar in character to a sweet Shiraz or Zinfandel. Marselan is a hybrid of Cabernet Sauvignon and Grenache.
• Grace Vineyard Chardonnay 2006 -- a pale straw colored wine of light body. Apple and floral nose; medium-high acid; low oak. Very elegant, with a touch of Chenin Blanc.
• Dynasty Semi-Dry White Wine NV -- a pale straw colored wine of light body. Nose of roses, high acid, low sugar, very refreshing.
• Chateau Bolongbao Dry Red Wine 2003 -- a ruby red wine of medium body with soft tannins and acid. Notes of dark red fruit and soft spices. A blend of Cabernet Sauvignon, Cabernet Franc, and Merlot. Easy to drink. Similar to a soft Italian red.
• Chang Baishan Ice Wine 2006 -- a dark blue purple wine with a velvety texture and the taste of a rich blackberry pie. Made from the native varietals Shuang Hong and Shuang You grapes of the "vitis amurensis" family, the wine is from the far north province of Jilin which has deep winter snows. Designed to be an ultra-luxury wine at $250US, each 500ml bottle is beautifully packaged, individually numbered, and comes with its own certificate of authenticity.
by Liz Thach, Ph.D. is a management and wine business professor at Sonoma State University in California. She can be reached at Liz.Thach@sonoma.edu.