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China’s Rebound: Imported Wine Back On The Rise

August 2, 2017

Following a tumultuous period in which a government austerity campaign stunted progress in China’s beverage alcohol market, imported wine is back on the upswing.“China is coming back after taking a big hit,” says Davide Marcovitch, president of Chandon at Moët Hennessy. “But the $5,000 bottles formerly bought by the government aren’t coming back.” These days, growth in imported wine is being led by entry-level offerings, as more middle-class consumers begin to explore the category.

In the first half of 2017, imported wine grew 12% by volume and 5% by value, according to China customs, with the entry level driving gains. Yoshi Shibuya, CEO of Suntory-owned importer ASC Fine Wines, says the middle and upper levels of the imported wine market remain challenging, with growth fastest in the $7-$14 a bottle area. Still, he notes that “the image of imported wine is positive because of its quality and value for money versus locally-produced wines. But the level of understanding about imported wine is relatively low. There is still a lot of market education to be done.” Overall, China’s imported wine market has enjoyed strong momentum over the past two years, surging by nearly 20 million cases—or 40%—since 2014, to reach 71 million cases, according to Impact Databank.

Treasury Wine Estates (TWE) has been investing aggressively in the region, announcing plans to open warehouse facilities in Shanghai later this year in a move the company says will reduce lead times for customer orders across its portfolio. In addition to Australian brands like Penfolds and Wolf Blass, the new Shanghai facility will handle labels such as Beringer and Beaulieu Vineyard from the U.S., as well as recent launch Maison de Grand Esprit from France. TWE is also upping its game as an importer in China, recently unveiling an agreement to distribute the Baron Philippe de Rothschild portfolio in the country, including Bordeaux’s Mouton Cadet and Chile’s Escudo Rojo.

While TWE’s Australia portfolio has been driving growth in China lately, the company says it’s eyeing improved penetration for its U.S. offerings looking ahead. Currently, TWE’s China footprint covers about 100 of the country’s tier-one and tier-two cities; moving forward it plans to enter another 50 such metropolitan areas. By channel, TWE derives about 80% of its net sales revenue in China from traditional retail, where the average price is about $18 a bottle. The e-commerce and on-premise channels, where average bottle prices are below-$15 and $27 respectively, each account for about 10% of TWE’s net sales in the market.

Moët Hennessy is also among the global companies looking to grow its presence in both imported and domestic sparkling wines. On the domestic side, it produces its Chandon brand in north-central China’s Ningxia region, a key winegrowing region. Recently, Chandon debuted a new offering, Me, geared toward female consumers. The new entry is tailored to the Chinese palate, with a slightly sweeter profile and low acidity, and is meant to be served at room temperature, either on its own or in cocktails. Chandon is now at about 200,000 bottles in China, and Marcovitch is eyeing an increase to 1 million bottles in the next few years, given the lack of competition in sparkling wine and the strong initial reception for Me. Moët Hennessy has also begun producing red wine in southern China’s remote Yunnan Province under the Ao Yun label. Ao Yun, which is expected to eventually get to a production of 50,000 bottles in the years ahead, retails at around $300.

For a full report on China’s wine and spirits market, see Impact’s upcoming August 1&15 issue.—Daniel Marsteller

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