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China’s Imported Wine Marketers Focus On The Long Term

November 16, 2020

From 2010 to 2017, China’s imported wine market more than doubled in size to above 80 million 9-liter cases, according to Impact Databank, as the country’s rapidly emerging middle class gravitated to Western drinks categories. Since then, trade tensions and the pandemic have thrown the market into flux, resulting in uneven conditions and clouding the near-term outlook, with volume falling below 70 million cases last year.

Most recently, China has begun threatening tariffs on Australian wines, the top import segment in the country, with bottled imports of 13.4 million cases worth $814 million on a 13% increase last year. China’s anti-dumping investigation on Australian imports “could result in a punitive tariff that would become a challenge to the competitiveness of Australian wines. The investigations are scheduled to end before August 2021 and could be extended to February 2022 if necessary,” says Yoshi Shibuya, CEO of importer ASC Wines, a subsidiary of Suntory Holdings Ltd. “Because of this the wine trade in China is stocking up Australian wine to avoid the cost increase in case of an unfavorable ruling.”

Shibuya tells SND there has been a significant decrease in imported wine overall due to Covid-19, but points to data from China Customs for January-August 2020 to affirm Australia’s position as the No.1 exporter in both value and volume at 8 million cases and $457.47 million. France is at 7 million cases and $305.71 million, while Chile is at 6.2 million cases and $139.76 million for the eight-month period. Like Australia, Chile has become a wine powerhouse in China due to a free-trade agreement between the two countries. Chilean imports slowed last year, down 4.1% to 7.94 million cases, but China remains the South American country’s top wine export market.

“Without a doubt, the Covid-19 pandemic has had a major impact on the wine market in China, with a decrease of close to 35% in imported wine,” says Cristián López, corporate export director, Viña Concha y Toro, noting how critical the on-trade is to Chinese wine consumption. “However, we’re seeing a gradual opening and recovery of on-trade business, as well as increasing e-commerce growth, so we’re optimistic.” Lopez notes that the hyper-fragmentation of the market makes it a complex region to compete in, but says Concha y Toro is dedicated to expanding its business there, especially with its Casillero del Diablo label.

Tariff hikes on U.S. wines have hampered the category in China lately, with bottled shipment value down by more than half to $33 million last year. Despite the challenges, Bill McMorran, vice president and general manager, Asia for E.&J. Gallo Winery, remains confident about China’s long-term potential. “During the pandemic, we saw that Chinese consumers only had a slight increase in wine consumption frequency, unlike mature wine markets in the Western countries,” he notes, pointing to the industry’s reliance on social or business occasions. “Drinking at home became the key drinking occasion. Unsurprisingly, the online wine channel has seen strong growth. This trend is going to continue to be prevalent.” McMorran says Gallo has doubled its e-commerce business this year, with initiatives like a three-year strategic partnership with e-commerce giant Alibaba paying off.

A full report on China’s wine and spirits market appears in the November 1 issue of Impact. Click here to subscribe.—Mary Keefe

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