Global Times

Global taste in your Chinese wineglass

As domestic wine industry struggles, companies seek better quality, look overseas to upgrade

- By Shen Weiduo and Ma Jingjing

The return of A Bite of China has made French wine brand Château de Pic popular among Chinese, but what about the status quo of domestic wine companies? The Global Times found that production of domestical­ly made wine posted an annual decline of about 6 percent over the past five years. Industry experts said the market entrance of foreign brands, higher costs for planting grapes in China as well as consumptio­n upgrading are the main reasons behind the downturn. Now, many Chinese wineries are beginning to look toward prestigiou­s markets by taking a high-quality route. Some large wine companies are even acquiring vineries overseas to support this upgrading.

With the return of CCTV’s A

Bite of China, one of China’s most popular cooking documentar­y series, French wine brand Château de Pic has become an instant hit thanks to the company paying a naming right fee of 118 million yuan ($18.69 million) to the news outlet.

Like Château de Pic, many foreign wine brands are becoming increasing­ly popular in the Chinese market, and as a result, are posing harsh competitio­n to domestic wine companies.

The latest data released by the National Bureau of Statistics (NBS) showed that China’s wine production was 1 million kiloliters in 2017, down 5.3 percent on a yearly basis.

Over the past five consecutiv­e years, the output of domestic wine brands slid around 6 percent each year, domestic newspaper China Quality Daily reported on Friday.

Chinese winery Yantai Changyu Pioneer Wine Co told the Global Times on Tuesday that its 2017 wine production was almost the same as in the years before, but said the country’s overall wine output decrease is mainly due to structural overcapaci­ty, public consumptio­n limits and a surge in imported wine.

“The continuous increase of imported wine in the Chinese market has seriously squeezed the market share of domestical­ly made wine,” it said. The volume of imported wine soared 16.4 percent year-on-year to $2.55 billion in 2017, China Quality Daily said.

“Chinese wine consumers are becoming more rational, which, together with the widespread entrance of foreign wine brands into the domestic market, is squeezing wine output by domestic producers,” Gao Yuan, owner of Ningxia Silver Heights Winery, told the Global Times on Monday.

“Foreign wines have a longer history than their Chinese counterpar­ts. Polished over time, foreign wines have a better taste and quality compared with domestic ones. On the contrary, domestic wine producers once gained a bad

reputation for producing fake wine, making them even less favored and trusted,” Qu Xing, CEO of winesinfo.com, told the Global Times on Monday.

Qu said that a lack of grape variety is another obvious factor contributi­ng to the shortage in domestic wine production.

Domestic wineries, whether in North China’s Shanxi Province, Northwest China’s Ningxia Hui Autonomous Region or Beijing, tend to produce identical wine products as most of them plant cabernet sauvignon and merlot – two popular grape categories.

“Due to the higher cost of planting grapes in China, a lot of Chinese wine producers prefer to import base liquor and then blend it with domestic liquors instead of expanding production, which also contribute­s to the decline in domestic wine production,” Qu said.

And some places in China are not suitable for the large-scale developmen­t of the domestic wine production industry, according to Wu Shuxian, an independen­t wine analyst.

Meanwhile, in eastern China, grapes growing there are more susceptibl­e to pests and diseases, Wu noted.

High-quality route

Domestic wine manufactur­ers used to carry out large-scale industrial production, which, together with the loose implementa­tion of industry standards, resulted in domestical­ly made wine with undesirabl­e qualities, said Chen Yong, secretary-general of the Wine Branch at the Guangdong Provincial Alcohol Industry Associatio­n.

“For instance, a winery’s production capacity may only be 1,000 tons, but its purchases of grapes from other plantation­s can enlarge its output to 10,000 tons. Without strict supervisio­n on the quality of materials, of course the quality of domestic wine is uncompetit­ive,” Chen told the Global Times on Monday.

“Now, rational consumers pay more attention to product quality rather than brand fame. Hence, certain very popular domestic brands such as Changyu and Great Wall do not enjoy high recognitio­n in [South China’s] Guangdong Province,” Chen said, noting that boutique wineries in Beijing’s Fangshan district, Ningxia as well as Northwest China’s Xinjiang Uyghur Autonomous Region are instead gaining recognitio­n in Guangdong.

Ningxia Silver Heights Winery, situated in Yinchuan, capital of Ningxia, began making wine in 2007. It has since adopted a high-quality strategy, with its products serving as banquet wines in China by 2016.

“Our sales performanc­e maintained an increase of 20 percent year-on-year in 2017, with an annual production rate between 60,000 and 80,000 bottles. We are now controllin­g our output because the domestic wine market has not yet matured, and we are still at the exploratio­n stage,” Gao said. “We will continue to produce high-quality wine, in response to consumers’ higher consumptio­n demand,” she noted.

Another winery interviewe­d by the Global Times named Shanxi Grace Vineyard said it has also taken the high-quality wine route and is trialing new grape varieties such as marselan, shiraz and aglianico. One of its production sites is in Shanxi Province while another is in Ningxia, with the two sites covering a combined area of 1.46 million square meters.

The company told the Global Times on Monday that its production maintained a sustainabl­e year-on-year growth rate, but didn’t specify the exact figure.

Global layout

However, despite boasting the same level of quality, imported wine naturally experience­s a higher performanc­e than domestic brands because it is seen as an exotic product and thus it seems more honorable to treat friends with such a foreign product or send it as a gift, said Zhu Danpeng, a food industry analyst based in Guangzhou, capital of Guangdong.

He also added that, “that’s one reason why domestic wine companies are rushing to acquire wine chateaus overseas.”

For example, domestic vinery Yantai Changyu Pioneer Wine Co recently completed the purchase of an 80 percent stake in Kilikanoon Wines based in Australia’s Clare Valley for AS$20.6 million ($16.1 million). This marks Changyu’s fifth overseas acquisitio­n following other deals confirmed to go ahead in France, Spain and Chile.

On January 8, domestic industry website cnwinenews.com reported that Jiangsu Yanghe Distillery is due to buy 12.5 percent of shares in the second-largest wine producer in Chile, Viña San Pedro Tarapacá, for about $66 million.

“By investing in foreign vineries, domestic wine producers can acquire advanced wine production and management expertise, and then help promote the competitiv­eness of the domestic wine industry with the support of brand constructi­on and technologi­cal innovation,” Zhu told the Global Times on Monday.

But he stressed that it requires at least five years for the industry to realize such an upgrade as this is a systematic­al project.

“With Chinese consumers’ increasing purchasing abilities and China’s upgraded consumptio­n structure, the domestic wine market has great potential. We should explore [this potential] together with global wineries,” Gao noted.

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 ?? File photo: IC ?? View of Changyu Pioneer Wine Co’s wine factory in Yantai, East China’s Shandong Province in 2013.
File photo: IC View of Changyu Pioneer Wine Co’s wine factory in Yantai, East China’s Shandong Province in 2013.

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