VINEX Regional Manager Report: Alex Yao, China

For our latest focus assessing what is happening on the ground in the key wine producing countries of the world we look at the situation in China through the eyes of VINEX’s regional manager in the country, Alex Yao.  

• Chilean and Australian wines are still very much in demand for Chinese wine importers as the impact of the Free Trade Agreement with both countries still takes effect.
• Importers are looking to pay around US$1.38-1.50 for entry level Chilean Cabernet Sauvignon and A$2.40-2.80 Shiraz and Cabernet Sauvignon from South Australia.
• These are going to the be key varietals that are most in demand in 2018.
• Australia has continued its strong growth momentum both in volume terms, driven by its headline brand (eg Penfolds, Yellow Tail etc) and the expected drop in tariffs. The AUD weakness to the RMB is also part of the reason.
• There is also a much closer analysis and understanding of different quality levels of entry level wine from the New World.
• VDCE wines - “Vin de la Communauté Européenne: are particularly under threat. They have been particularly popular in China over the last two years and lots of importers have started up their businesses using these style of wines.
• Chinese consumers are getting more knowledgeable about the wines they drink and importers are no longer interested in just bringing in the cheapest products. They have to be quality as well.
• You also have to understand the OEM market in China. These small to medium sized Chinese wholesalers are trying to get Chinese importers to carry their own label brands rather than just use imported wine. They have seen how successful the imported wines have been and are now looking to do it for themselves. This has been particularly the case with entry level Chilean wine.
• OEM wholesalers offer a clear and transparent route for Chinese importers, as they also use the right types of paper for labels, embossing, foils and printing.
• Own label overall is going to be important.There is also more demand for bottled wine than bulk wine in China, although some importers are mainly interested in unlabelled wines from Spain, France, Chile and Australia.
• There is more activity taking place in the market again with wine businesses investing in manpower and financial resources to help importers promote their products better in different markets with private wine dinners, city tours and exhibitions.
• The most effective route is through the e-commerce and online and more wine companies are using Wechat, Weibo or other social media to open up new markets. It’s an effective way for producers to put an image in people’s minds about the wines they have to sell.
• Looking ahead then France, Spain and Chile are all well placed.
• There has been an increase in the value of Spanish wine, which, which reflects the lower 2017 harvest.
• Italian wines could also benefit from Chinese importers and distributors looking for new imported wines.
• But as the unit prices of wines from so many countries goes up, like the United States, South Africa, Germany and Portugal, then producers need to work harder with their importers to promote their fine wine credentials by focusing more on brand and image building to attract quality buyers.
• There is much less opportunity to attract wholesalers for entry level wines.  

The latest imported wine data for quarter one shows:

• 141,795,478 litres of bottled wine, 25.13% increase year-on-year. 
• US$711,976,863 value for bottled wine, 32.47% increase year-on-year. 

• 54,204,610 lites for Bulk wine, 53.6% increase year-on-year.
• US$57,238,041 value for bulk wine, 87.31% increase year-on-year.
• 3,190,643 litres for sparkling wine, 24.75% increase year-on-year.
• US$19,150,654 value for sparkling, 44.06% increase year-on-year. 

• 199,190,731 litres for total import volume, 31.77% increase year-on-year.
• US$788,365,558 for total imports value, 35.62% increase year-on-year.