China’s Wine Industry. A Brief History, Facts And Figures


Akademische Arbeit, 2010
36 Seiten, Note: 1,3

Leseprobe

Content

1. Introduction

2. A Brief History of Wine in China

2.1. Chinese Tradition and Alcoholic Beverages
2.2. The Emergence of Wineries
2.3. The Asian Crisis and Its Aftermath

3. China’s Wine Industry: Facts and Figures
3.1. Market Value and Structure
3.2. China’s Domestic Wine Industry
3.2.1. Wine Regions and Brands
3.2.2. Major Players and their Strategies
3.2.3. Preferences and Prices
3.2.4. Trends for Chinese Wines
3.3. Imported Wines in China
3.3.1. Main Exporting Countries
3.3.2. Prices and Preferences
3.4. Foreign Wine as an Asset
3.5. Policy Environment
3.5.1. Tariff Regulations
3.5.2. Labeling
3.6. Distribution Channels
3.6.1. Importers and Wholesale Distributors
3.6.2. On-Trade and Off-Trade Distribution
3.7. Excursus: EU Agricultural Exports to China

4. References (including additional literature recommendations)

1. Introduction

China is turning into one of the world’s largest, most lucrative food and beverage markets. With a growing middle class, the demand for premium lifestyle products is constantly increasing. A new generation of consumers, typically located in urban areas, is emerging, with more disposable income and a greater awareness and willingness to pay for high quality, often imported products – including wine. Wine has become “fashionable” as a symbol of social status and this trend is likely to continue. Further, the health benefits associated with red wine in particular, have convinced some consumers to switch from traditional Chinese alcoholic beverages to grape wine.

Although China traditionally is a rice-wine-consuming country and unlike in many Western countries, grape wine is considered a luxury product, the grape wine market[1] has grown rapidly since its emergence in the mid 1990s, with still wine being the most lucrative. According to a recent survey, in 2009 the Chinese wine market generated total revenues of US$ 7,2 billion which constitutes a compound annual growth rate of 5,3% for the period from 2005 to 2009[2]. As wine consumption in China is closely related to income, there is no end in sight to this positive trend.

However, the Chinese wine market is in its early stage. Not only is the annual per capita consumption of wine still low compared to other countries[3], also the demand for information and education on wine is enormous: Many new wine schools are opening, courses on wine tasting take place in the whole country, wine tours to Chinese wineries are offered and wine exhibitions like the “China International Alcoholic Drinks EXPO” in Beijing attract more and more visitors every year.

The market’s healthy value growth will further encourage newcomers, especially from abroad. But how can a market entrance be managed ideally and what are the main challenges when marketing wine in China? This paper takes a thorough look at the wine market of China, the typical behavior of the Chinese wine consumer and approaches the question whether the thirst for wine will prevail and if so, what possible marketing strategies there are for importers that want to enter this dynamic market.

2. A Brief History of Wine in China

The literature about wine in China is often imprecise about the usage of the word “wine” in Chinese. In fact, the Chinese word for wine, jiu, is used for a wide variety of alcoholic beverages, including beer (pi jiu), red wine (hong jiu) and liquor (bai jiu). This evokes confusion. This paper sharply distinguishes between the different types of beverages in order to compare properly and uses the term “wine” only for alcoholic beverages with low alcohol content and made of grapes.

Despite missing written proof, it is assumed that the production of alcoholic beverages started at least 3000 years ago in China. By 1000 BC, the fermentation process was well established and the Chinese invented the chiu, a strong beer with much higher alcohol content than its Western counterparts[4]. Mostly grain was used for making it, as well as rice, herbs, corn, flowers and wild mountain grapes. This strong Chinese beer never made its way to other countries, except Japan[5].

It is a rarely known fact that the distillation of alcohol in China started 500 years earlier than in Europe. The Chinese invented the brandy (“burnt wine”, Chinese: shao chiu, German: Branntwein) in the 7th century BC, whereas the distillation of European alcohol started first in Italy and only in the 12th century[6].

2.1. Chinese Tradition and Alcoholic Beverages

During the Han Dynasty (206 BC – 220 AC), when Western Regions were explored and contacts with Hellenistic kingdoms were made, high quality grapes came to China and Chinese grape wine was produced. However, wine from grapes was considered exotic and was reserved mainly for the emperor's table[7]. The fact that rice wine was more common than grape wine was noted even by Marco Polo when he was in China in the 13th century[8]. Not much has changed until today: A rice-based alcoholic beverage literally called "yellow wine" (huang jiu) is still among the most popular wines in China[9].

The use of alcoholic drinks in China is intimately related with culture, i.e. with the social, ethical, religious, economical and other aspects of life over all periods of time[10]. In ancient times, drinking alcohol took place with certain forms of etiquettes and strict rules, such as kneeling down first, then pouring some alcohol on the ground to thank the earth for providing grains and food and then start drinking[11]. Further, alcoholic beverages were incorporated into religious ceremonies both as sacrificial offering for the gods or for the dead and as a drink during festivals featuring divine states of drunkenness.

Moreover, alcoholic beverages have always been seen as a healthy beverage. The Chinese have special medicinal wines that have been an essential ingredient in Chinese medicine[12]. Just as in Europe, it is believed that red wine as a beverage reduces the risks of cancer, arthritis and cardiovascular disease[13].

Today, wine is consumed during traditional festivals such as The New Year Festival and at important social events such as weddings. According to a wine importer in Zhuhai, South China, imported wine is mainly served to impress a guest or business partner at a restaurant banquet dinner or to use as a gift on a special occasion. Chinese nationals returning from living and working abroad or doing business with “Westerners” are more prone to selecting imported wine. However, at official governmental events and among older generations huang jiu or the high proof bai jiu, literally “white alcohol” and sometimes mistakenly translated as “white wine”, is the preferred beverage. It is not a white wine in the sense of a Western white wine, but rather a liquor.

Chinese people do not drink alcohol at home but only when in a restaurant or bar and in company of others. Alcohol beverages are often downed in shots with the objective of getting drunk rather than enjoying it slowly. Many Chinese down small glasses of wine in one swig while making toasts and shouting ganbei (“cheers”) before they drink. Sometimes they drink fine quality wines in this fashion.

Last but not least, a simplistic mentality exists in many parts of Asia: Eating is for eating and drinking is for drinking. Eating is done traditionally without any beverages that could distract from the pure taste of the food. This is true in most cities in China, Korea as well as Japan. Tea is the only traditional beverage served with food, more recently also beer[14].

2.2. The Emergence of Wineries

The domestic wine making industry began about one century ago, when in 1892 Zhang Bi Shi, an officer in the Qing government, established the Changyu winery in Yantai with an Austrian consul as wine-maker. He introduced 150 European vinifera wines. Many other wineries run by foreigners followed, all of which served mainly to produce wine for foreign delegates in China: Melco winery (today: Tsingdao) was run by Germans, Shangyi winery (today: Beijing winery) by French and Tonghua winery in Northeast China was managed by Japanese[15].

Since the late 1970s and early 1980s, foreign companies have been allowed to invest into wine businesses in China. Cognac giant Remy Martin was among the first ones to set up a joint venture winery (“Dynasty” in Tianjin). Other multinationals, such as Pernod Ricard with the “Beijing Friendship Winery” and Seagram with the “Summer Palace”, followed[16]. These companies brought advanced vinification equipment and foreign wine experts, i.e. oenologists, to China and produced the first 'Western style' grape wines[17].

In 1996, grape wine was promoted even by the government: During a presentation at the People’s Congress, it was emphasized that the increasing Chinese population makes the production of food vital. As mainly grain was used for producing Chinese “wine”, it was suggested to focus on the production of fruit wine. Thus, grain could be preserved for food production[18].

2.3. The Asian Crisis and Its Aftermath

The rising demand in the 1990s made domestic production and imports from abroad necessary. Among imported wines, French wines dominated sales. The high wine demand overheated the industry, which in turn resulted in an over supply when the Asian crisis hit the country in the mid-90s. At that time, there was an abundance of poor quality domestic and imported wines in China[19]. The negative consequences of these critical days for the industry lasted for a couple of years. Until the early 2000s, warehouses were still stuffed with large amounts of unsold wines. Importers who sent the products on consignment remained unpaid. For reasons of liquidity, stocks were sold off cheaply to Taiwan and other regions.

Consequently, the Asian crisis changed the industry in certain ways. Experts observed a “rationalization” of the industry, realizing that “the wine craze is over and that’s good”, as Spain’s regional sales commissioner Tomas Gomez stated in an interview in 2000[20]. Consumers in Asia became more aware of value buys, many small to medium-sized wine enterprises had to close down or reduce their product offerings and some domestic wine enterprises made their way up to become the industry’s leaders. The next chapter gives an overview of China’s wine industry today.

3. China’s Wine Industry: Facts and Figures

In 2009 China’s GDP grew by 8,7% and ranked 4th in the world. Retail sales rose 16,9%, according to the National Bureau of Statistics[21]. In terms of purchasing power parity, China ranks second worldwide[22]. About 211 million people are middle class in terms of income and over 300 million are middle class in terms of their consumption behavior[23]. The strong economic growth is the major force behind the increasing buying power of the Chinese consumers.

The market for domestic and imported wine developed rapidly and has grown steadily. Due to rising incomes, an establishing middle class and a better wine education, people are becoming more and more interested in wine. Moreover, young urban professionals are keen on taking on the Western lifestyle and tastes, and expensive high quality wine is as much considered a desirable luxury good as a designer bag or a German car.

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Table 1: Wine market revenues 2005 - 2009, in US$ million (Source: Datamonitor (2010) Industry Profile: Wine in China)

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Table 2: Wine market consumption 2005 – 2009, in million liters (Source: Datamonitor (2010) Industry Profile: Wine in China)

3.1. Market Value and Structure

Today, China has the highest wine consumption growth rate in the world. Since the 21st century, wine consumption in the traditional wine consuming countries has more or less remained the same, whereas the Chinese wine market has seen a prominent growth in wine sales. The entire Chinese wine market generated total revenues of $7,2 billion in 2009, with still wine sales being the most lucrative one, accounting for 90% of total wine sales with revenues of $6,4 billion (cf. Table 1 and Fig. 1).

Consumption-wise, the market grew by 4,7% to a volume of 545,9 million liters (cf. Table 2). According to a recent report, the market volume is expected to rise to 673,2 million liters by the end of 2014[24].

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Fig. 1: Wine market by segments, % of share by value (Source: Datamonitor (2010) Industry Profile: Wine in China)

Compared to the beer and liquor industry, the wine industry is much more concentrated. The same report names the three top players in the wine market, holding 49,2% of the market share by volume. All three, Yantai Changyu, China Great Wall Wine and Tonghua Grape Wine, are Chinese companies, of which Yantai Changyu is the market leader generating 20% of the market (cf. Fig. 2).

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Fig. 2: Wine market by share in % by volume (Source: Datamonitor (2010) Industry Profile: Wine in China)

3.2. China’s Domestic Wine Industry

Since China opened its doors in 1978, the domestic grape wine production has expanded enormously: At that time less than 10.000 liters of wine were produced annually. Two decades later, in 1998 the annual production was about 315 million liters.

According to a recent wine industry analysis, the Chinese wine industry has entered a high-speed growth stage in recent years. The international financial crisis in 2008 did not place severe influence on the Chinese wine industry. In 2008, Chinese wine production totaled more than 600 million liters, a 5% increase over 2007. In 2009, Chinese wine production amounted to over 1 billion liters, rising by 37,48% year on year[25].

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Table 3: World grape producers (in thousands of hectares) and wine producers (in thousands of hectolitres) 2009. (Source: Organisation Internationale de la Vigne et du Vin)

Grapes rank among the Top 5 fruits produced in China. From an international perspective, China ranks 2nd in grape production, behind Italy (cf. Table 3)[26].

With regard to wine production, China is on the 6th position, behind three European countries (Italy, France, Spain), the USA and Argentina.

3.2.1. Wine Regions and Brands

The growth of Chinese wine yards has been remarkable, too, with an increase of 113% over the past five years. There are several hundred wineries in the country. 26 provinces produce wine. The main areas of grape and wine production are in the Northern part of the country, around Beijing, in Jilin, Henan, Hebei, Tianjin, Shandong and Shanxi, providing around 87% of the entire domestic wine production[27] (cf. Fig. 3)

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Fig. 3: Regions of wine growing in China. Source: International Journal of Wine Research 2009.

[...]


[1] The wine market consists of champagne, sparkling and still wine, fortified wine.

[2] Datamonitor (2010) Industry Profile: Wine in China, p. 8. Online: www.datamonitor.com

[3] Pan, Suwen et. al. (2006), Alcoholic Beverage Consumption in China: A Censored Demand System Approach. In: Applied Economics Letters, vol.13, p. 975

[4] Eijkhoff, Pieter (2000) Wine in China – Its History and Contemporary Developments, p.23. Online: http://www.eykhoff.nl/Wine%20in%20China.pdf

[5] Shanghai Finance (2003), Chinese Wine, Chinese Liquor, Chinese Alcohol and Chinese Culture. Online: http://www.shanghaifinance.com/food/chinesewine.php

[6] Eijkhoff, Pieter (2000) Wine in China – Its History and Contemporary Developments, p.24ff. Online: http://www.eykhoff.nl/Wine%20in%20China.pdf

[7] Rong, Xu Gan and Bao Tong Fa, Grandiose Survey of Chinese Alcoholic Drinks and Beverages. Online: http://www.sytu.edu.cn/zhgjiu/umain.htm

[8] Gernet, Jacques (1962) Daily Life in China on the Eve of the Mongol Invasion, 1250-1276. p.134ff.

[9] The Hong Kong Tourism Board, 28 july 2010, Festive Food and Chinese Wine. Online: http://www.discoverhongkong.com/eng/dining/chinese-festive-wine.html

[10] Eijkhoff, Pieter (2000) Wine in China – Its History and Contemporary Developments, p.7. Online: http://www.eykhoff.nl/Wine%20in%20China.pdf

[11] Rong, Xu Gan and Bao Tong Fa, Grandiose Survey of Chinese Alcoholic Drinks and Beverages. Online: http://www.sytu.edu.cn/zhgjiu/umain.htm

[12] Eijkhoff, Pieter (2000) Wine in China – Its History and Contemporary Developments, p.22. Online: http://www.eykhoff.nl/Wine%20in%20China.pdf

[13] Guo, Hangyuan et.al. (2010), Chinese yellow wine and red wine inhibit matrix metalloproteinase-2 and improve atherosclerotic plaque in LDL receptor knockout mice. Online: http://www.ncbi.nlm.nih.gov/pubmed/20370796

[14] Cho Lee, Jeannie (2007) China: An Elusive Market. In: Wine Business, 1/07, p.59 Online: http://www.wine-business-international.com/Market_Watch_China-_An_elusive_market.html#

[15] Bretherton, Phil (2001), Market Entry Strategies for Western Produced Wine into the Chinese Market. In: International Journal of Wine Marketing, 13(1), p.23ff

[16] Bretherton, Phil (2001), Market Entry Strategies for Western Produced Wine into the Chinese Market. In: International Journal of Wine Marketing, 13(1), p.24

[17] Eijkhoff, Pieter (2000) Wine in China – Its History and Contemporary Developments, p.31. Online: http://www.eykhoff.nl/Wine%20in%20China.pdf

[18] Eijkhoff, Pieter (2000) Wine in China – Its History and Contemporary Developments, p.32. Online: http://www.eykhoff.nl/Wine%20in%20China.pdf

[19] Bretherton, Phil (2001), Market Entry Strategies for Western Produced Wine into the Chinese Market. In: International Journal of Wine Marketing, 13(1), p.24

[20] Kuen, Lai and Prudence Lui (2000), Wine Asia: What’s Happening to the Market?. In: Wines and Vines, july 1. Online: http://www.allbusiness.com/retail-trade/food-beverage-stores-beer-wine-liquor/616346-1.html

[21] China GDP Grows by 8,7% in 2009, CNN, 21 january 2010. Online: http://edition.cnn.com/2010/BUSINESS/01/20/china.GDP.annual/index.html

[22] Mitry, Darryl J. et. al. (2009) China’s Role in Global Competition in the Wine Industry: A New Contestant and Future Trends. In: International Journal of Wine Research, vol.1, p.2

[23] Fewsmith Joseph (2007), The Political Implications of China’s Growing Middle Class. In: Hover Institute, China Leadership Monitor, vol.21, p.1ff

[24] Datamonitor (2010) Industry Profile: Wine in China, p.11ff. Online: www.datamonitor.com

[25] Research Report on the Chinese Wine Industry 2010-2011, China Research & Intelligence, may 2010. Online: http://www.researchandmarkets.com/reportinfo.asp?report_id=1236321&t=t&cat_id=

[26] According to the yearly statistics of the Organisation Internationale de la Vigne et du Vin (OIV). Online: http://news.reseau-concept.net/images/oiv_uk/Client/Communique_Stats_Tbilissi_EN.pdf

[27] Mitry, Darryl J. et. al. (2009) China’s Role in Global Competition in the Wine Industry: A New Contestant and Future Trends. In: International Journal of Wine Research, vol.1, p.2

Ende der Leseprobe aus 36 Seiten

Details

Titel
China’s Wine Industry. A Brief History, Facts And Figures
Hochschule
Hochschule für Wirtschaft und Recht Berlin
Note
1,3
Autor
Jahr
2010
Seiten
36
Katalognummer
V298622
ISBN (eBook)
9783656948902
ISBN (Buch)
9783668143173
Dateigröße
673 KB
Sprache
Deutsch
Schlagworte
china’s, wine, industry, brief, history, facts, figures
Arbeit zitieren
Melanie Bobik (Autor), 2010, China’s Wine Industry. A Brief History, Facts And Figures, München, GRIN Verlag, https://www.grin.com/document/298622

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