China: The Future Wine Capital of the World?

Starting in the 21st century, China became wine-crazy. The extremely wealthy were buying the world’s finest wines en masses for gifts and as status symbols up until recent financial turmoil and a government corruption crackdown . Although they’re currently feeling the hangover, the thirst of the market is not yet quenched.

The Dragon Awakens

The Chinese obsession with wine began in the early 21st century. At this time, it was seen as a status symbol of Western sophistication. Wealthy businessmen and bureaucrats fueled demand and prices of the finest wines from Bordeaux skyrocketed. Strangely, most of these sales came from two brands: Chateau Latour and Chateau Lafitte. These were the only brands Chinese consumers were familiar with, and only because they had been referenced in pop culture in the past. As Chinese consumers acclimate to the wine scene their desires will diversify.

“When foreigners come to a Chinese restaurant and open a menu [they are so confused]… and as a result, they eat the same dishes over and over again. It’s easy, it’s what’s famous, and it’s what they understand.” said Fongyee Walker, a wine consultant located in Beijing, during an interview for the documentary Red Obsession. “And, for a Chinese person coming to wine, it’s the same thing.”

Scarlet Fever

White wine is not nearly as popular as red in China, although this might have more to do with the culture in China rather than tastes. Red is considered the luckiest color and is associated with wealth and power. White has a similar function in Chinese culture as black does in Western culture. It’s the color of mourning and is worn at funerals (conversely, wearing red is taboo at funerals).

Red wine is thriving in China. From 2007 to 2013, wine consumption grew by 136%. According to International Wine and Spirit Research, China is currently the largest market for red wine in the world.

In China, wine made from grapes (as opposed to rice wine,which originated in China) is considered exotic. It’s new, it’s exciting. Compare that to countries like France, where wine has been around for hundreds of years. Wine is tradition is France, but it is not hip. As a result, wine consumption among France’s younger generation is in decline. Therefore,these old world wineries are channeling their efforts to catering to the Chinese.

In 2008, the same year as the Beijing Olympics, Chateau Lafitte made a small change to their bottle by placing the Chinese number eight right above the label. These bottles became so valuable in China that they ended up costed over $23,000 for a single one. Analysts assumed that prices would soon crash as this ‘Bordeaux Bubble” could not last.

Life after the Hangover

China’s recent economic decline, poor vintages three years in a row following two “classic” years, and an anti-corruption crackdown by the government resulted in a burst of the fine wine bubble. Import growth rates have been declining for two years straight, and no one is willing to pay the same prices for fine French wines as a few years ago. Other wine segments are now growing, with French wine imports shrinking to 43% of the import market after peaking around 49% back in 2010. Australian, Chilean, and Spanish wine sales are growing but still do not even compare to France’s market share with 17%, 11% and 7% of the market, respectively. In absolute terms, the market in still growing but at a much slower pace than half a decade before. Wineries abroad are now innovating ways to reach new customers.

Tastings conducted by foreign wineries are educating the Chinese in the intricacies of wine. Buyers are becoming more knowledgeable and choosing to diversify their collections with choices from across the world and younger consumers seem willing to try cheaper brands.

Looking Forward

Red wine is seen as a status symbol in China. With the Bordeaux bubble bursting and different regions gaining exposure via tastings, expect Chinese consumers to diversify their demands. Any winery looking to be successful in Chinese needs to respect Chinese culture.Even the smallest act of kindness, like what Lafitte did with their 2008 bottle, can pay dividends for years to come.

Additional Source:
Red Obsession (Currently available on Netflix)

Manuel Ferro
https://www.linkedin.com/in/ferromanuel