Winemakers uncork booming Chinese market

At China's sixth international wine exposition, western winemakers are offering hundreds of wines for sampling and experts are demonstrating the art of wine and food pairings.

They hope to infuse the increasingly affluent Chinese with a culture of wine, and boost sales in this booming market as their business in the other parts of world struggles.

The growing personal wealth, the need to impress and a perception that red wine has health benefits have caused the Chinese market to grow at a remarkable 20 percent per year, much faster than the world's average of 1 to 2 percent, according to the International Wine and Spirit Research (IWSR).

Having overtaken the United Kingdom to be the fifth largest market in 2011, the country will become the largest wine consumer over the next 20 years if the growth rates remain unchanged, it said.

The display at China's eastern Yantai city embraced domestic brands including Changyu, Great Wall, Dynasty and Weilong, and a number of world famous chateaux such as Lafite Rothschild, Mouton Rothschild and Montelena.

Some 450 exhibitors from leading wine producing countries including France, Spain, the United States, South Africa, Italy and Chile, came across the ocean to tempt the palate of the well-heeled Chinese and win their heart.

At one of the expo's biggest booths, D.O. La Mancha, Spain's primal wine region, has been touting the idea that their wines are a perfect match with some Chinese food. As visitors sipped and spat vintages, they were told that a crisp Airen, La Mancha's star white wine, goes well with many Dim Sum dishes, while a Reserva Tempranillo red wine will shine when paired with an abalone dish with a flavorful sauce.

The Chinese government has also been counting on domestic consumers to boost spending to restructure the export-driven economy and sustain growth.

China's wine consumption surged 28.26 percent to 1.55 million kiloliters in 2011, according to data provided by industry insiders. Imported wines accounted for nearly one-third of the market, up from less than 10 percent in 2006.

France, which has dominated the Chinese wine palate after pioneering efforts in the 1980s, supplies roughly half of China's bottled wine imports. While its leading position is unshakable for the time being, wineries in other countries are trying to woo the consumers with more affordable prices.

"Our products can compete with any, especially in terms of quality for price," said Josef Dolle, export manager of a La Mancha winery which traditionally focused on the European market.

"Our bottled wines are selling well despite the eurozone crisis because we're cheap."

In 2011, Spain surpassed Chile to become China's biggest exporter of the inexpensive bulk wine, with a 45 percent jump in volume from a year ago.

Currently, sales in China made up only a minimal amount of their total exports, Dolle said. But they saw a huge potential in the market, and have stepped up efforts to expand footholds.

Before 2010, Dolle had never been to China. However, in 2011 alone, he visited the country three times, and this expo trip marked his second time this year.

As foreign vintners are swarming to the Chinese market, local winemakers start to feel a twinge. Not only did they lose market share to western competitors, but they also saw a decline in profits.

The industry's average gross margin slipped to 30 percent from around 40 percent, said State-level Wine Appraisal Judge Sun Fangxun. But the figure still outperformed that of beer brewers, he noted.

Facing the western competition, Chinese wineries are unlikely to hike prices in the near term. Instead, they may strive for greater volume of sales, said Sun.

Local wine producers may hardly compete with foreign competitors in terms of grapes and wine-making techniques, but they know the market better. In contrast, a lot of big western vintners flopped in China after ignoring local culture or misusing marketing strategies, according to Sun.

"In lack of wine culture, Chinese would choose products by brands rather than tastes. And you have to do the networking, or your selling channels will be very limited," said Sun who has been working in the sector for 30 years.