Can China’s Domestic Wine Compete with Imports?

With the generation born in the 1980s and ’90s coming to center stage as consumers, the Chinese taste for wine is changing. Red wine has long been considered a social gift in China, but that is evolving. According to a survey by International Wine and Spirit Research, China has overtaken France and Italy to become the world’s largest consumer of red wine. In the past, imported wine dominated the Chinese market. But with the global pandemic and the introduction of China’s anti-dumping policy, the consumption of domestic wine has soared.

GLG invited Liu Feng, a GLG Network Member and former vintner at the Grace Vineyard in Shanxi and the Ao Yun Winery of Moët Hennessy, to interpret the domestic and international wine landscape. This is a condensed and edited version of that interview.

What are the differences between domestic and imported red wine?

Why, after so many years, is China’s wine production industry still in its infancy? Why are many international wines cheaper and better than domestic ones? You can point to five clear reasons.

First, wine grapes. Wine making has specific and strict requirements for the grapes that make wine. Because China is still relatively new to wine growing, there is still room for grape quality to improve. Renowned wine-making regions in France, Italy, Germany, Spain, and other countries of the Old World have hundreds of years of wine history. Through experiments across terroirs and climates, they have developed their official varietals as well as growing guides. However, China’s wine-grape-planting history is relatively short. There is no strict standard in the selection of grape-planting areas, a lack of experience in soil management and inspection, and also a gap in cultivation methods.

Second, wine-making philosophy and technique. Wineries in either the Old World or the New World (New Zealand, Australia, the United States, etc.) have had their wine-making techniques and experiences handed down for decades or even centuries. However, Chinese wine making is still introducing equipment and ideas. We need time to nurture this sector.

Third, laws and regulations. Almost all world-renowned wine-producing countries have long-established laws for wine production, down to the details of grape growing, varietal selection, planting methods, harvesting time, wine-making methods, auxiliary materials, and other aspects. China has a huge blank in this field, and the current technical specifications of wine making fall behind those places.

Fourth, wine offerings. There are more than 8,000 types of grapes in the world, about 1,000 of which can make wine. In the Old World there are many varietals that have been preserved for wine making. At present, there are more than 50 popular wine varietals all over the world. Imported wines are products of thorough exploration of the local terroir and climate in terms of production style, regional varietals, and varietal ratios, resulting in a wine with regional marks, each with its own distinctive features. The New World countries, for their part, have been offering specific wines through practice for more than 100 years, by selecting the right varietals to grow with consideration to their terroir. China, though, still has lots of blind choices when it comes to wine production. Different regions may chase the same varietal despite their huge differences in terroir and climate.

Fifth, climate difference. China’s climate is fundamentally different from most wine-growing countries. Wine grapes prefer dry conditions, yet China’s grapes ripen from June to September, which is the rainy season for most wine-growing areas in China. That translates to rain and heat at the same time. Traditional wine-growing regions in other countries receive less rainfall during the ripening season.

Ultimately, China’s climate is not as suitable as that of other countries for wine growing. In China, the grapes must be removed from the rack and buried in the ground to survive winter. They are then dug out and put back the following spring. This process hurts the vines, and growers in other countries do not have to do this.

Who are the red wine consumers in China? What are the consumer trends?

Based on my years of observation, Chinese red wine consumers can be divided into the following four categories.

Wine connoisseurs. Chinese wine connoisseurs have a deep understanding and appreciation of good wine. They have a higher income, a higher level of education. They are willing to try trendy and new things. Most of them are millennials. They are more likely to seek wines that are rare and niche but fit their tasting profile.

Business-oriented wine consumers. This category of consumers buys wine mainly for business purposes, but they do have some wine knowledge. They have high brand awareness. Especially when serving business partners, they will choose better-known wines at the higher end of the price spectrum.

Emerging consumers. This group of consumers likes to socialize and pursue fashion, and it pays attention to the quality of life. They do not spend too much time learning about wine. They have higher incomes, but their consumption levels are not as high as those of the first two groups. They will choose to buy some affordable midrange wines.

Middle and low-end consumers. These consumers tend to choose cheaper wines, with the focus on its health benefits [ed note: Chinese believe that drinking some wine can have health benefits, especially anti-aging], and have a relatively basic knowledge of wine.

In the past, Chinese people drank to “please others.” Whether drinking at a dinner party or a social gathering, the consumption of alcohol was all about making others happy and then getting something in return. But now, drinking is to “please oneself” for its health benefits. Female consumers have also pushed up wine consumption.

What challenges do top domestic players face?

In addition to being hit hard by COVID-19, there are several other reasons for the serious decline in profits of some wine giants.

First, as economic growth slows, reckless consumption is gradually being replaced by rational consumption. With the deepening of the public’s understanding of red wine, their consumption tends to be rational, paying more attention to the cost of red wine. The proportion of affordable products in the market will increase.

Second, the fierce competition brought by newcomers. There are many new but influential wineries coming into being in China. These wineries are not as valuable as some of the industry leaders, but can serve as a weather vane within the industry.

Third, profit compression and transparency. In the past, information about wine was scant, and choices were more limited. Now wine at all price levels can be found on some apps.

Although the market share of imported wine in China has been rising, the import volume has shown a downward trend. In the future, Chinese wineries should conform to the evolving tastes of their consumers, upgrading and trying to replace the share of some imported wines.

Chinese wineries can learn the best practices of their foreign counterparts: hold wine tastings for wine connoisseurs, invite them to visit the wine-producing areas. This will also enhance tourism, catering, and entertainment in the region. They can also join hands with the cultural and creative sector to design distinctive wine brand logos and bottles, increasing the cultural and creative influence of the wine-making industry.

---

About Feng Liu
Feng Liu has 20 years of experience in the wine business and currently serves as an independent consultant to the domestic wine industry. During his career, he has been responsible for several winery projects, including winery and vineyard planning and design, production and daily operation management, grape planting, winery theme planning, and brand promotion. Mr. Liu has also studied viticulture and oenology in New Zealand and has many years of working experience in the New Zealand wine industry, and he is very familiar with red wine at home and abroad.

---

This wine industry article is adapted and translated from a Chinese-language GLG Remote Roundtable. If you would like access to events like this or would like to speak with wine industry experts like Feng Liu or any of our approximately 1 million industry experts, contact us.