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‘Buzz, energy’ around China’s premium wine industry, and it’s only going up

‘Buzz, energy’ around China’s premium wine industry, and it’s only going up
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The two brothers who run Qingdao Lilong Winery of China quietly served samples of their bubbly Sancaro brand to a trickle of people in a corner of the vast Vinexpo Asia in Hong Kong last week, tucked behind festive and crowded displays from Australia, France and California.

Overall, just 10 of the 1,030 producers and distillers who exhibited over the three days at the end of May came from mainland China.

But Lilong has built a following in China for its sparkling wines since 2012, hitting a peak in 2020 with 30 million bottles sold.

“We’re not so interested in surpassing imports – not thinking that way,” Lilong representative Yu Zhiyong said.

“I think premium wine can represent a region’s local resources. We have created our own consumer base by promoting the wine itself.”

The winery sits on 53,300 square metres (573,716 sq ft) of land, and obtains its grapes from a vineyard north of the coastal city Qingdao.

I’ve had quite a few of them [to drink] that are at international standards

Ian Ford, Nimbility

Chinese premium wineries such as Lilong are edging into the domestic market as consumers scout for unique flavours and prefer national brands over foreign equivalents, although imports are expected to remain the dominant force.

The domestic premium wine sector in China has spawned several hundred operators over the past decade, but it remains small compared to overseas peers due to its adolescence and lack of land that can yield high-end wine grapes.

“There’s a lot of buzz and energy in that space. I’ve had quite a few of them [to drink] that are at international standards,” said Ian Ford, the Shanghai-based founder and chief executive of Nimbility, a brand and sales management company for alcohol sold in Asia.

“It’s only going in one direction. It’s going up.”

Industry giants Changyu Pioneer Wine and China Great Wall Wine, which both make relatively cheap products, boosted China’s vineyard coverage to the third largest in the world by area at 756,000 hectares (1.87 million acres) in 2023 behind Spain and France, according to an estimate by the International Organisation of Vine and Wine trade group.

China’s grape wine production reached 4.2 million hectolitres (420 million litres) in 2022, according to the trade group, which would place it behind 11 other countries globally, including Argentina, Australia, Chile and the United States as well as several in Europe.

Bottles shipped from Chile, France, Italy and South Africa also appear in China’s restaurants and supermarkets.

Domestic premium wines could eventually outdo imports due to a lack of import tariffs and international shipping costs, analysts said, but building name recognition would take years.

“The volume of Chinese premium wine has been increasing over the past couple of years, but in terms of marketing, people might not be aware of the quality,” said Paul Tsui, founder of the Hong Kong-based wine logistics firm Janel Group.

Still, he said, “more and more people recognise the quality of the wine”.

The western Ningxia Hui autonomous region has become a top source of premium wines due to its climate and elevations, and has created a “price bubble” that may have improved the image of China’s wine industry as a whole, the JS Wine Ratings website said in a 2023 commentary.

There’s the language, also the culture and feeling of supporting local producers as well

Rob Temple, Sinowine

Vineyards are also sprouting up in the provinces of Shandong, Shanxi and Yunnan, with the likes of Helan Qingxue, Xige Estate and Grace Vineyard already established premium brands.

Consumers pay between US$35 and US$50 per bottle for high-end Chinese wines, which is often more than the cost of imported alternatives, Ford said.

In some cases, he added, domestic consumers drink local wines simply because they are local.

“Wherever you go in the world, customers feel comfortable if the name is familiar,” said Rob Temple, managing director of Hong Kong consultancy Sinowine.

“There’s the language, also the culture and feeling of supporting local producers as well.”

Premium brands have taken off because Chinese consumers want “integrity”, such as knowing a vintner’s backstory, and that the product is local rather than partly imported, Temple added.


Chinese wineries gaining domestic recognition amid Covid-19 pandemic

Chinese wineries gaining domestic recognition amid Covid-19 pandemic

Chinese white wines are “refreshing”, while red wines are “rich”, said Liu Yibo, a 39-year-old Beijing-based wine consumer and the founder of a forum on domestic wine culture.

“The taste of premium wines in China shouldn’t lose out to wines from overseas,” she said.

And consumers who can afford a 2,000 yuan (US$276) bottle care about subtle differences in taste, said Huang Fei, general manager of the Shangri-La wine brands under Beijing-based ZJLD Group.

Huang’s grapes grow over an elevation range of 5,000 metres (16,404 feet) in Yunnan province, with flavours varying within the area.

“This kind of land resource is quite rare – high elevation and low latitude,” he said at Vinexpo in Hong Kong.

Huang said middle-class Chinese pay up to 1,000 yuan per bottle and feel comfortable at 500 yuan. His wines range from 500 yuan to 2,000 yuan.

I think [Chinese brands] have a better reputation than in the past

Graeme Hogan, Best’s Wines Great Western

“We can’t replace exports,” Huang said. “It’s sometimes because of their reputation and sometimes because of personal preferences – or it could be because foreign wine quality is good.”

China’s premium brands would eventually rival imports by avoiding tariffs, shipping costs and production that may be more expensive overseas, Temple said.

“I think [Chinese brands] have a better reputation than in the past,” said Graeme Hogan, national sales manager at Best’s Wines Great Western in Australia.

Their rise, he said, should generate more interest in wine overall.

“Once they get to drinking wine, they may go ‘I might try a bottle of Australian wine to see what that’s like’,” added Hogan in Hong Kong while exhibiting his products alongside other Australian labels.

The people who are doing it love doing it. It’s about passion

Andy Xie, economist

But China’s middle-class consumers have cut back on premium wines because of wider economic uncertainty since 2020, Ford said.

China’s bottled wine imports fell by 17.6 per cent by value to US$1.09 billion and 29.1 per cent by volume last year, according to the China Chamber of Commerce of Import and Export of Foodstuffs, Native Produce & Animal By-Products.

France, Chile and Italy were the top suppliers of bulk and bottled wine combined last year.

Consumer hesitation leaves premium winemaking in the hands of vintners, said Andy Xie, an independent economist in Shanghai.

“The people who are doing it love doing it,” he said. “It’s about passion.”

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