China: big country, small wine market
Chinese wine drinkers are brand-driven and focused on price.
Wine importer and distributor Scott Hitchcock, left, sampled Butch Milbrandt’s wines (Milbrandt Vineyards) during the Washington Wine Commission’s Wine Experience. Hitchcock came to learn about the potential of importing Washington wines into China.
China and its 1.4 billion population is one of the world’s largest markets for many products. For wine, it’s actually a small market, though it has great potential. About 1 percent or 14 million of the population currently drives wine sales, but the overall wine market could grow to 100,000 to 130,000 million people, according to a Chinese wine distributor.
Scott Hitchcock, founder and general manager of Plus Wines, a small foreign wine import distributor based in Shanghai, China, likens today’s Chinese wine market to the U.S. wine market of the late 1960s, a time when California was mostly known for producing bulk wines (jug and table wines) and the market was dominated by either names like Gallo and Heublein or imported European wines.
“The Chinese that have a lot of money and travel outside the country have developed a taste for French Bordeaux wines,” he said. “They are brand-driven and buy recognizable brands.” He said businessmen entertaining and hosting want top French labels such as Chateau LaFite Rothschild and Chateau Latour. Of the wine imported by China, about 40 percent comes from France, according to Hitchcock. He describes the local Chinese wine as “horrible” and “probably bad for your health.”
Red wine is popular with Chinese, outselling white wines by eight to one, Hitchcock said. “Red is a lucky color for the Chinese, and there’s also the French connection and health reasons.”
And though they buy Old World, European wines, in blind tastings most Chinese consumers prefer New World wines.
The wine consumers in China are at two ends of the spectrum. Affluent consumers can afford established brands, but at the other end are consumers buying inexpensive, imported bulk wines from places like Chile that are bottled in China.
“They’re at the early stages in their wine culture,” he said. “It’s like they still have training wheels on. Much of what they drink is cheap, foreign imports. The next step is to get them into entry level wines, like a Mondavi Woodbridge,” he said.
Hitchcock visited Washington State in early May as part of the Washington Wine Experience, a four-day whirlwind tour of vineyards, wineries, and wines hosted annually by the Washington Wine Commission for international wine buyers, distributors, and trade media. It was his first visit to Washington’s wine industry.
He said the Wine Experience tour was excellent and well organized, and he enjoyed the people and wineries. “The education forums were so informative and fun, too. The landscapes there in Washington State are so beautiful. And, as far as the wines, I was really impressed on the quality level. Well balanced, structured, and good acidity with mineral overtones seems to be a consistent theme in the wines I tasted.”
Before starting his own wine import company, he worked for a foreign wine import distribution company and the largest wine import distributor in China. He spent two years in Shenzhen, China, as general manager for one of the companies. Hitchcock is originally from California, with connections to the Golden State’s wine industry, and he has connections to France, having lived in Bordeaux.
His company is focused on serving the second- and third-tier cities in China, such as Chengdu, Harbin, Kunming, and Qingdao, where competition among wine distributors is not as strong and the wine markets are young and developing. His goal is to offer better wines for reasonable prices and to help improve the overall quality of the wine culture in China. Thus far, the Plus Wines portfolio includes French, South African, and Italian wines entering China for the first time, but other countries will be added in the future.
Although Hitchcock did connect with a few Washington wineries that could be potential sources in the future for Plus Wines, he said the main obstacle is price for the China market.
“Washington wines in China are a hard sell because of their price points,” he said, noting that imported wine is taxed heavily at 48 percent. “Wines need to retail between $9 and $25. If they go above that, they’ve got to be a famous, well-recognized brand.”
Washington wines themselves are very good values as measured by quality versus price against wines from other major producing regions, he said. “However, in the case of the China market, this will not allow easy entrance there. The main issue is the starting price points of many Washington wines that are too expensive.”