LOOKOUT CHINA, HERE WE COME

The U.S. is attempting to work their way into the Chinese market where the thirst for wine is growing and knowledge is limited. Hoping to sideline the dominate bigwigs, Australia and Europe, who have already made their presence felt for years, the California Association of Winegrape Growers undertook a year-long study.

The U.S. already has one less player to worry about. France has steadily been losing share in China where France holds 32% of the market today, only half of its market share 20 years ago.

Wine consumption in China is expected to grow 78% between 1999 and 2009, equivalent to annual growth of 7.8%, while domestic wine production is expected to increase just 2% year between 2004 and 2010. Domestic growers will not be able to keep up with the demands of Chinese wine consumers.

However, little knowledge of California wines currently exists. The CAWG study found that out of more than 30 supermarkets surveyed, not one promoted California wines. And out of those that did carry U.S. wine, the store employees had little or no knowledge of their existence.

Key players such as E&J Gallo, Constellation and Kendall-Jackson, along with some niche players, are positioning themselves to benefit from a maturing market with an exploding economy and rising middle class. Although it will take some determination and difficulty to move into China, many feel it’s worth the trouble along with a little planning. Wine-producers who are used to the fairly easy and more predictable U.S. market will have to use a very different strategy in China.

U.S. wineries will have to compete against fast-growing, low-priced Chinese wine that is much more affordable for the average consumer. The Chinese per capita income is only about $1,500, while the average California and Chinese wine brands sell for $15 and $4. Clearly a big difference. Also, distribution networks remain difficult to work through, and there is a need to develop a taste for high-quality wine among Chinese consumers.