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14/01/2016

Opportunities for Spanish wine in China

Manel González. Journalist

Spanish wine is becoming fashionable in China. Although as an industry it's still "immature" compared with other products which account for a significant portion of the agri-food trade in China, countries with a long-standing winemaking tradition are noticing its high growth potential, as they see a golden opportunity for exports.

What are the causes behind this "development"? According to the most recent report from ICEX (Spain Export and Investment) entitled The Wine Market in China, drafted by Guillermo Ruenes Pérez under the supervision of the Spanish Embassy's Economic and Commercial Office in Guangzhou, it's due to growth of the country's middle class, rising per capita income, and the sophistication of Chinese consumption.

China, now the second-largest wine-growing area in the world, produced 1.100 billion liters of wine in 2014. However, even though it's the fifth-largest wine consumer in the world, per capita acquisitions are still negative. According to ICEX's report, it's still not a "mature, informed sector on prices, varieties and qualities".

However, as we said earlier, the popularity of wine is increasing in China, with the result that bodegas around the world are setting their sights on its main cities: Beijing, Shanghai, Shenzhen and Guangzhou. The companies with more export experience have an advantage in a "highly competitive" market, according to the experts.

China mainly produces red wines which are inexpensive, poor quality and sold by leading brands via aggressive marketing strategies. This contrasts with imported wine, which is considerably more expensive and better quality than Chinese wine. ICEX's report provides some illustrative data: "the price of a bottle on the shelf of a Chinese supermarket is twice or three times the price of the same bottle in Spain" and "the price of wine imported by the hospitality sector is usually seven or eight times higher than its price at the winery". Is the higher price attributable to duties and logistics? No, it's also due to the fact that wine is still perceived as a luxury product. Nevertheless, the report says that "due to recent changes in the market, the price of wine is gradually sliding, creating opportunities for countries which sell wines with good value for money".

How is Spanish wine viewed in China?

According to Ruenes Pérez, “Spain is known as one of the world's leading producers". After all, it is the fourth-largest wine supplier in China (accounting for 6.7% of the total), trailing France, Australia and Chile. However, bulk wine imported from Spain for many years has left a lasting impression: broadly speaking, the Chinese see Spanish products as being cheap and of poor quality. Fortunately, this perception has been changing since 2011. In fact, the percentage of bulk Spanish wine heading to China is very small (4%).

In general, Rioja and Ribera de Duero are the regions and labels that are most well-known, if not the only ones that are known at all. This "weakness" of lacking renown faced by the wineries could revert; in fact, it's already happening among Chinese consumers "in the know", due to promotional efforts and, in particular, its value for money and the extensive range available.

Distribution

As regards distribution, according to ICEX, "structural changes are under way in several channels". It's worth noting that the HoReCa channel accounts for two-thirds of total sales. In 2013, anti-corruption policies and public spending restrictions on presents and parties led the Chinese government to crack down on gifts traditionally linked to the public sector. Channels with fewer intermediaries are also on the rise, mainly direct channels, purchasing groups and online sales.

Leading Chinese brands, large international companies, distributors of imported wine and other large business conglomerates are working in an "increasingly professional" way, doing their part to help drive the rise of wine in China.

Lastly, for Ruenes Pérez, Spanish wines are in a strong position in the race to carve out their space in China's extensive, competitive market, due to "some of their distinguishing values, such as their good value for money, the varieties available, and the cultural, tourist and gastronomic aspects surrounding Spain's wine sector". ICEX recommends "working together to build a clearly identifiable image and position for Spanish wines that enables them to position themselves around those attributes".

*Photos from Félix Solís Avantis: 1. Félix Solís Ramos, International Sales Director for Félix Solis Avantis, standing next to the Félix Solís Winery Co. Ltd. 2. Inauguration of the Félix Solís Winery in Shanghai (1989) 3. The team at Shanghai Félix Solís Winery Co. Ltd.

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