Wine History in China

Wine production has a long history in China, which can be dated back to the Neolithic Age, almost 5,000 years ago. Not only grape wine, but also the known rice wine and meat were made long before the time counting. As famous as wine became in China in the Bronze Age, it almost vanished during ancient times. A variety of other Chinese beverages, made out of millet, rice, sorghum or plums, replaced the grapes. Finally, the wine consumption increased again in the Han Dynasty (206 BCE – 220 CE) and started to become an inherent part of the Chinese Culture.

Other than in many of the nations in the world where wine often appears in the occasion of the dinner, worship or with the connotation of public decency, the purpose of drinking wine was different in China during early times. Scientists, like Luan Feng, the director of the archaeological research center in the Shandong University, China, believes that wine was originally drunk during funerals. This finding is based on wine vessels, jars and pottery from early times, which were found in Central Asia.

Later on, the Chinese either used wine as a libation to their forefathers to express reverence, or enjoyed it by themselves while writing poetry or prose, or to toast their relatives and friends during a feast.

During the past centuries grapes were also planted by the Jesuit practices who needed the wine for celebrating mass. In 1892 the first Winery (Zhangyu Winery) in Yantai was started and is still one of the largest in China. In 1910 the Beijing Winery started, who first produced mass-wine for use in religious services. After 1949 the government wave much attention to wine. The Beijing East Winery was established about 1956. For a deeper understanding of the wine history in China, its highly recommend to read the paper written by Pieter Eijkhoff: "Wine in China: its History and Contemporary Developments".

Wine Market in China Today

The capacities for wine growing in China are generally good. A wide variety of soils, many different climates, indigenous and imported grapes can be found. The most important wine regions in China today include the areas around Beijing, Shanxi, Ningxia, Sichuan, Yantai, Hebei and Jilin.

Nowadays, China is among the ten largest markets when it comes to wine consumption. The rise started with the import of foreign wines during the 1980's and the growth in domestic demand is expected to continue. But still, the current consumption of around one liter per capita per year is quite low compared with the largest consumer countries (around 30-40 liter per year).

Quite recently, grape wine from China appeared more often in shelves of western supermarkets and specialty stores. As one of the latest recognized members in the globalized world of wines, China slowly gains a better reputation for their domestically produced and exported products. The most popular Chinese brands are China Great Wall Wine, Dynasty Wine and Changyu Pioneer Wine.

A limited range of wines can be found in every Chinese supermarket and even in many of the small convenience stores. Most of the larger restaurants, hotels and cafés sell it by the bottle and some high-end establishments also by glass. The selection of wines, especially imported varieties, is increasing steadily.

Preferences of Chinese Wine Consumers

Since foreign wines were imported into China, the taste of the consumers started to change. Influenced by French and later other kind of imported wine, people begin to develop a subtler sense of taste for wine. The consumer taste matured with the diversification through imported wine.

The majority of Chinese wine drinkers still prefers to consume domestic products. The decision for a particular wine depends in the first place on recommendations by friends or family, followed by the origin of the wine. Everyday consumption of imported wine barely exists, so that the main reason to buy the more expensive, imported wine remains for gifts, parties or some special occasions.

In general red wine is overwhelmingly preferred by Chinese wine drinkers and is historically predominant. But there are also regional differences in taste and the way of drinking wine. Some consumers like to mix wine with lemon, ice or soda in order to achieve a sweeter taste.

Imported Wine in China

France was the first country which exported wine to China. With the beginning of the Chinese economic reforms in 1979, they started to build joint ventures with enterprises in China. Due to the low average income in China, the first attempts to sell foreign wine in China were not very successful. That changed with the turn of the millennium when the economic boom fueled the demand for imported wine and and more people were able to afford the more expensive wines.

LaTely, more and more foreign wine companies started to see the huge potential for imported wine in China's domestic market and followed the French predominance. Still, the French wines – principally from Bordeaux – are having the largest market share but other nations are catching up. According to a research, carried out by Wine Intelligence Vinitrac, the ten most popular wine producing countries for Chinese consumers are France, China, Italy, Australia, Spain, Chile, New Zealand, Portugal, Germany and Argentina.

When it comes to the kind of grapes which are imported to China, the most common red grapes are Cabernet sauvignon, Cabernet franc, Pinot Noir and Merlot. The imported white grape varieties include Riesling, Pinot Chardonnay, Semillion, Colombard and Chenin Blanc.

In 2012, China imported 286 million liter of wine at a total value of USD 798 million. That is an increase of 81% respectably to the previous year. Imported wine accounted for over 20% of the total wine consumption in China, up 6 percent points from 14.7% in 2009 (Data: VINEXPO).

A lot of global brands are facing problems to sell wine in China since the target group is very diverse und unfamiliar for most foreign businesses. Companies have to gain a deep understanding of preferences and buying behaviors of Chinese consumers in order to reach them. Most channels and sales strategies need to be adapted to the given circumstances in China.

Special Regulations for Wine Importer

There is no need for a special license to import wine into China. When a company decides that it manages it custom clearance itself, its Chinese subsidiary needs to be registered as a Foreign Trade Operator after establishment, otherwise an import agent must always be engaged.

Since the food and beverage industry is subject to the strict administration of the Chinese food safety law and other relevant regulations, foreign importers have to apply for the food distribution permit at the local Administration of Industry and Commerce (AIC). To sell wine directly to customers, the company must be included in the business scope of the Chinese entity's license.

The labeling of imported wine is subject to strict regulations. The CIQ (China Entry-Exit Inspection and Quarantine Bureau) categorizes wine in production batches, each requiring separate labeling. Wine from a different harvest will be viewed as a different production batch, regardless of how similar the labeling is.

The import duties and consumption tax for Wine (Wine made from fresh grapes, including fortified wines) consists of Customs tariff (14%), VAT (17%) and Consumption tax (10%). Some countries (New Zealand, Chile and Peru) are exempt from customs tariff due to their free trade agreement with China.

The Future of the Chinese Wine Market

It is a common opinion that the Chinese wine consumption will continue to grow in the future and attract more foreign wine companies. The competition will become denser and rivalry between wine importers will increase. A study by VINEXPO expects that the total wine consumption of China will reach 127 million 9-lit cases by 2014. This means a growth by approximately 20% per year.

A brand new report, released by Radobank at the VinExpo 2012 in Hong Kong in May 2012, offers revealing forecasts for the wine market in China. A summary of the most important outlooks:

• one challenge for wine importers remains to build the bridge between the unfamiliar consumers and the huge demand for imported wine
• imported rose wine increased by 65% ​​year over year and offers huge growth potential
• Chinese domestic winemakers structure their business and will try to gain back some market share from foreign wine importers
• the competition among foreign wine importers becomes more aggressive (almost 4,000 companies in 2011 which correspond to a growth of 200% in the last five years)
• the number of younger, wealthy wine consumer is growing overproportional
• brands, as a guide for a purchase, will become even more for the Chinese wine buyer important in the future