China wine imports: Will the market shrink in 2012? Plus, more on Spain…

OK, how do we get the elephant *out* of the bubble?

By Jim Boyce

Those used to getting drunk on massive growth when it comes to wine imports in China are finding the numbers for the first half of 2012 to be quite sobering.

First, a few weeks ago I wrote that stats from China Customs showed wine imports from Spain were characterized by high volume and low value, and thus it was no surprise that country might be among those singled out for providing unfair subsidies — see The Spain Drain. (I never claimed there were any such subsidies, only that the numbers stood out.)

At the time, I only had January to March stats. I recently got the numbers for January to June and they strengthen the impression.

  • Spain saw the fastest growth by volume in the first half of 2012, up 47.2 percent year-on-year compared to overall growth of 12.3 percent.
  • On top of that, of the top ten import sources, Spain was the only one to see a drop in value per case. Yes, case value dropped less than a euro, but it was already lowest and it now stands at 20.7 euros, or 1.7 euros per bottle. Next lowest: Portugal at 24.3 euros and Italy at 26.1 euros.

In short, even more volume at even lower value.

Second, the overall growth numbers are striking.

In May, I wrote a post titledIs China seeing a slowdown in bottled wine import?” based on a longer article I did for Wine Business International (see here). I cited statistics and interviews with four people in the wine industry that suggested a slowdown. Possible reasons included too many distributors flooding the market, a filled pipeline of new wine bars, hotels, etc, an earlier Chinese New Year that boosted wine imports for 2011 numbers and reduced them for 2012, and economic uncertainty.

Given the first quarter 0f 2012 showed 15 percent growth in wine imports by volume, which is very light by recent China standards, and the first-half of 2012 showed only 12.3 percent growth, the market has obviously slowed further. The New Year is off the hook. But there are still too many distributors, too much stock and, perhaps crucially — especially if my discussions with alcohol distributors, bar and restaurant owners, and others in Beijing are any indication — increasing economic uncertainty. While things sound better when it comes to value, with 29.4 percent year-on-year growth, one source says this might be due in large part to exchange rate fluctuations and value reassessments.

As noted, sobering numbers and a sobering situation. One senior person in the China wine industry says that he is “almost convinced” we will see fewer imports in 2012 than 2011. Maybe, maybe not, but if such a situation came to pass it would be more than sobering. It would be the beginning of a hangover.

(Hat tip to TPNL)

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  1. I think you will see more drop in value and more increase in spanish wines for two reasons, it is a growing category in china which means more Spanish wineries are competing with each other offering better prices to get the deal done. And two of the biggest markets where spain used to do well are really slow in spain (USA and UK). So Spain has juice that needs to be sold.

    Other countries like NZ and CA have positioned them as premium player. Spain and Australia will always be a volume play and it will take time for those countries to become a super premium player. There are some huge wineries with great facilities.


  2. Hi Serena,

    Which second-tier and third-tier cities do you find are excited about California wines? All of them? Because there are certainly a lot of such cities.

    And I do agree sales, at least in the form of imports, are growing in China, though it is not clear how many of those imports translate into sales. Let’s hope lots of them.

    Cheers, Jim

  3. We still see strength in the sale of California wines and a new interest in “other than Napa” California wines. The second tier cities of China, and even third tier cities are excited about new options for purchase–including the new enthusiasm for “American Wines” and everything American. Looking good…Cheers. Serena

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