– By Dan Siebers
In part 2, I discussed some anecdotal evidence about wine consumers in China. Now, here are some “hard facts” about importers:
– Total bottled wine imports in 2005Â were 1.15 million cases. In 2004, imports were 750,000 cases.
– The total number of importers in 2005 was 531.
– In 2005, 122 importers brought in more than 2,000 9L cases, 42 importers brought in more thanÂ 5,000 9L cases, and 21 importers brought in more than 5,000 9L cases in 2005 and imported wines from more than four nations.
The market is far too immature for regional specialists. Any seriousÂ importer should haveÂ wines from France, Italy, Australia, Spain, United States, and from at least one of the following: Chile, New Zealand, Argentina and South Africa.
Importers can be divided into several types, each with its advantages and disadvantages.
– For brand owners, the advantage is high marketing budgets, large financial resources, and very low system margins. The disadvantage is that they depend on wholesalers for distribution, which from a customerâ€™s point of view are tooÂ inconvenient in scope to use in a serious way. Major players are Gallo, Pernod Ricard (Jacobâ€™s Creek), and LVMH (Moet Chandon and Veuve Cliquot).
– The advantage of independent foreign-owned importers is they have consistently been most successful, while disadvantages sometimes include poor financial management and limited financial resources.
– For independent locally owned importers, their advantage is the best distribution to Chinese venues. The disadvantages are that distribution is relationship-based and thus limited (often to one city) and there is a lack of basic wine knowledge that leads to improper storage and sometimes a lack of basic logistics and operations planning (they sometimes order and pay for wine while lackingÂ the ability to import it). They tend to be commodity traders in nature and their distribution is often “purchased” rather than earned. The result is that this type of importer appears very often – and disappears at almost the same rate.
– One derivative of this group is “cowboys” – companies that import one shipment from one country and then never appear again. For example, in 2004 one cowboy imported 12,000 cases of Spanish wine – more than 20 percent of the 2004 total – in one shipment. The company never appeared again, and we never saw the wine in the market. These companies can account for 20-60 percent of total China imports, depending on how they are defined.
– Independent Hong Kong-owned importers have the advantage of a more convenient home base from which to start a company that imports and distributes into China. They sometimes have the ability to penetrate markets normally supplied by locally owned importers. Their disadvantages may include massive overconfidence leading to a lack of due diligence and proper planning. They chronically “have plans” to enter China without ever realizing them. And they often confuse and distort the market to producers trying to enter the mainland China market.
– Finally, Chinese wine companies have the advantage of the largest and widest distribution networks. Their customers demand “imported wine”, meaning anything red, cheap and not from China, with no other specification or need. These companies often import one wine from one brand from one nation. The disadvantage: this is essentially commodity trading, with little positive brand value and possibly negative brand building. It inevitably shifts to the company bottling bulk wine in China as its own brand.
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