– By Dan Siebers
This is partÂ 5 of 5. See also part 1, part 2, part 3Â and part 4.In part 4, I talked about brands in China. In this, the last part of the series, I look at distribution and at some of the “land mines” for producers to consider in the China market.
Here is some information about geographic segments in China:
– Shanghai is the most developed wine market in China and the headquarters for most wine importers. The relatively well developed Western restaurant scene is due to a more outward-looking Shanghai subculture.
– Beijing is the second most developed wine market, and is 5-10 years behind Shanghai.
– South China has the highest per capita income in China, with Guangzhou and Shenzhen as centers. It is 10-20 years behind Shanghai.
– There are 20-30 secondary cities spread across the country. They focus on the most inexpensive imported wines, even in five-star international hotels. They are 15-20 years behind Shanghai.
– Tertiary cities are found throughout the rest of China and have virtually no wine market other than the occasional premium Chinese restaurant that can sell serious amounts of Grand Cru.
As you approach these markets, and consider the consumers, wholesalers and distributors in China, here is some friendly advice that will hopefully allow you to avoid costly mistakes.
– You are your own worst enemy. Donâ€™t let your excitement cloud your judgment
– Be suspicious of any order. BeÂ very suspicious of any first order over 500 cases.
– Demand full prepayment.
– Do not use letters of credit from Chinese banks.
– If it sounds too good to be true, it probably is. The importer is often honest, but shares the same weakness as the producers when it comes to China – overexcitement based on impressions rather than facts. This leads to a lack of due diligence and planning.
– Even with prepayment, the odds are that the company will not be able to sell the wine and will dump it on the market. It is thus best not to put your brand anywhere on the label.
– Contact the importer’s other suppliers to ask about payment. Only ask other questions to people who have visited the market themselves.
– Ask the importer about basic statistics on the market, for example the total size of the market in 2004 and 2005. Make sure they understand the wine market themselves.
-Â Do not simply sell to the first person who contacts you.
– Do not put undue pressure on your export manager to enter the China market. Intelligent, professional export managers sometimes enter situations they know are high risk only because of pressure from owners who want their wines in China, a desire that arises from poor coverage in the media and inadequate facts.
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Kudos to Dan for his five-part series. I have some inklings of what he says. But he is the one who can put it altogether, lucidly and succinctly.
In this Olympic year the Chinese wine market will see a big surge not just because of the largest number of international visitors. The Chinese themselves will also try to be more international – if only to be fashionable. The question is whether the Olympic surge will translate into a long lasting trend. My feeling is that it will. How do you size it up Dan?