Internal use only: Why boutique wineries in China are staying home

By Jim Boyce

Mike Steinberger of Slate wrote about the China wine scene earlier this year and we traded emails ahead of time on a few topics. One of them: Is the trend to create ’boutique’ wineries, often with Western consultants, turning out pricey wines that might appeal to international consumers and not just Chinese ones?” Five thoughts on this topic:

1. Given the size of China’s market and the growing spending power of its consumers, the opportunities are at home, which is evident from the clamor of foreign wine makers seeking a piece of the pie here. As the old Chinese saying goes, “Why fish in your neighbor’s pond when yours is full of trout?” (Actually, I made that saying up, but the point stands.)

2. Chinese wineries have “home court advantages” in terms of linguistic and cultural knowledge, bigger marketing and promotion budgets, and the ability to connect to consumers through wine tours, overnight stays, and so on. They offer familiarity and comfort to consumers who lack knowledge and confidence.

3. On the other hand, they have “away court disadvantage” in the highly competitive global market, namely, a lack of experience and quality wines. While some foreign consumers might shell out USD15 for a bottle of Chinese wine as a novelty, how many are going to drop USD250 for a wine that might not even qualify as entry-level in most major wine-producing countries? That’s a pretty tough sell.

4. China imports a significant amount of bulk wine. It can’t make enough wine for its own market, at least in the short term, let alone the kind of quality wine needed to command high prices abroad.

5. Finally, China is known as a manufacturer of mass goods, not “boutique” ones. Add in the high-profile scandals that have hit its food industry and many people have a bad taste in their mouths when it comes to Chinese products. Any Chinese company exporting boutique wine faces an uphill PR battle not to mention excruciatingly intense scrutiny of its products.

Chinese boutique wineries would no doubt be happy to have foreign consumers buy their wines, especially since it would serve as an additional marketing tool for selling at home (look, the French are buying it!). But, at least for the foreseeable future, the cash cow is in their backyard and, as I’ll explain tomorrow, they are milking it for all it is worth.

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