Two-headed dragon | While local wines improve, China’s producers grab more import share

The right canopy has been trimmed, the left one has not, to gauge the effects.

Update: Along with the Changyu info below, I’ve posted more details at this link on key companies ranked among the top 100 bottled wine importers in China.

By Jim Boyce | As many who follow the wine scene here know, the recent Asian Financial Review headline “China’s Weilong aims to beat Treasury Wine Estates at own game” is symbolic of a bigger trend.

Most people I talk to think the biggest wine importers are those whose labels are in supermarkets, corner shops or restaurants in Beijing, Guangzhou or Shanghai. Names like ASC, Aussino, Pernod Ricard, Torres and Summergate come to mind.

But of the 5,000-plus firms that imported wine in 2016, only one of those makes the top 20, according to China Customs. Instead, the list is heavily populated by logistics firms that bring in wine for online retailers, supermarket and regional wholesalers. (I’ll post soon, both here and in my newsletter, about the top 100 players.)

One name that stands out in the spreadsheet is Changyu. It’s not only China’s biggest producer, it also has the ambition to match.

Changyu has been very active in recent years. It has built massive “chateaus” across the country with an eye to wine tourism, although that business is still yet to take off. (My dozen trips to Changyu operations in three regions revealed few visitors save for couples taking wedding photos.) And it also has global distribution ambitions, although those have already seen one ‘reset‘. While the company’s domestic measures have perhaps brought results below expectations, they are at least positioned to excel.

Where Changyu is also increasingly active is with imports: it ranked sixth in 2016, just a few steps behind ASC, with over 7 million bottles, more than double its volume in 2015. Given Changyu’s plans to add overseas wineries to its stakes in properties such as France’s Château Mirefleurs and Spain’s Marques del Atrio, we can expect this number to rise.

There are certainly incentives: Chinese production is stalling; imported wine has taken an increasing market share and has a good reputation with consumers; and Changyu can leverage its vast distribution network and massive marketing power. Why settle for a regular-sized bottled of wine when you can diversify and possibly come away with that magnum?

And Chinese companies buying wineries abroad is hardly a new story. The list of purchases is long, from Alibaba’s Jack Ma picking up three French properties, to regional winery Ningxia Red buying Bordeaux’s Chateau du Grand Moueys, to major Chinese producer COFCO, which makes Great Wall and other brands and was 36th biggest importer in 2016.

That brings us to Asian Financial Review and its recent update about Weilong in Australia, a country second only to France as a source of bottled wine for China:

China’s third biggest wine company is aiming to have an $80 million winery up and running by 2019 near Mildura to mirror the export strategy of big Australian rivals including Treasury Wine Estates, and says short-term red tape won’t crimp its long-term plans.

Weilong Grape Wine Company, which operates the Grand Dragon wine brand, has a permit from the local council for the construction of the winery. It is just a few kilometres from the vast Karadoc winery in north-west Victoria operated by Treasury, which produces a number of brands including Lindemans. The Weilong winery is being described by experts as one of the largest infrastructure investments in the $4 billion wine industry in Australia in the past decade.

The rise of Chinese companies controlling wine brands from overseas vines to domestic sales is a story well worth watching. While these wineries are usually claimed to be for slaking the thirst of China’s market, who is to say they won’t eventually battled with domestic players in their respective countries, with profits flowing back to China? While Chinese-made wines make inroads into those very same markets? Perhaps that sounds a bit far-fetched, although others have no doubt contemplated it, but there are major forces at work when it comes to wine and China.

There are also more angles to this story, from top overseas brands teaming with major China producers for distribution to e-commerce sites going around traditional suppliers to directly import wine. Unfortunately, I’m on deadline at the moment, but I will post more about this soon (posted here), including about the well-known players in the top 100 import list.

(Thanks to TLW for the data.)

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