Mainland's wines come of age

PUBLISHED : Monday, 05 June, 2006, 12:00am
UPDATED : Monday, 05 June, 2006, 12:00am

Critics who scoff at the low quality of Chinese wine are missing out on the competitive threat Chinese wine poses to the global wine industry. Cynics who joke about unsophisticated Chinese mixing wine with Coke fail to appreciate the reality that China is already Asia's biggest wine consumer and Asia's biggest wine producer.

In response to charges of the poor quality of Chinese wine, Bai Zhisheng, chairman of Hong Kong-listed Dynasty Fine Wines, said: 'In white wine, we're approaching international standards but in red wine we still have some way to go.'

The company planned to improve quality by adopting more French expertise, Mr Bai said. Dynasty was established as a Sino-French joint venture with French Cognac producer Remy Martin in 1980 when China's modern wine industry was born.

'It takes time to improve quality,' said Dominique Heriard Dubreuil, whose brother Francois and father Andre co-founded Dynasty.

Ms Heriard Dubreuil, the overseas chairman of Vinexpo, attributes the superior quality of high-end French wine to the centuries taken to cultivate the industry, whereas China's wine industry was only a quarter-century old. 'In the place where I live in Cognac, my ancestor was given permission to replant a vineyard in 1610.'

Bernard Tan, a wine merchant based in Singapore, said: 'Chinese wine is good value for money. The Chinese don't profess to make high-end wines.

'The Chinese have the ability to produce huge amounts of wine at very good quality-to-price ratio, like other products that the Chinese are pushing today such as textiles. Like other products, if wine is offered at a good price-to-quality ratio, it will find willing buyers,' Mr Tan added.

'In time, Chinese wines will be a competitive threat to mid-to-low- end wines from France, Australia, New Zealand and other countries.'

In Singapore, a bottle of Chinese wine sells for less than $100 while a bottle of mid-range Australian wine typically costs $200 and a bottle of high-end French wine costs $1,000 to $5,000.

'The global mass market for wine is huge, accounting for most of the world's wine market by volume. Everyone wants to get into the mass market. Chinese wine will be very competitive in the wine market in time to come,' Mr Tan said.

World consumption of still and sparkling wine reached 225.62 million hectolitres in 2004, growing at an annual rate of 3.6 per cent from 1999 to 2004, according to International Wine and Spirit Record (IWSR), a market researcher.

IWSR expects Asia's consumption of still and sparkling wine to grow 45.8 per cent from 2000 to 2010, to 9.2 million hectolitres of wine, representing 4 per cent of world consumption.

China produced 3.7 million hectolitres in 2004, according to IWSR.

Chinese wine accounted for 94.8 per cent of the volume of wine drunk in the country, while France was the biggest exporter of wine to China and Asia, IWSR said. China's consumption by volume was 3.87 million hectolitres in 2004, although Japan is the largest Asian wine consumer in dollar value, it said.

'The growth potential for grape wine in China is huge,' Mr Bai said.

Last year, China's wine market was 400,000 tonnes while the country's beer market was 30 million tonnes and the market for homegrown liquor like Moutai was five million tonnes, he pointed out.

A decade ago, China's wine market was growing 5 per cent annually but in recent years it has accelerated to 15 per cent a year due to rising incomes, Mr Bai said.

Last year, Dynasty's turnover rose 17.8 per cent to $947.5 million while net profit rose 7.9 per cent to $179 million.

'We expect Dynasty's revenue to grow at 15 per cent annually from 2005 to 2008 on the back of capacity expansion and rising wine consumption in China,' analyst Vivia Tong wrote in a recent KGI Securities report.

Mr Bai said Dynasty's production capacity would rise to 50,000 tonnes this year from 35,000 tonnes last year.

The company aims to increase that to 70,000 tonnes next year and 80,000 tonnes by 2010.

Nearly all of Dynasty's wine was sold in China, with less than 1 per cent exported, Mr Bai said. 'In the next five years, we will still focus on China.'

Ms Heriard Dubreuil said that wine production in China would boost demand in the country's domestic market.

'When a market becomes a wine producer, then it creates a home consumer base that knows and enjoys wine,' she said.

She cited the United States, which has been producing wine for a century. Since the 1980s, the typical consumption of wine by Americans increased from one glass at dinner to one bottle, she said.

'When you are a producer, you draw more consumers. The effort will be multiplied when consumers include wine in their diet, which they did not before. Then they try other wines. That is how they expand the market,' she said.

Key statistics of China's wine industry


2010 (Forecast)

China's wine production

3.7m hectolitres

4.2 hectolitres

China's wine consumption

3.86m hectolitres

5.7m hectolitres

Hong Kong's wine consumption

123,000 hectolitres

Asia's retail sales of wine



Source: International Wine and Spirit Record