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China Wine Market Snapshot

Cover Image: www.istockphoto.com

APRIL 2010

Authors: Philip Webley, Project Manager, Victorian Employers’ Chamber of Commerce and Industry (VECCI)
Employers’ House, 486 Albert Street, East Melbourne Victoria, Australia, 3002.

Stephanie Jiang, Manager, Sino Access Room 1408, Ramada Yihua Hotel, 45 North Zhongshan Road, Nanjing 210008, China.

Bryan Balmer, Manager, Thailand and Vietnam, Department of Primary Industries,
Level 29, Central World Tower, Rama, 1 Road, Pathumwah, Bangkok 10330, Thailand.

Lucy Ridley, Project Officer, Strategic Market Analysis, Department of Primary Industries.
1 Spring Street Melbourne, Victoria 3000.

ISBN 978-1-74264-062-4 (print)
ISBN 978-1-74264-063-1 (online)

Contents

Executive Summary
Introduction
Import of Bulk Wines
China Sparkling Wine Imports
Import Duties
Food Safety Regulations
Chinese Consumption Patterns
Distribution and Retail Channels
China Wine Industry Summary
Chinese wine Production
References

Executive Summary

China is now the world's fastest growing wine consumption market. It has rapidly become Australia's fourth largest export destination for bottled wine with exports worth US$87 million in 2009 up from only US$6 million in 2004. Australia is now China's second largest supplier of bottled wine next to France, supplying 21% of China's imported bottled wine. Australian wines have appeal to Chinese palates with their strong fruity flavour.

Over the last ten years, wine consumption in China has exhibited the strongest growth amongst all alcoholic beverages. In 1999, retail wine sales were only 3.76 billion RMB. By 2008, this increased to about 20 billion RMB, an average annual increase rate of about 20%. For the first time in 2009, bottled wine imports exceeded bulk wine import volumes. This trend reflects the demand for good quality wines that suit a growing middle class consumer base.

In terms of quantity, annual per capita consumption of wine in China is still only around 0.5 litres per annum, a fraction of the consumption in western countries. However wine consumption has been growing at around 7% per annum; a much higher rate than traditional wine drinking countries which have been growing at 1% only in recent years.

Wine drinking is increasingly considered a healthier alternative to spirits and is somewhat trendy. Still red wines are particularly popular. Wine bars and boutique wine stores have flourished in the major cities of Shanghai, Beijing and Guangzhou. Young urban professionals and business people account for most wine consumed in bars and hotels. The retail sector is also experiencing growth, with many supermarkets and other outlets stocking a range of domestic and imported wines. In many instances the purchase of imported wine is for a special occasion gift or to serve at a restaurant banquet to impress guests.

China is also becoming a wine producing country in its own right, and in the past few years has made some progress developing local premium wines. Some European wine houses have started producing wine in China, particularly in the Penglai region of Shandong Province which has climatic and soil conditions similar to those of the world famous wine region of Bordeaux, making it a suitable growing region. The quality and brand recognition of local wines is increasing, with the local industry recognizing that brand and packaging are important and spend large amounts of money on advertising and brand building.

Chinese distribution companies are fast gaining wine marketing expertise and many new companies have joined the industry with the rules for establishing private import/export businesses being relaxed in recent years. These privately owned importers are now starting to take market share from foreign distributors and in some cases have an advantage in being able to tap into local corporate and government client networks.

Since joining the World Trade Organisation, (WTO) China lowered its wine import tariff rate to 14% from 65% (excluding consumption and VAT tariff) creating more opportunities for foreign wine against local products and higher taxed spirits. Although China is still emerging as a wine consumption market, the prospects for continued growth are huge because of the rapid increase in wealth and increasing urbanisation of the population.

Introduction

China, being the most populous country in the world has huge potential as a growth market for wine. In 2009, China was the second-largest economy in the world after the United States of America (on purchasing power parity basis) although in per capita terms the country is still lower middle-income (CIA 2010). It is estimated that by 2025, there will be 221 Chinese cities with a population greater than one million, compared to only 35 cities in Europe (McKinsey & Co 2009). Rapid economic growth has produced a middle class with the capacity to pay for imported foods and premium products of all types including wine. Reflecting this, now the world's fastest growing wine consumption market.

Wine drinking is considered a healthier alternative to spirits and somewhat trendy, with still red wine being particularly popular. Young urban professionals and business people account for most wine consumed in bars and hotels, in the main cities of Shanghai, Beijing and Guangzhou (NZTE 2009). The retail sector is experiencing growth, stocking a range of imported wines. In many cases the purchase of imported wine is for special occasion gifts or to at a restaurant banquet to impress guests.

In Asia, wine sales have doubled over the past decade, with China and Japan together accounting for 80 percent of the total Asian market (Thorpe 2009). China only began importing bottled wines in the last 15 years or so, and only in recent years, have consumers begun to develop a taste and preference for particular wine types that compliment food. Growth in wine consumption from 2001 to 2006 averaged around 7% annually, in contrast to global demand which grew at just over 1% during the same period (Thorpe 2009).

In the past five years, Australia has been gradually gaining market share of bottled wines from traditional market leaders including France, Italy and Spain, and bulk the wine segment mainly supplied from Chile and used for local blending. These trends reflect the demand for good quality wines that suit a growing consumer base (Thorpe 2009).

In 2009 Australian wine exports to China were valued at A$131 million, an increase of 75% from 2008 (GTIS, from Australian Customs Data, 2009).

Chinese bottled wine imports (excluding sparkling) have grown hugely from US$25 million in 2004 to US$377 million in 2009 as shown in Figure 1. The volume grown from 7 million to 91 million litres over the same period (GTIS, China customs data, 2009). China is now Australia's fourth largest export country for bottled wine (excluding sparkling) growing from US$6 million to US $87 million in 2009.

Figure 1. Bottled Wine Imports (excluding sparkling) 2004 – 2009 US$ million

Source: GTIS, (from China Customs Data), 2010

France still dominates with 48% market share of the imported bottled wine segment in 2009. Australia had 21% share and other producers such as Italy, Chile and the USA have only 6% or less, as shown in Table 1

Table 1. Market Shares of Chinese Imported Wine

Country	Bottled		Bulk
	2008	2009	2008	2009
Australia	20%	21%	4%	27%
France	46%	48%	8%	5%
Italy	8%	6%	5%	0.2
New Zealand	2%	2%	<0.1	<0.1
South Africa	1%	1%	2%	3%
Chile	5%	6%	50%	47%
Spain	4%	3%	7%	3%
USA	5%	6%	5%	8%
Others	9%	6%	17%	5%

Source: GTIS, (from China Customs Data), 2009

Prices paid for imported wines in China declined in 2009, reflecting increasing supply competition from both established and lower priced producers such as Chile. According to GTIS Chinese Customs data (2010), the unit price for Australia's bottled wines was US$4.29 per litre in 2009, behind New Zealand and France. France receives US$0.17 cents per litre more for bottled wine than Australia, suggesting much of the French wine entering the market is at relatively low price points (GTIS, from China Customs Data 2010).

Table 2. Average Price of Imported Wine US$/Litre

Country	2006	2007	2008	2009
World	3.82	4.35	4.80	4.14
Chile	3.34	3.21	3.42	3.54
Italy	4.07	3.5	4.28	3.58
Australia	3.73	4.15	4.72	4.29
France	4.24	5.33	5.53	4.46
Chile	3.34	3.21	3.42	3.54
New Zealand	7.12	7.07	8.82	8.07
Germany	3.94	4.46	5.68	4.95
United States	3.19	3.64	3.82	3.34

Source: GTIS, (from China Customs Data) 2010

According to the latest statistics from the National Statistics Bureau, (NBS China, 2009) imported wine has around 20% market share in China. The majority share is occupied by low to mid priced domestically produced wines retailing at A$3.20 to A$ 9.60 per bottle. The sharp increase in wine imports can be attributed to:

• Consumption tax on White Spirit (rice wine) has risen causing a price increase on spirits.
• Import duties (bottled wine) dropping from 65% to14% following China's accession to the WTO. (wine.info.com. 2009).
• Overall wine demand has increased and this has pulledin more imported wine.

Import of Bulk Wines

Over the past couple of years, bulk imported wines have been losing market share to imported bottled wines in China. From 2005 to 2008, bulk wine (greater than two litre packaging) had twice the volume of imports compared to bottled wine (less than two litre packaging). However, in 2009, bulk wine imports of 80.2 million litres were exceeded by volumes of bottled wines at over 90 million litres, as bulk wine imports in 2009 shrank by 24% over the previous year. The shrinkage in bulk imports is explained by expanding Chinese vineyard acreages and growing domestic grape production increasingly able to supply the needs of domestic wine producers. While overall bulk imports from the world declined in 2009, bulk imports from Australia surged to US$18.9 million in 2009 from US$3 million the previous year. Australia’s market share in this segment grew from imports to China with 47% share (see Figure 2). The extra bulk supply from Australia in 2009 reflects the glut ₅ of grapes and wine in Australia, with producers offloading wine at low prices. According to Chinese Custom’s data, the price per litre of Australian bulk wine imported into China was only US$0.85 per litre in 2009.

Figure 2. China Bulk Wine Imports 2004-2009 US$ million

Table 3. Import Price Comparison 2008-2009 US$/L

	Bottled		Bulk
Country	2008	2009	2008	2009
Australia	4.7	4.3	1.2	0.8
France	5.5	4.4	1.2	1.4
Italy	4.2	3.6	0.8	1.0
New Zealand	8.8	8.1	n/a	n/a
South Africa	3.5	3.5	n/a	n/a
Chile	3.4	3.5	0.9	0.7
Spain	3.8	3.0	0.6	0.6
USA	3.8	3.3	1.0	1.2
World	4.8	4.1	0.8	0.8

Source: GTIS, (from China Customs Data), 2010

China Sparkling Wine Imports

Chinese sparkling wine imports declined to US$15.65 million in 2009, down from US$20.3 million in 2008. This reduction may be due to the Global Financial Crisis and a preference for other wine types by Chinese consumers. France dominates this sector with 74% market share. Australia sold US$623,000 of sparkling wine in 2009. While volumes of Australian sparkling wine into China increased by 6% in 2009, the total value was down 9.7% reflecting lower prices. See Figure 3.

Figure 3: China Sparkling Wine Imports 2004–2009 US$ million

Source: GTIS, (from China Customs Data) 2010

Table 4: Chinese Wine Import Ports 2008

Main entry port for wine in 2008	Import value USD million	Increase rate over 2007 %
Shanghai	140	44
Shenzhen	120	70
Nanjing	5.5	71
Yantai	6.9	30
Wenzhou	4.38	N/A

Source: China Customs Statistics

Import Duties

The import tariff rate for wine in less than 2 litre packaging has been lowered from 65% to 14%. Australia has done well to increase market share over the past few years in the face of increased competition, though still faces challenges from both new world countries such as Chile, (who have strong government sponsorship), New Zealand and the United States as well as old world countries such as France and Italy. Both Chile and New Zealand have the added advantage of Free Trade Agreements, that in the case of New Zealand, sees China import tariffs reduced on a yearly basis from 14% in 2007 to zero in 2012 (NZTE 2009).

At the beginning of 2008, the Hong Kong Government announced the elimination of import duties on wine. This policy was favourable in stimulating more high quality wines to enter China through Hong Kong. It also meant that imported wine became more competitive with the domestic product.

A consumption tariff rate of 10% and a value added tax (VAT) rate of 17% are also imposed on imported and domestic wine.

Food Safety Regulations

New Food Safety laws were enacted on 1 June 2009 and are applicable to both imported and domestically produced food (Austrade, 2010). Wine producers are now required to indicate a lot number on the body of wine bottles. The lot number can be either the date of bottling (yy/mm/dd) or a batch code reflecting the production (NZTE, n.d).

Chinese Consumption Patterns

Over the last ten years wine consumption has exhibited the strongest growth amongst all alcoholic beverages. In 1999, retail wine sales were only 3.76 billion RMB. By 2008, this increased to about 20 billion RMB, an average annual increase rate of about 20% (See Table 5). The Government has discouraged drinking higher alcohol beverages through public education and by increasing liquor taxes.

Table 5: Percentage Annual Growth in alcohol beverage consumption by value 1999-2008

Type of Alcohol	Wine	White liquor	Yellow liquor	Beer	General
Average Increase rate 19992008	20%	11.8%	15.4%	11.2%	12.2%

Source: China Daily Information Guide, 2009

Imported wine is believed to be healthy and implies a certain social status and cultural sophistication. It is considered a fashionable alternative to traditional Chinese rice wines and alcohol.

In China, gift giving and the presentation of the gift is extremely important. Chinese often purchase wine as an elegant and tasteful gift to share or for others to enjoy. Larger gift boxes may include two bottles of wine and a corkscrew or wine glasses. Gift packaging in the form of a sturdy, ornate wooden display box is very standard. Gift items are top sellers among premium wines especially during festive times of the year (USDA, 2008).

A survey conducted by China Wine Information Network with Chinese wine consumers, found the following general characteristics:

• People believe that wine can help relieve pressure/stress.
• 95% of consumers have limited knowledge about wine but are willing to learn.
• 60% of consumers prefer to buy imported wine if the imported wine and domestic wine are the same price.
• People believe the quality of imported wine will be better at the same price.

Red wine is overwhelmingly more popular than white wine in China. The colour red is associated with good fortune and happiness. Also, the tannins in red wine allegedly evoke a taste similar to that of tea, which is the most commonly consumed beverage in China. However, white wine (and rose) are also now more accepted by consumers than before and are becoming fashionable.

In 2008 the Australian Wine Research Institution (AWRI) in Beijing conducted a blind tasting of foreign and local red wines amongst Chinese consumers in Beijing, Shanghai and Guangzhou. The Australian wines were particularly well liked, with Chinese wines least liked. The results showed that Chinese consumers preferred fruity, berry and vanilla flavoured wines with a touch of sweetness. However, there were differences in palates with 50% preferring lighter styles and 20% choosing strong flavoured wines (AWRI 2008).

In July 2009, Munari Estate Schoolhouse shiraz/viogner won a special gold medal in the Yantai International Wine Competition, the highest award in this competition. Another 12 Australian wines won gold medals and silver medals, accounting for 65% of all the awards. Seven of the 13 awards won by Australian producers were for Shiraz or Shiraz blends.

Distribution and Retail Channels

Foreign owned wine distributors brought wine distribution expertise to China in the 1990’s. In the past few years, with relaxed rules on establishing import businesses and the perceived market for wine, private companies have entered this market with significant impact. These privately owned importers are starting to take market share from foreign distributors and in some cases have an advantage in being able to tap into local corporate and government client networks. The extent of their impact is shown in Table 6.

Table 6: China wine Import Share Jan-Sept 2009

Nature of importer	Import volume litre	Change Than same period last year	% total volume
Private owned	50,400,000	Increased by 66.9%	38.6
Foreign owned	52,590,000	Decreased by 34.5%-	40.2
State owned	21,860,000	Increased by 3.5%	16.7

Source: China Customs Special Report. Dec 09

Whilst the Eastern seaboard capitals, Beijing, Shanghai and Guangzhou, have a strong but still growing wine culture, second and third tier cities are emerging as viable markets. These cities have been the focus of strong promotional activity by Austrade and the Australian Wine and Brandy Corporation (AWBC) over the past two years.

As Chinese consumers are still relatively new to wine, generating sales requires considerable education and promotion, something that both foreign and private Chinese distributors are beginning to undertake. This involves educating traders such as shop assistants, waiters and hotel staff as well as the general public. Some Chinese wine distributors such as Jointek, Aussino and Guangzhou Longchamp work on a franchise model with different investor partners in different Provinces spreading the promotional cost but allowing the wines in their range a broader reach. Important clients for these companies are corporate and government organisations who buy wine by the case for business meetings and functions or for distribution as gifts at festive times of the year.

Both Chinese and foreign distributors are increasingly undertaking to support Australian partners to bring wine into the market. Two such companies are Vigena Wines in Nanjing and Yabby Lake in Guangzhou. Both companies have set up impressive concept stores and tasting rooms to showcase their own wines. Their main target is not the passing retail trade but corporate, government and high end individuals. Some wines are imported from Australia by Chinese potential migrants, with limited knowledge about wine, who need to reach a level of trade to satisfy Australian permanent visa requirements. These may be one off purchases.

China is still emerging as a wine consumption market, and success can come down to brand recognition and distribution channels. In China the highest volume brands are the result of huge effort in brand building and marketing. Mazet from French Castel became famous in China, due to successful brand building by the wine distributor Jian Fa Wine. Pernod Ricard China input vigorously on Jacob Creek promotion. Golden Butterfly from Spain is being promoted by Guangzhou Long Cheng Wine in elevator advertisements in Shenzhen and sold in retail outlets and night clubs.

The leading foreign and domestic wine distributors have good access to hotels, restaurants, bars, supermarkets and speciality stores in the major cities and have a sales force that respond quickly to customer orders. Increasingly these distributors have a near full complement of brands and are reluctant to take on new brands and smaller foreign wineries unless these wineries come with considerable promotional backing.

Figure 4. Wine Bar

Whilst supermarkets and hypermarkets are good sales channels they sometimes charge shelf and promotion fees and wines are quickly dropped if they do not sell sufficiently well. Hypermarkets like Carrefour and Metro offer a wide range of imported and domestic wines with wine sections in their stores showcasing different countries of origin. In May 2008, during the SIAL International Agribusiness Exhibition period in Shanghai, Metro invited 18 wine suppliers to the show to exhibit over 160 styles of wine. Some cheaper wines sold in these supermarkets, promoted by some of the newer importers, are export orientated brands not marketed in Australia; it remains to be seen how many have a long term presence.

Wine bars and speciality wine stores first flourished in Shanghai and are emerging in secondary cities and even some smaller cities. Wine bars are becoming increasingly popular, especially after a dinner and to meet with friends. Seeing the trends, some traditional Chinese wine, liquor and cigarette shops have been transformed into fashionable wine shops where they provide a selection of wines rather than white spirits. Jieqiang, who own over 100 wine, liquor and cigarette shops in Shanghai, a subsidiary of the State owned Shanghai Tobacco, Sugar and Liquor Company, have recently refurbished their shops and renamed them Joymax.

Some bars now serve both coffee and wine. The main consumers in these bars are aged between 18-45 years. A recent survey in these outlets found that 20% choose wine by the glass, 20% choose bottled wine and 40% choose coffee, the other 20% choose juice or other drinks (Source: China wine information network).

Around 54% of wine sales in China were made through retail chains (supermarkets, discounters, other outlets). Wine retail sales increased volume share slightly in 2009 (Euromonitor, 2010). A contributing factor is that many restaurants are allowing BYO wine, after changes were made to legislation to stop excessive charges from within the foodservice industry. Restaurant wine sales (clubs, pubs, bars) declined in 2009, as a result of the global financial crisis and consumers cut back on entertainment. However, in the long-term, consumer expenditure on entertainment is expected to show an upward trend (Euromonitor, 2010).

Table 7: Major wine distributors/retailers and sellers in Shanghai

ASC Fine Wine www.asc-wines.com	A pioneer of China wine imports, ASC is reputedly the biggest wine importer and distributor in China. Sells a high proportion of premium level wine including some of the biggest brands in France and Australia. In 2009, ASC imported 12 new styles of wine, seven of those being from New Zealand. Key customers are high end restaurant and hotels.
Aussino www.aussino.net	A leading distributor/importer of fine wines was established in 1995. Targets medium to high-end market, stocks more than 1000 wines from 200 wineries selected from 12 countries. The company owns their own retail outlets, wine club and undertakes wine appreciation courses. Aim to have 100 retail outlets and 50,000 wine club members by 2012.
Jointek Fine Wines www.jointekfinewines.com	Leading importers of international wine brands in China established the 1990s with regional offices in Hong Kong, Macau, Guangzhou, Shanghai and Beijing, together with wholesalers in various second or third tier cities. Clients include major 5 star hotels, top-end western restaurants, leading Chinese restaurants, private clubs, night-clubs, supermarkets and retail stores. Jointek imported two types of Australian wine in July 2009. Over sixty of their own retail shops throughout China.
Sino Drink www.channelvino.com	Focus on Italian wine import and distribution. Price of wines imported range from less than AU$16.00 to over $AU80.00. Distribution to Shanghai and Northern China.
Jian Fa Wine www.cndwine.com	Head quarters in Xiamen. Belongs to top 500 Chinese company, Jian Fa Group. One of the leading distributors of white spirits. Starting importing wine in 2006. They distribute French, German, Chile and Australian wine. Have retail outlets in 40 cities and distribute to 100 cities. Deal with Castel from France and Constellation from America.
Global Wine Shop www.global-finewines.com	Small distributor and online seller based in Shanghai. Retail store in Shanghai. Focus on premium wines.
Wine Mall	Wine Mall is a wine retail shop set up by Global Beverages Asia. They sell over 800 types of wine from 14 countries.
Shanghai Torres www.torreschina.com	Foreign owned distributor established by Miguel Torress in 1997. Now has the backing of Baron Philippe de Rothschild. Focus on selling premium wines to major hotels and fine restaurants. Offer wines from 14 countries including Australia. Regional offices in Shanghai, Beijing, Guangzhou and Shenzhen. Online sales and offer free delivery within 36 hours in the centre of those four cities.
Summergate Wine www.summergate.com	Foreign owned distributor that commenced operations in Shanghai in 1999 and now have offices in Shanghai, Beijing, Guangzhou, Shenzhen, Macau and Hong Kong distributing to hotels restaurants and retail outlets. Import from 60 wineries in 12 countries including a strong portfolio of Australian wine.
The Wine Republic	Owned by Australians. Wine importer with offices in Shanghai and Beijing. Import wine from 30 wineries in six countries. Strong focus on Australian wine.
Sino Drinkwww.sino-drink.com	Importer based in Shanghai selling Italian wines to a network across China. Strong program of promotional events.
Shanghai Vinna www.vinna-finewine.cn/	Set up in 2002. Small wine importer. Import wine from many countries including Australia. Supply to wine distributors and clubs.
Panati Wine Shanghai www.panatiwine.com/	Set up in 1995. Specialises in Spanish and French wine. Limited importer of Australian wine.
Napa Reserve www.napareservewines.com	American wine importer focusing on wines from the Napa Valley. One outlet in Shanghai..
Guangzhou Longchamp Wine www.longchampwine.com	Established in 1998 they are a prestigious wine importer and distributor focused on Southern China. Have ten franchised wine outlets across China. Strong focus on French wine but also import from Australia, Italy, Chile, USA and other countries.
Hangzhou Dingshi Wine www.fwp-wines.com	Set up by a Frenchman Erwann Lemoigne in Hangzhou in 1999. Have several offices in China. Sell to major supermarket chains. Sell wines from eleven countries but have a strong focus on French wine.

Source: in market and desktop research

Specialty wine shops are a relatively new concept in Shanghai, with many only having been established in the last few years. These are often run by importers selling an exclusive selection of wine in addition to selling to restaurants, hotels and clubs (USDA, 2008). The table below shows Shanghai importers and distributors that take orders and deliver to customers.

China Wine Industry Summary

Table 8: Key Specialty Retail Wine Shops and Sellers in Shanghai Table

Retailer	Market Segmentation	Additional Information	Year Business Started
ASC Fine Wines	Import/Distribute/Retail*	www.asc-wines.com	1996
Aussino Fine Wines	Import/Retail/Wholesale/ Distribution	www.aussino.net	1996 (1st retail shop in June 2006).
Aux Millesimes	Import/Retail	Shop address 415 Shan Xi Bei Rd	2006
Cheese & Fizz	Import/Retail	Has 3 shops in Shanghai, can taste cheese and wine.	2002
Enoteca Wine Lounge	Import/Retail/Wholesale	www.enoteca.com.cn	2007
Globus Wine	Direct Import, Wholesale/Retail	http://www.globuswine.com/	2006
Golden Gate Wines	Import/Wholesale/Retail	www.goldengatewine.com	2006
Jointek	Import/Retail/Wholesale	www.jointekfinewines.com	1997
Just Grapes	Retail	www.justgrapes.cn	2007
Napa Reserve	Retail/Wholesale	www.napareservewines.com	2007
Summergate	Direct Import, Wholesale*	www.summergate.com	1999
Torres China	Direct Import/On & Off Trade/ Retail/Wholesale*	www.torreschina.com	1997
Vins Descombe	Import/Retail/Wholesale	www.vinsdescombe.cn	2007
Ruby Red	Import/Retail/Wholesale	www.rubyred.com.cn
Wine Red	Import/Retail	A wine bar.	2007

Source: USDA 2008

*These importers/distributors will take orders and deliver to customers but do not have a physical retail store.

Chinese wine Production

Figure 6. Vigena Wines in Nanjing

Source: Nanjing Vigena wine Ltd

Figure 7. Vigena Wines in Nanjing

Source: Nanjing Vigena wine Ltd

China is fast becoming a wine producing country. Domestic wine production is mostly concentrated on dry red wine and with an emphasis on quantity rather than quality. Most wine producers buy grapes from farmers under exclusive contract or from brokers; they rarely own their own vineyards due to government restrictions on commercial land ownership. Grape growing areas in China are mainly concentrated in Shandong, Hebei, Ningxia and Xinjiang provinces. China's wine companies are mainly located close to grape supply areas (Jenster & Cheng 2008).

The top three domestic wine producing companies control 50% of the market share and 67% industry profit share. Changyu, has a strong presence in Shandong; and Fujian provinces; Great Wall, dominates North China, South China, including Southwest and Northwest regions, and Dynasty has a strong presence in Shanghai (CBI, n.d).

In the past few years there has been good progress in the development of local premium wines. A few wines from Xinjiang, Shanxi and Henan are retailing at 300 RMB (AU$48) and selling in hotels and restaurants for as much as 800 RMB (AU$128) (USDA, 2008). Intricate, sophisticated labels are extremely popular with local Chinese. The rise in local production has actually helped the imported wine market profile. To build brand recognition some of the larger Chinese wine companies spend hugely on television and print advertising and public relations efforts, such that their reputation can sometimes exceed that of imported wines. With local brands selling at such high prices, they have created an acceptable price category that is higher than many believed the Chinese consumer would be willing to pay.

European wine houses are starting to produce wine in China. The owners of the famed Chateau Lafite label will plant a vineyard on 25 hectares (62 acres) on a peninsula in eastern Shandong Province and Domaines Barons de Rothschild, one of the great names in wine-making, recently announced plans to produce in China. This area has good potential to produce top quality wines and will enhance China's reputation in the wine world.

One of the biggest names in Bordeaux wine, Barons de Rothschild, is to produce a premium grand cru wine in China for the first time. The group, which owns iconic Bordeaux wine house Chateau Lafite, plans to produce the wine near Penglai in the Shandong Province. The area has become known as the Chinese Bordeaux due to its potential for turning out top quality wines (topwinechina.com).

The value of the wine market in China continues to grow and become more sophisticated as consumer knowledge of grape wine develops. Imported bottled wines are becoming more available in both the foodservice and retail sectors. Consumer research is essential to success for wine importers who must compete with an increasing variety and quality of domestic wines.

References

Austrade (2009) Food and Beverages to China. Australian Government. Viewed 19 March 2010, http://www.austrade.gov.au/Food-and-beverage-toChina/default.aspx

Australian Wine Research Institute (2008) Survey Opens Door to China for Winemakers. Viewed, 18 March 2010, http://www.awri.com.au/information_services/media/rele ases/Chinese_sensory_2008.pdf#search="survey"

CBI China Business Intelligence (n.d) China's Wine Industry Development and Import Analysis, viewed 20 March 2010, http://chinabizintel.com/industry-updates/chinas-wineindustry-development-and-import-analysis-part-1.html

CIA, World Factbook, (2010) China. Viewed 18 March 2010, https://www.cia.gov/library/publications/the-worldfactbook/geos/ch.html

China Customs Bureau (2009). Accessed 21 February 2010, http://english.customs.gov.cn/default.aspx

Euromonitor (2010) Wine-China. Viewed 18 March 2010, http://www.portal.euromonitor.com/Portal/Default.aspx

GTIS (2010) China Customs Data. Bottle Wine Imports. Viewed 18 March 2010, http://www.gtis.com/gta/

Jenster, P. & Cheng Y. (2008) Dragon win: Developments in the Chinese Wine Industry. International Journal of Wine Business Research [online]. 20(3): 244-259. Available: Emerald.

McKinsey & Co. (2009) Preparing for China's Urban Billion. Viewed 18 March 2010, http://www.mckinsey.com/mgi/publications/china_urban_ billion/executive_summary.asp

NZTE (2009) Market Profile for Wine in China. New Zealand Trade and Enterprise. Viewed, http://www.nzte.govt.nz/explore-export-markets/market- research-by-industry/Food-andbeverage/Documents/Wine-market-in-China.pdf

NZTE (n.d) Changes for Wine Importers under China's food safety law. Zealand Trade and Enterprise. Viewed 23 March 2010, http://www.nzte.govt.nz/explore-export-markets/ExportIntelligence/Pages/Changes-for-wine-importers-underChina-food-safety-law.aspx

Thorpe, Michael (2009) The Globalisation of the Wine Industry: New World, Old World and China. China Agricultural Economics Review [online]. 1(3): 301-313. Available: Emerald.

Topwinechina.com (2009) China: Barons de Rothschild to Make Fine Wine in China. Viewed, http://www.topwinechina.com/visitors/startframe.htm

Wine.info.com (2009) China Emerges in World Wine Market. Viewed, http://www.winesinfo.com/html/190/2006228163727593.html www.cnwine.cn

Wines Information Website Viewed, 18 March 2009 http://www.winesinfo.com/Newshtml/201003/1892010031402493831.html http://www.stats.gov.cn/english/

USDA (2008) China Wine: Shanghai's Specialty Retail Wine Shops. GAIN Report Number: CH8802