CHINA OVERVIEW
June 2019
During our time China, we visited China’s largest and historical wine growing region, Shandong, as well as the China most promising and supported wine producing region, Ningxia! Here are our global comments on what we experienced.
key figures
6th largest wine producer in the world with 10.7million hL in 2017
5th largest wine market in terms of national consumption
Total vineyard area: 870 000 ha. 2nd in terms of vineyard area but 80% is dedicated to table grapes and not wine!
60% of the wine production is Cabernet Sauvignon
Main Wine producing regions
Chinese wine regions are spread across the country. 40% of China’s wine is produced in Yantai in the Shandong Peninsula on the east coast.
Ningxia, further inland, is China’s most promising and supported wine region and has been associated with high-quality wines. Within Ningxia, Helan Mountain appellation is the most prestigious and awarded area. Grapes also grow in Jilin province, in the northeast on the borders with North Korea and Russia), as well as in the Xinjiang province to the northwest of the country and finally in the Yunnan plateau in the southwest!
a striving industry highly supported by the chinese government
Most of the people we met were surprised that we decided to visit China. But looking at the figures, it’s seems rather natural! China has emerged quickly on the global wine scene in terms of production and consumption. It’s currently the 6th largest wine producer in the world, right after Argentina, with 10.8 million hL in 2017. China is also the 5th largest wine market in the world by annual consumption and has the potential to become the 2nd largest wine market in the world by 2021. China represents a vibrant market for the wine business and the government seems committed to further develop it.
China has a large history of winemaking tradition and culture that dates back to 3,000 years but the first modern winery was established in 1892 – Changyu in the Yantai Region in Shandong – which is now the largest wine producer company in China. More recently, since the late 1990s, the government has acknowledged the real potential of Ningxia (same latitude as Bordeaux): the local government has been planning huge initiatives to transform this poor area into a successful wine region. For instance, the local government has financed the construction of an efficient irrigation system in this dry region as well as all the road and power utilities required. The wine sector was even mentioned in the Five-Year Plan unveiled in 2012 with the idea to improve technology, created 12 wine regions, enhance wine culture and tourism with new regulations.
The government is the one giving licenses to build wineries and to plant vines. For instance, in Ningxia, there are currently 87 licensed wineries but more than 200 under construction. What’s more, something to keep in mind when talking about “vineyard” in China is that you never own the land you farm on: you can only rent it from the government for a certain period of time. Normally, for agricultural purpose, the contract is for 20 to 30 years but as the government wishes to enhance the wine industry, land for vines can be rented for 50 to 70 years. However, you have to pay everything at the beginning and if you’re a foreigner, you must find a Chinese tutor willing to pay for you..
Finally, one of the reasons why the government has been supporting the expansion of the wine industry is because rice wine (baiju) requires too much rice that is actually needed as a food condiment to feed the population. Hence, the government is trying to encourage the grape wine consumption instead of baiju one to limit the lack of rice.
mostly red grape varieties
Red wines are much more popular in China than the white ones, notably because red is a symbolic colour for Chinese people. Cabernet Sauvignon is by far the most planted variety in China as it accounts for 60% of the total vineyard area. The second most planted variety is a Chinese red variety that you can’t find anywhere else called Cabernet Gernischt - “mix of cabernet” in German. After DNA research, they actually found out that it’s a derivate version of Carmenère!
What’s more, when a Chinese wine made mostly with Marselan from Ningxia won the gold medal in Brussels in 2009, people started to pay attention to this French cross between Cabernet Sauvignon and Grenache. So Marselan is currently what Chinese are looking for! In terms of white grape varieties, which don’t represent a lot of what’s planted in China, Chardonnay is the most planted variety.
a challenging climate leading to high production costs
China’s largest challenge is climate. We were quite amazed to learn that winters are so brutal in Ningxia, with temperatures that can fall below -25°C, that grapevines have to be buried underground to make it through. How do they proceed? 1 or 2 weeks after harvest, they prune their vines. Then they lay the remaining branches on the floor. And in 15 days, by the end of November before it gets too cold, they burry everything under the soil by hand. Right after, they fill the gutters with water and pour some on top of the buried vines: a thin frozen layer forms and will protect even more the vine underground and keep the buried soil warmer. 4 months later, at the end of March/beginning of April, they unbury everything. This burial process is very harmful for the vines as there is a 8% loss in average… It’s hard to know how long the vines will support this burial process!
Everything is done by hand and is therefore very labor-intensive. What’s more, since wages have steadily increased in the past years, production costs are high and it’s quite expensive to produce wine in China. One solution would be to grow frost-resistant hybrids: they’ve already developed a couple of hybrids, Bei Hong and Bei Mei, which tend to be slightly sweet for now…
Another interesting fact is the lack of water in some regions such as Ningxia which only gets an annual 200mm rainfall a year but 3,000 hours of sunshine leading to 1,800mm evaporation. Water from the Yellow River is crucial: as said before, the local government invested to implement the required irrigation system as well as purifying filters since the water coming from this river is too muddy. However, there are restrictions and each winery only receive from the government a certain amount of water every month.
a growing wine consumption among the young generation
In terms of consumption, China is the 5th largest market with 17,9 million hL in 2017. Since, 2013, consumption has increased by 1,4% in volume, by 8,2% in value and is expected to follow the same trend in the coming years. Despite these impressive numbers, wine is still not really integrated into society and only accounts for 3% of China’s alcohol consumption: the annual consumption is in fact only 1,4L per person. People are more used to drink beers and spirits, above all the “national drink” baiju which is rice wine. They also drink wines the same way as they drink their spirits: served chilled in tiny amount, consumed during a group toast and very often, you have to finish the entire glass at once! Which can be quite surprising when you don’t expect it!
Nevertheless, the new generation, between 25 to 36 years old, is moving away from their parent’s habits of drinking baiju for alcohol with lower content such as wine. The young generation, especially women, also drink wine for its supposedly healthy benefits. In addition, drinking wine is seen as a trendy and classy trend. That’s also why they’d tend to favor expensive designs and are willing to pay more for famous wine brands/vintages.
As red is the lucky color in China and is the symbol of the elite, Chinese people mostly drink red wines (above all Cabernet Sauvignon): China is now the world's largest market for red wine before France. They like rather sweet wines, with high alcohol level and some spices.
chinese brands challenged by foreign players on their domestic market
Most of Chinese wines are consumed domestically and aren’t exported abroad. This still leaves room for importation from foreign players. Of course, Chinese have a thing for prestigious and expensive French labels from Bordeaux but recently, Australia has overpassed France in terms of sales! One of the reasons why is trade agreements lowering prices since tariffs on their wines slashed from 14% back in 2001 to 0 today (also for wines from New Zealand and Chile).
Another consequence of these trade deals is that it’s often cheaper for Chinese to buy foreign wine than to buy Chinese wine: as Chinese production costs are high; the selling prices are also high and can’t be around $10 a bottle. Therefore, to be able to cope with foreign competition, the main Chinese producers’ challenge is to improve the country’s quality image to convince consumers to pay the right price for their national wines. And the competition is tough since they prefer to purchase and drink imported wines rather than drinking local Chinese brands.
These trade deals have also encouraged the development of a massive “bulk wine” market: foreign wineries, especially Chilean, send bulk wine to China for assembly are are then branded as Chinese. The Shandong province, because of its coastal position and proximity to commercial harbors, is known for this wine production method.
a globally attractive chinese terroir
Firstly, we’ve seen that national brands are challenged by foreign ones on the domestic market and experience strong competition.
What’s more, as China is perceived as a promising market with lots of potential, many international wine companies have decided to invest there. In fact, Remy Martin, the French cognac producer, was the 1st to form a joint venture in China when he set up Dynasty Winery in 1980 (it’s now one of the largest Chinese wine producers). Among Western companies, there are also LVMH who launched Chandon China for sparkling wines in 2013, Pernod Ricard with Helan Mountains and Barons de Rothschild who opened its Lafite winery in Shandong in July 2019.
On the other side, experts from all over the world come to China during harvests to share their experience and collaborate with local winemakers, scientists and viticulturists. Many French, and increasingly Australian, winemakers come to China as “consultants” to give advice and increase their practical knowledge.
Bernard Douvry, Georges Marais, Florence et Emmanuel Ramé, Florence et Jérome Dubar, Sabine Marais, Brigitte et Jean-Benoit Ramé, Marie-Christine Douvry, Molly Breiner, Anne-Sophie Klimczak, Lyssiar Oriwen, Astrid Massot, Juliette Leroy, Walfroy Dauchy, Sylvain Dubar, Antoine Rogeau, Tanguy Le Quilliec, Agathe Houssin, Mauricette et André Michel, Gillian Goulart, Ianja Rabenasolo,Valentine Burban, Delphine Héran, Valentine Ramé, Éléonore de Marnhac, Barthélemy Héran, Mathilde Perruchot, Jules Veyrat et Lise Riesen, Juliette Pinget, Juliette Dubar, Pablo Veyrat, Holly Bolgar, Jérémy Cerf, Phoebé de Sousa Passos, Emmanuelle Guisln, Charlotte Fliche, Mathilde Nike, Matthieu Giudicelli, Edouard Dollfus, Perrine Mathieu, Marie Altmayer, Romain Brissonneau, Valentine Bono, Yvan de la Baume, Maxence Béguin, Lydia Bellahouel, Aurélie Bergeras, Grégoire Leroy, Eloi Marquet de Vasselot, Agathe Guérin, Margaux Nuyts, Angèle de Leusse, Jean-Baptiste Mulliez, Mathilde Halpern, Diane Bunod, Blandine Charveriat, Marie Robaczewski, Clémentine Mittelman, Marie Delavoie, Holly Quintard, Chloé Peugeot et Antoine Charlent !
