The austerity-filled atmosphere hanging over China's fine wine sector shows little sign of clearing, but many remain optimistic for the longer-term.
The Chinese wine market is undergoing a ‘period of correction’, say insiders
Many of China’s major wine importers are finding the sector hard-going in 2013. In a number of cases, year-on-year values sales are either flat or in slight decline, with lavish spending on the best Bordeaux chateaux less common than in more prosperous times.
While some of the problems are due to a general fall in prices for Bordeaux en primeur over the past two vintages, the new Chinese government’s clampdown on officials’ entertainment budgets and a general economic slowdown in the country are also taking their toll.
‘We’re planning for another tough year in 2014,’ said John Watkins, chief executive of industry heavyweight ASC Fine Wines and speaking to Decanter.com in Shanghai ahead of the first ProWine trade expo in the city. ProWine is the sister show of Prowein, held annually in Germany, and organisers have signed up 570 exhibitors from 30 countries for the debut expo in China, to run for three days from today (13 November).
‘There are a lot of stocks,’ said Alberto Fernandez, managing partner at Torres and who has been running the Spanish firm’s China business since 2000. ‘The market is in a period of correction,’ he said, adding that he agrees next year will probably remain difficult.
He told Decanter.com that there could be some consolidation on the market, because some companies’ profits are being squeezed by weaker demand and ongoing rises in government charges, including those for social security.
However, for those able to ride the storm, there is a sense that China’s wine market could be moving to a more sustainable footing for the longer-term.
Sales of wines priced between the equivalent of US$20 to $60-a-bottle are picking up, according to Watkins. Based on normal market dynamics, Watkins said that this mid-level is ‘exactly where the main part of the wine market should be’ in China.
A significant part of ASC, though, will always cater for the very high-end of the market, and the firm recently completed its new Wine Residence in Shanghai, complete with private lockers for clients, tasting rooms and several choices of dining room on different floors. There are just under 100 private members of the Residence at present, and ASC aims to raise this to 250 next year.
For Fernandez, ‘the market is going back to where it used to be 10 years ago’, when restaurants and bars dominated wine sales, rather than the gifting and banqueting culture that has since developed and now begun to wane.
‘I don’t think China has gone off wine, but it’s been a perfect storm for the past 18 months,’ said Richard Sutton, Asia MD for Armit Wines in Hong Kong. He said that it could take around the same time for existing stocks of imported wine to clear.
‘We all hope it will come a bit sooner, and perhaps for some it might.’ He said there is particular optimism around Burgundy, which has been one of the success stories of fine wine in Asia over the past year.
Written by Chris Mercer