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Trade Numerologist: Booming Chinese Wine Market

28 December 2018 John Miller

The fastest-growing market for wine is China, where a bottle of Bordeaux is replacing a traditional Chinese liquor called baijiu as the alcohol of choice. A new generation has come of age with Western middle-class tastes and incomes to match, and what they want is more wine. In addition, rising wages for women help sales of wine, which is seen as classier and more feminine than beer and spirits.

Top wine importers, 2017

· US $6.2 billion (+6%)

· UK $4.1 billion (+5%)

· Germany $2.9 billion (+5%)

· China $2.8 billion (+18%)

· Canada $1.9 billion (+6.4%)

· Japan $1.6 billion (+7.5%)

· Hong Kong $1.5 billion (-1.1%)

· Netherlands $1.3 billion (+4.1%)

· Switzerland $1.2 billion (+8.8%)

· Belgium $1.1 billion (+7.7%)

To be sure, there are factors besides income that shape wine production and consumption markets. One is religion. People in Muslim-majority countries drink less than elsewhere. Indonesia, a country of over 260 million, imported only $13.9 million worth of wine last year.

And, when it comes to production, quality of climate and soil is essential. "Grape growing is limited by certain climatic conditions," according to the Food and Agriculture Organization. "A reasonably long growing season (150-180 days) with relatively low humidity (less than 800 mm per year) but sufficient soil moisture is necessary."

Climate change is pushing wine-growing regions further north. One surprising new spot is Canada, which has been increasing wine exports this decade, mostly to the US.

Canadian wine exports, first 10 months

· 2018: 80.8 million liters

· 2017: 72.3 million liters

· 2016: 58.8 million liters

· 2015: 61.8 million liters

· 2014: 52.8 million liters

· 2013: 33.5 million liters

· 2012: 20.7 million liters

· 2011: 18.8 million liters

· 2010: 11.4 million liters

A healthy wine industry demands a developed economy. Making good wine is a complex process that involves, among other things, destemming and crushing grapes, fermentation, and bottling. And consistent quality control, another expensive process, is essential.

Top wine exporters, first 9 months, 2018

· France $8 billion

· Italy $5.3 billion

· Spain $2.6 billion

· Australia $1.5 billion

· Chile $1.46 billion

· US $1.1 billion

· Germany $899.2 million

· New Zealand $877.3 million

· Portugal $673 million

· UK $620.1 million

For exporters – big wine companies like Constellations Brand, E & J Gallo Winery, Torres, Treasury Wine Estates, Vina Conch y Toro, Distell Group, Accolade Wines, and The Wine Group, there is no bigger prize than China. For over a decade, French chateaux have been hiring marketing experts to help them sell their best wines in China. The sales pitch is working.

French wine exports to China

· 2017: 214.4 million liters

· 2016: 178.9 million liters

· 2015: 164.3 million liters

· 2014: 125.9 million liters

· 2013: 120.9 million liters

· 2012: 139.5 million liters

· 2011: 117.7 million liters

· 2010: 75.4 million liters

Overall, China is expected to supplant the UK as the world's second-biggest wine market by 2021, say wine analysts. By the start of next decade, the total size of its domestic market will top $20 billion, and it's expected to keep growing by around 30% a year, according to a recent report released by Vinexpo, a global alcohol exhibition, and the International Wine and Spirit Research.

With only so much real estate available in France, and that kind of soaring demand, expect a tightening supply and higher prices. That will help a couple of other wine-growing regions, especially Australia. Its wine exports to China have boomed during this decade.

Australian wine exports to China

· 2017: 149.8 million liters

· 2016: 101.1 million liters

· 2015: 68.8 million liters

· 2014: 41.1 million liters

· 2013: 40.9 million liters

· 2012: 44.8 million liters

· 2011: 40.7 million liters

· 2010: 53.9 million liters

With a far bigger domestic market, the US lags far behind in competing for a share of China. In fact, after ramping up investments in selling in China, the US has pulled back.

US wine exports to China

· 2017: 13.1 million liters

· 2016: 13.4 million liters

· 2015: 12.5 million liters

· 2014: 16.4 million liters

· 2013: 17.3 million liters

· 2012: 16.4 million liters

· 2011: 14.9 million liters

· 2010: 12.2 million liters

But as new-world upstarts compete for market share in China, the pecking order in popular taste and brand value remains decidedly old-school. According to the 2018 Wine Trade Monitor, France remains the most popular country in wine portfolios, followed by Italy and Spain.

What topic would you like the Trade Numerologist to cover? Email tradenumerologist@gmail.com with comments and questions.

Posted 28 December 2018 by John Miller, Guest Blogger


The Trade Numerologist is IHS Markit's unique weekly look at global trade by award-winning journalist John W. Miller, formerly of the Wall Street Journal, using proprietary numbers from IHS Markit's Global Trade Atlas database, the world's most complete and accurate set of trade numbers.

What topic would you like the Trade Numerologist to cover? Email tradenumerologist@gmail.com with comments and questions.

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