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China’s Second Tier Cities Switch On to Wine

China’s Second Tier Cities are heavy weights when it comes to size and developing markets; they are the power houses of the Chinese economy. The three big markets in China may be Beijing, Shanghai and Guangzhou but there are at least 25 – 30 Second-Tier Cities but the number keeps growing. Several of these Second-Tier Cities are ports such as Tianjin, Dalian, Shenzhen and Xiamen and others lie near the East Coast such as Shenyang, Suzhou and Hangzhou. Jing Daily has reported that the inland Second Tier City Wuhan, which is a major transportation hub on the intersection of the Yangtze and Han rivers, is now switching on to wine over the traditional drink Baijiu. Wuhan has a population of 10, 020, 000 million.

Their report Baijiu Sinks, Wine Booms In Second-Tier Wuhan reveals that wine sales are increasing 40% annually as consumption shifts:

According to the trade site Wine China (Chinese), the wine market in Wuhan, capital of Hubei province (previously on Jing Daily), is developing quickly as the city’s wealthier consumers switch from baijiu to wine, owing to the latter’s lower alcohol levels and relative health benefits. The site notes that Wuhan’s wine market is at its earliest stage, yet sales of wines priced between 100-200 yuan (US$16-32) are rising 40 percent per year.”

The wine market in Wuhan is still immature and most aspiring wine buyers are opting for domestically produced wines by Great Wall, Changyu, and Dynasty more than imported wines. However, Jing Daily explains that “rather than a taste issue, this is probably due to the greater availability of Chinese wines and a dearth of experienced importers and quality wine stores in the city. According to Wine China, Wuhan’s wine drinker typically makes his or her purchases at supermarkets, rather than dedicated shops.”

In the summer of last year Wine Intelligence research showed that around 40% of imported wine drinkers in China buy online. Their recent report highlights the positive outlook for imported wine in China in 2013, highlighting the surging demand for wine from reputable online retailers, and the increased distribution of imported wine products in the huge new urban areas of China’s interior, where much of the growth in wine consumption will come over the next 5 years:

Rui Su, Research Manager at Wine Intelligence explains that “Most Chinese consumers who can afford to buy imported wine are intensely curious about the product and eager to understand it better”, highlighting that boosting consumer confidence in the wine category is the key to the next stage of China’s wine market development.”

The report also notes that Chinese consumers are being discouraged from buying higher value imported wines in shops because of growing fears that what they buy will be a fake, according to new research:

Wine Intelligence’s survey of 1,000 drinkers of imported wine in China found that fear of buying a fake was the biggest barrier to purchasing wine in the off-trade, with 44% of respondents saying it discouraged them from buying.”

It seems that online sales in China of imported wines from reputable companies are set to grow. Savvy Chinese investors have already started to circumvent the problem of fake wine and dodgy provenance by snapping up chateaux in Bordeaux – around 30 estates are now under Chinese ownership, the most recent being Chateau de Lugagnac in Pellegrue. The chateau dates back to the Hundred Years War () and was once an ancient fortress. Chateau de Lugagnac produces claret, white Bordeaux and rosé and has 180 hectares (430 acres) of which 75 hectares (185 acres) are under vine.

Interestingly de Lugagnac has 8% of the vineyard planted with the rare Carménère as well as Malbec 4%), Petit Verdot 1%), Cabernet Sauvignon (22%) and Merlot (65%). The white grapes planted are Sauvignon Gris (50%), Sauvignon Blanc (40%), Semillon (8%) ad Muscadelle 2%). The chateau’s wines were distributed to 25 different countries but now it has been sold to Chinese investors we might see the majority of its wines heading to China instead . . .

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