China Concerned that Imported Wine from Europe is Damaging their Domestic Market

The People’s Daily has reported that China is concerned that wine imports from Europe are harming domestic producers. The China Alcoholic Drinks Industry Association has made a formal request to the Ministry of Commerce to look at the situation.

Wang Zuming, Secretary General of the group, has said that the rivalry between imported wine and domestic brands has never been so intense:

Almost every Chinese winemaker has felt the impact from the EU.

The EU has provided various subsidies to the wine industry, putting Chinese makers at a disadvantage.”

According to European estimates, exports of wine and spirits to China total more than one billion euros ($1.2 billion) annually. Imported wine accounts for about 25% of the Chinese market and China imported 200 million litres of wine in the first half of 2012, up 12% year-on-year. Between 2006 – 2010 wine imports grew from 114 million litres to 283 million litres, up 65%.

Zhang Zhigang, analyst at Rising Securities, has said that domestic brands face challenges from foreign wine brands in terms of price and distribution. Until recently imported wines occupied the top end of the market but today they can be found on supermarket shelves in China after their prices dropped.

China’s domestic wine industry has recently been affected by quality issues as well as a decline in consumption. 2011 was a bad year for China’s leading domestic brands Changyu, Dynasty and Great Wall as their revenue declined and this year Changyu’s shares fell by 9.83% (a 2 year low) due to media reports of residual volumes of germicides in some of their wines being investigated by the National Food Quality Supervision and Inspection Centre.

Changyu maintain that the level of 2 of the germicides found was much lower than limits in the EU. However food scares in China have been big press across the globe and food safety is a bug bear that China will find hard to shift.

Zhang predicts that imported brands will eventually account for half of the Chinese market.

China’s domestic wine industry has been making great strides in establishing wine regions, improving quality and gaining an international reputation. Some of China’s wine pioneers are starting to collect awards for their wines and are finding an export market to Europe.

By 2012 wine production in China is expected to reach 2.2. billion litres, an increase of 100%, at an annual growth rate of 15%, according to the 12th Five-Year-Plan (2011-15) for the Wine Industry, published by China’s Ministry of Industry and Information Technology and the Ministry of Agriculture.

If European wine imports continue to interfere with China’s 12th Five-Year-Plan will we see taxes put up on imported wine to encourage the Chinese to buy local? It’s an interesting thought.

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