China's conquest of wine

China celebrated the start of the new year on February 8th, a year under the sign of the Fire Monkey, predicted to be dynamic and unpredictable. The Chinese even agree that anything can happen during the Year of the Monkey. If 2016 is the year of all possibilities, could it also be the year of Chinese conquest of the global wine market?

China, the world's second largest wine-growing region

This is information that caused quite a stir last April, when the OIV (International Organisation of Vine and Wine) published its economic outlook revealing that China now surpassed France in terms of cultivated vineyard areas .

With nearly 800,000 hectares in 2014, China became the world's second-largest vineyard, just behind Spain. While these figures should be qualified, as some of these 800,000 hectares are dedicated to the production of raisins and table grapes, the growth of Chinese vineyards is nonetheless remarkable. Whereas it accounted for less than 4% of the world's vineyards in 2000, China now represents 11%.

The Chinese government has strongly encouraged this policy of expanding viticulture by offering virgin land, incentivizing industrialists to plant, and even going so far as to invest in developing wine tourism in certain regions.

Wine production is on the rise in China

This increase in vineyard area has been accompanied by a rise in Chinese wine production. As a result, China became the 8th largest wine producer in the world in 2014, with approximately 11 million hectoliters produced, representing 4% of global production. (Note: France holds first place with 46.7 million hectoliters produced.)

A quantitative boom, but not only that, because while Chinese wines have long been criticized for their lack of quality, things are starting to change. Professionals were certainly aware of this, praising this qualitative improvement at the last Vinexpo in Bordeaux.

The investment of major international groups ( LVMH, for example) in Chinese vineyards in recent years is partly responsible for this positive trend. So too are Chinese owners who are increasingly turning to international oenologists and consultants to contribute their expertise and knowledge of viticulture. Finally, young Chinese students readily come to France to train and acquire best practices that they will then implement upon their return home.

China is investing more and more in French vineyards

While China is relying on its vineyards to become a major player in the global wine market, it is also investing in vineyards abroad, particularly in France.

For the past five years, Chinese investors have been increasingly present in French vineyards , particularly in the Bordeaux region where they have bought more than a hundred châteaux.

According to a report presented in 2015 by the company Vinea Transaction, they represent 21% of foreign investors across the entire French vineyard (NB: the study covers 600,000 ha, excluding Champagne , Cognac, Armagnac, Corsica , Savoie , Jura and Alsace ) and 47% in the specific region of Bordeaux .

China: Opportunity or threat to French wine?

With this quantitative and qualitative boom in Chinese wine and an increased presence of Chinese investors in French vineyards, should we see China as a threat to French wine?

Not for the moment, and for several reasons. Firstly, Chinese wines are still far from competing in terms of taste with French wines, although their quality is improving. Secondly, local production is primarily geared towards the domestic market, with exports representing a negligible share of global exports.

China currently presents little competition for France in terms of exports. As for the Chinese domestic market, it represents a significant opportunity for French wines. China has become the fifth largest wine-consuming market, just behind the United States, France, Italy, and Germany. It is even the world's leading consumer of red wine. And the Chinese enthusiasm for wine shows no signs of waning, particularly thanks to the growing Westernization of the middle class, which is increasingly interested in wine.

Currently, 80% of Chinese wine consumption is met by local production. Imports account for the remaining 20%. French wines are the leading imported wines because they enjoy a very positive image among consumers.

With the anticipated growth in Chinese consumption, it's reasonable to expect that the share of local production will decrease in favor of imports. This presents an opportunity for French wines, from Bordeaux or elsewhere, but be warned: other countries are also looking to capitalize on this, such as Australia, which has already launched a major charm offensive targeting Chinese consumers.

Maïlys (VeryWineTrip)