China's Conquest of Wine

On February 8, China celebrated the start of the new year, a year marked by the Fire Monkey and predicted to be dynamic and unpredictable. The Chinese even agree that anything can happen during the Year of the Monkey.

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

This news caused quite a stir last April, when the OIV (International Organisation of Vine and Wine) released its market report revealing that China had now surpassed France in terms of vineyard acreage.

With nearly 800,000 hectares in 2014, China has indeed become the world’s second-largest wine-growing region, just behind Spain. While these figures should be viewed with some caution—since part of those 800,000 hectares is devoted to the production of raisins and table grapes—the growth of China’s vineyards is nonetheless remarkable. While it accounted for less than 4% of the world’s vineyards in 2000, China now represents 11%.

The Chinese government has strongly promoted this policy of expanding viticulture by providing undeveloped land, encouraging industrialists to plant vineyards, and even investing in the development of wine tourism in certain regions.

Wine production on the rise in China

This expansion of vineyard acreage has been accompanied by an increase in Chinese wine production. As a result, in 2014 China became the world’s eighth-largest wine-producing country, with approximately 11 million hectoliters produced, accounting for 4% of global production. (Note: France ranks first, with 46.7 million hectoliters produced.)

A surge in volume, but that’s not all—while Chinese wines have long been criticized for their lack of quality, things are starting to change. Industry professionals were quick to recognize this improvement in quality at the latest edition of Vinexpo in Bordeaux.

Investments by major international groups (such asLVMH ) in Chinese vineyards in recent years are partly responsible for this positive trend. Similarly, Chinese vineyard owners are increasingly turning to international oenologists and consultants to bring their expertise and knowledge of viticulture to the table. Finally, young Chinese students are eager to come to France for training to learn best practices that they will then implement upon returning home.

China is investing more and more in French vineyards

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

Over the past five years, Chinese investors have increasingly been making their presence felt in French vineyards, particularly in the Bordeaux region, where they have purchased more than a hundred châteaux.

According to a report released in 2015 by Vinea Transaction, they account for 21% of foreign investors across all French vineyards (Note: the study covers 600,000 hectares, excluding Champagne, Cognac, Armagnac, Corsica, Savoie, Jura, and Alsace) and 47% in the Bordeaux region specifically.

China: Opportunity or Threat for French Wine?

Given this growth in both the quantity and quality of Chinese wine, as well as the increased presence of Chinese investors in French vineyards, should China be viewed as a threat to French wine?

Not at the moment, for several reasons. First, Chinese wines are still far from rivaling French wines in terms of taste, although their quality is improving. As for local production, it is primarily geared toward the domestic market, with exports accounting for a negligible share of global exports.

For now, China poses little competition for France in terms of exports. As for the Chinese domestic market, it actually represents an opportunity for French wines. China has indeed become the fifth-largest wine 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 middle class, which is becoming more Westernized and increasingly interested in wine.

To date, 80% of China’s wine consumption is met by domestic production. Imports account for the remaining 20%. French wines are the top imported wines because they enjoy a very positive image among consumers.

Given the expected growth in Chinese consumption, it is reasonable to assume that the share of domestic production will decline in favor of imports. This presents an opportunity for French wines—whether from Bordeaux or elsewhere—but it’s important to note that other countries are also determined to capitalize on this trend, such as Australia, which has already launched a full-scale campaign to win over Chinese consumers.

Maïlys (VeryWineTrip)