China's conquest of wine

On February 8, China celebrated its entry into the New Year, a year placed under the sign of the Fire Monkey and which is announced to be dynamic and unpredictable. The Chinese even agree that during the Year of the Monkey anything can happen. If 2016 is the year of all possibilities, could it also be the year of the conquest of the world wine market by the Chinese?

China, 2nd largest vineyard in the world

This information had made a lot of noise last April, when the OIV (International Organisation of Vine and Wine) published its economic report revealing that China was now surpassing France in terms of cultivated wine-growing areas.

With nearly 800,000 hectares in 2014, China has indeed become the 2nd largest vineyard in the world, just behind Spain.If the figures are to be qualified because a part of these 800,000 hectares is devoted to the production of raisins and table grapes, the growth of Chinese vineyards is nevertheless remarkable. Whereas it had less than 4% of the world's vineyards in 2000, China now represents 11%.

The Chinese government has strongly encouraged this viticulture expansion policy by offering virgin land, encouraging industrialists to plant and even investing to develop wine tourism in certain regions.

Wine production on the rise in China

This increase in wine-growing areas has been accompanied by an increase in Chinese wine production, making China the world's 8th largest wine producing country in 2014, with around 11 million hectolitres produced, i.e. 4% of world production. (NB: France takes 1st place with 46.7 million hectoliters produced).

A quantitative boom, but not only because although Chinese wines have long been reproached for their lack of quality, things are beginning to change. The professionals were not mistaken in saluting this qualitative progression at the last edition of Vinexpo in Bordeaux.

The investment of major international groups (LVMH for example) in Chinese vineyards in recent years is partly responsible for this positive development. Just like the Chinese owners who increasingly call upon international oenologists and consultants to bring their know-how and knowledge in viticulture. Finally, young Chinese students do not hesitate to come and train in France to acquire the best practices that they will then implement back home.

China invests more and more in French vineyards

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

Over the last five years, Chinese investors have thus become increasingly present in French vineyards, particularly in the Bordeaux region where they have bought more than a hundred châteaux.

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

China, an opportunity or a threat for 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, for several reasons. Firstly, Chinese wines are still far from rivalling French wines in terms of taste, although their quality is improving. As for local production, it is mainly oriented towards the domestic market, with exports representing an anecdotal share of world exports.

China therefore presents for the moment little competition for France on the export market, while the Chinese domestic market represents more of an opportunity for French wines.Indeed, China has become the 5th largest market for wine consumption, just behind the United States, France, Italy and Germany. It is even the 1st red wine consuming country in the world. And the Chinese infatuation for wine does not seem to be about to be denied, in particular thanks to the middle class which is becoming westernized and more and more interested in wine.

To date, 80% of Chinese wine consumption is satisfied by local production. Imports represent the remaining 20%. French wines are the first imported wines because they benefit from a very positive image among consumers.

With the foreseeable growth of Chinese consumption, it is legitimate to think that the share of local production should decrease in favor of imports. An opportunity to be seized for French wines, from Bordeaux or elsewhere, but beware, other countries are counting on doing well, such as Australia which has already started a real operation of seduction with Chinese customers.

Maïlys (VeryWineTrip)