Wine exporter eyes China market

By JIM DOWNING
Sacramento Bee
09-JUN-06

SACRAMENTO, Calif. -- Like just about everyone else who sells anything, California's winemakers are eager to market their goods to the newly prosperous residents of China's megacities.

Not so fast.

A study released recently by the California Institute for Winegrape Growers found that, while the Chinese market certainly shows promise, it remains more potential than paydirt.

California wines face several challenges in China, starting with competition from fast-growing, low-priced Chinese brands. In addition, distribution networks remain difficult to navigate, and there's a need to build a taste for high-quality wine _ virtually from scratch _ among Chinese consumers, the report said.

What's more, a bottle of wine sells for roughly the same price in China as in the United States, but the Chinese per capita annual income is only about $1,500, according to the World Bank. That puts wine _ even cheap wine _ out of reach of all but higher-income urban residents.

Still, with projections showing an explosion in the numbers of affluent Chinese, there's good reason to believe that the market will develop.

"We're bullish on the market, but for the very long term _ a decade, or decades, realistically," said Dave DeBoer, vice president for international sales at Delicato Vineyards in Napa, Calif.

"It will happen, though."

To some extent, it's already happening. While less than 1 percent of U.S. wine exports went to China (not including Hong Kong) last year, sales of wine to China are up fivefold in the past five years, to $5.9 million in 2005, the wine grape growers study reported.

U.S. wineries exported about $658 million worth of wine worldwide last year, 95 percent of which came from California, according to the San Francisco-based Wine Institute.

The wine grape growers report says that many Chinese consumers already are sold on red wine's health benefits, thanks to a long-running public relations campaign sponsored by the Chinese government _ which, in part, is aimed at weaning citizens off high-proof rice liquor.

"Whether they drink wine or not, nine out of 10 Chinese are aware that wine is good for your health," said Michael Parr, who worked as a wine importer in China for four years before coming to Livermore, Calif.-based Wente Vineyards, where he runs the export business.

The study, funded by a $100,000 grant from the U.S. Department of Agriculture, also found a strong correlation in China between income and the demand for wine: As income doubles, wine consumption increases more than fourfold. That suggests that the rising Chinese economic tide will raise the California wine industry along with it.

Wine is tied to wealth in the United States, too, according to John Gillespie, president of the Wine Market Council, a nonprofit trade group.

Regular wine drinkers in the states _ those who drink it once a week or more _ have a household income of $78,900, well above the median national household income of $45,000, he said. In Western Europe, where a broader section of the population drinks wine routinely, the connection between income and wine consumption isn't as strong, he said.

Constellation Wines US, which owns Mondavi and Ravenswood, among other brands, exported about 150,000 cases of wine last year to China, according to Eric Morham, senior vice president international. Though that's just a fraction of the 5.2 million cases the company sold worldwide, Morham expects the number to rise.

"Wine consumption tends to follow affluence in society _ the more successful China continues to become, the more interesting the Chinese wine market will become," he said. "From our perspective, it's a five-year horizon."

The taste for wine in China will take some time to develop, said Joe Rollo, director of the international department at the Wine Institute.

While he said the practice of diluting expensive wine with Sprite seems to be less popular than it once was, wine is still seen as a status symbol, rather than as a drink to be appreciated regularly, for its own sake. As that changes, the demand for midrange wines should rise, he said.

"What gets in the way in China is that they still have the belief that you have to drink very expensive wine in order for it to be good," he said.

"The confidence in their own taste isn't there yet. That's what I think is more important."

(Distributed by Scripps-McClatchy Western Service, http://www.shns.com.)

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