Wine Industry Report

The California Association of Winegrape Growers (CAWG) has released the findings of a year long market study of China’s wine industry which paints a picture showing both opportunities and concerns from the viewpoint of the California wine industry.

The report, Wine in China, was compiled by Dan Sumner and Scott Rozelle, of the University of California Agricultural Issues Center at U.C. Davis, and Jikun Huang, of the Center for Chinese Agricultural Policy. Partial funding was provided by the USDA Emerging Markets Program of the Foreign Agricultural Service.

“There is no question that China is emerging as a major market for wine,” said Sumner. “The expanding market also exhibits growing marketing and consumer sophistication. These bode well for a profitable future for U.S. wine with effort and investment.”

“The report explains the current focus of the Chinese wine industry and clearly shows us that China’s potential as a world player in production and consumption is rapidly developing as the rest of the wine world watches,” said Rodney Schatz, Chairman of CAWG and a winegrape grower in Lockeford, Calif. “The report also underlines that the future of China’s market should be of interest to every California winegrape grower.”

Joe Rollo, Director of the International Department of the Wine Institute, sees a strong potential for California exports to China. “The report showed evidence of China developing a strong wine consumer base,” he said. “In fact I see a Chinese market that could be so large I don’t see it being satisfied by their own domestic wine industry alone and that could open the door for imported wines, especially those from California.”

The 256-page report contains three sections. The first section is on China’s horticulture economy and details aspects of the industry relevant for those who really want to understand what is happening in the winegrape industry in China. Section two entitled, “The Wine Economy of China,” takes a look at what is driving the wine industry in China. The third section, “U.S. and California Wine Relationships with China,” provides trade statistics and a discussion of a survey of California wineries who expressed interest in marketing in China.

Some of the opportunities cited in the report are:

The environment for imports has improved with China’s accession agreement with the WTO, which mandates that China will reduce tariffs on wine from 65 to 14 percent.

Beijing and Shanghai generally have the largest markets for Western foods, while major hotels and restaurants feature wine quite prominently.

The urban consumer class is estimated to exceed the total population of the United States and will almost certainly develop into a large market for imported and domestic wine in the future.

Some of the concerns raised in the report are:

Consumers in China are price conscious. Domestic wines are typically below $4 US per bottle, while imported wine is generally $15 US per bottle or more.

The major constraint for selling wine in China is consumer knowledge of the product. Most Chinese consumers have not developed a palate for higher quality wine.
Between 1995 and 2001, the area planted to vines for winegrape growing doubled and wine production from grapes has more than doubled The area planted to wine-grapes is estimated to have climbed above 300,000 hectares. .It is estimated that production from China’s wineries is growing by more than 10 percent annually

Section two of the report is available on CAWG’s Web site at www.cawg.org. To obtain the full report on CD, contact CAWG at 800-241-1800.

CAWG represents the growers of more than 60 percent of the gross grape tonnage crushed for wine and concentrate in California. The statewide association provides industry leadership to advocate for public policies, research and education programs, and trade positions to enhance the business of growing California winegrapes. For more information about CAWG, visit www.cawg.org.