Xia Zhongbang: imported wines will dominate Chinese high-end market
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Late-comers still wait-and-see
Journalist: In recent years, China become globally recognized as one of the fastest-growing wine consumption countries, It has already attracted many well-known international producers to come in. As a world leading wine company, why Constellation come so late?
Xia Zhongbang: Constellation produces 500,000 tons of wine each year, including 325,000 tons of dry wine, 105,000 tons bulk wine, among which sweet wine accounts a considerable proportion. Most of our products are from Chile.
Although China is the world's fastest growing market, but consumption of imported wine in the global market is relatively small. In 2005, Chinese mainland consumed 100 million cases (9L per case) import wine, only the equivalent of a mid-range brand’s sales volume, and even less than Taiwan and Hongkong. At present, China's imports of wine topped to 4.5 million cases, about 40,000 tons, a figure accounting for about 12.5% of China's overall sales, mainly French and Australia wine .
Brazil, Russia, India And China were called” BRIC”( same pronouncation with BRICK, often cited as a source of foreign expansion opportunity). Imported wine has rised more than 100% for 2 successive years in Chinese market, it is expected imported wine will account 20%—30% in future 10 years. We aim to "make each country's imported Wine from Constellation in Chinese market accounted for 20 percent of all proportion". At present, Constellation only has a market share of less than 0.5% in Chinese market , it means we have a long way to go.
Journalist: In recent years, big international players began to seek invest in local wineries, will Constellation acquire wineries in China to improve its market share,?
Xia Zhongbang: Constellation now occupied 7% -8% of the global wine market, in the same time of integration, we also sell many small wineries. But there is not any intention to cooperate with any Chinese manufacturers. Because China is not suitable for wine grape cultivation, on the other hand, we are not optimistic about the construction of the wineries for difficulties to cooperate with local wine grape growers. So, we will just wait-and-see.
Domestic wine globalization is not realistic
Journalist: With the developpment of wine market, big domestic wine producers made rapid growth in recent years. At the same time imported wine surging into China, domestic wine producers are actively committed to international development, they even started to buy overseas wineries. So what is the prospects in your opinion”
Xia Zhongbang: China only export 50 million cases wines totally in 2007, of which 30 million cases are re-export, real exports less than 1%. Imports are mainly bulk wine, 1/3 of the domestic wine rely on imports for short of wine grapes. Moreover, many wine grapes can not produce good dry wine, not to mention meet international standard.
Domestic producers focus on wine prices rather than quality, generally purchase bulk wine by a relatively fixed price. As costs rising internationally, to maintain the same purchase price can only sacrifice a certain quality. And domestic producers often meet orders as much as possible. These are the reasons why the quality of the domestic wine rather low.
The acquisition of domestic enterprises in overseas vineyards, wineries, has not much practical significance. They acquired only in a very limited scale, while those enterprises focuse on the international market, if bring all the products into China, the risks are considerable.
Journalist: What are the biggest barrier to constrain Chinese domestic wine into the international market?
Xia Zhongbang: The biggest problem of Chinese wine is wine grape, the total annount is not enough, especially wine grape to make high-end wine. Real domestic wines ares very few, the real domestic wine enterprises, such as Huadong, Dragon Seal, are too small for economic significance, and their high-quality wine are also of great difficulties in exports for its high cost. Often a bottle of wine sell 80 yuan in China can only sell 30 yuan in overseas market. In fact, overseas development is not so easy to do.
Over the past decade China did a lot to develop its wine industry, but achieves little, therer is no good grape variety, no international brand either.
"Wolf" will not come
Journalist: Hong Kong has just abolished tariffs on wine imports, will this have any effects on Chinese imported wine consumption?
Xia Zhongbang: zero tariffs will lead to the concentration of global wine, the wine brands in Hong Kong will be more than any other country in the world. This will be of great impact on Mainland imported wine market and shake the dominant position of domestic wine. There are several major factors: 1. Domestic wine, particularly high-end wine, is constrained by volume limitation for lack of wine grapes; 2. Adoption of international rules will regulate market behaviors. 3. With the changes of consumer tastes, high-end demand will grow.
Journalist:Many Chinese producers are focusing on high-end wine market, as you mentioned just now, the limitation of wine grapes restrained the production of high-end domestic wine, do you think they will make any progress in this market?
Xia Zhongbang: Why can imported wine make 100% growth? For persuing high-quality wine is an international trend. China's limitation of wine grape will lead to imported wines dominate high-end market.
Journalist: There has long been a "crying wolf" argument in China. Do you think imported wine will change domestic wine’s dominant position in the future ?
Xia Zhongbang: I do not think there is competition between domestic and imported wine, for the channel is controlled by all the major distributors and channel owners, they are the same group of people, they will make good arrangements for domestic and imported wine distribution market, to expand the overall market as far as possible.
"Wolf" will not come. The development of Chinese wine market will make winner but no loser, the only difference is who won more and who won less. Imported wine will actually take up the local wine market growth of consumption, rather than snatch a share of domestic wine,for domestic wine can not meet the demand of high-end market for its supply limitation.
China's wine market growth rate is faster than the local production, which is key factor that imported wine has a huge potential for growth. Imported wine in China has just begun, but its future are bright. In the next five years, if the growth rate of imported wine surpass that of domestic wine, we are expected to acquire 20% market share.