The overview of Chinese wine market in 2008

Presently, the annual per capita wine consumption in China is 0.51 litres and the annual growth rate remains about 15%, the level of Chinese wine consumption equalled as the same as Japan in the late 1980s, the per capita wine consumption in Japan has been increased to 3 litres in the last 20 years and maintains stable, but sill in a relatively low level compared with the world average level. Therefore, China has to go through a long period to reach the 3 litres per capita wine consumption, but, on the other hand, taking into account the huge population in China, even though the per capita annual consumption of wine reach 1 litre, the total amount will be in a huge quantity, the potential market is very large.

During Jan-July 2008, China yielded 507,000 tons wine, an accumulated growth of 66%. The reasons for this rapid growth are the great increase of consumption and the more wine manufacturers were accounted in the statistical data. According to the scope of statistics of the National Bureau of Statistics that all manufacturers whose income is over RMB five million should be accounted; after the rapid development of China wine industry, more and more wine manufacturers qualified into the scope of statistics. In 2008, there were 155 manufacturers into the scope of statistics, while only 130 in 2007.

In recent years, the cost of production, logistics and marketing such as wine grapes and labour has been risen gradually and the retail prices also has been soared; particularly, since 2007, the average monthly price of dry red wine in 36 cities has soared significantly.

In terms of the regional feature of grape resources and the higher standard of production technology, the concentration of China's wine industry is relatively high, almost dominated by Zhangyu, Dynasty and Great Wall. The total income of these three companies of 2007 accounted for 38.43 per cent of the total amount of China's wine industry, further more that profits accounted for 67 per cent; of which Zhangyu as a leading manufacturer stands on the top. In the first-class brand products, Great Wall and Zhangyu take an advantage, because of some management matters that the sales of Dynasty in recent year were lower than the industry average growth rate. Although in recent years some second-class brands such as LongWei have afforded to enter first-class brand, but Zhangyu's strong brand appealingness and comprehensive advantages support it to continue leading the Chinese wine industry and its industry leading position.

The three domestic wine giants have their own marketing advantages in various regions: Dynasty takes 40% market share in Shanghai; Great Wall ranks No.1 of market share in North China, South China, Southwest and Northwest regions; and Shandong and Fujian provinces are the main market for Zhangyu.

According to China Custom's statistics, in the first five months of 2008, China imported 84.89 million litres of wine, an increase of 10.3 per cent than the same period last year; the value of $310 million, up 49.1 per cent year-on-year; the average import price was $3.6/L, up 35.1 per cent.

Although the import of wine has increased, but in terms of the poor brand cognitive of global wine brand of China's consumer, the brand consumption is still focused on the Chinese brands. In 2006, the volume of import wine increased 116 per cent and in 2007 increased 29 per cent; 2007 imports reached 140,000 tons, but 80 per cent of the wine were in economy size, then bottling by domestic brands to sell, the proportion of foreign brands was relatively lower, which is caused by the low brand cognitive in China.

The wine market capacity in China is huge, and supervise and regulation has improved, also, the market competition has become more intense and foreign wine has strengthened their competitiveness in China market; meanwhile, domestic consumers' behaviour has matured; all of these elements will affect the Chinese wine industry and the structure of products will transform from low-grade to mid-and high-grade, and domestic wine manufacturers have to face the new competitive environment.