Lodi vintners make China a dynamic, new possibility for wine sales

Imagine a nation with hundreds of millions of wine drinkers who have more access to spending cash than ever before and a growing taste for the finer things in life. Imagine this place has seen wine consumption increase by leaps and bounds in the past several years, and the trend shows no signs of slowing or even leveling off.

This isn't make believe, it's China. And wineries worldwide are salivating at the marketing potential.

China has a population of more than a billion people and its middle class is expanding at a rapid rate. The World Bank estimates China's middle class will grow to roughly 1.15 billion people by 2030. Since China became a member of the World Trade Organization in 2001, the country has expanded its influence and has become a major player in the world economy. Once isolated, the country is positioned to become a global and economic superpower.

This new and dynamic market is intriguing to businessmen around the world. And Lodi is no exception.

Van Ruiten Winery is one Lodi winery that has enjoyed success in China and is continuing to elbow its way into the blossoming marketplace. Van Ruiten has opened a wine tasting room and corporate sales office in Shanghai.

Diablo Dragon Wines is the official exporting business of Van Ruiten family winery. Chief Operating Officer Gus Julian said what is most appealing about China is the potential but there are constant challenges to doing business. Besides the cultural differences, there are significant economic hurdles to overcome.

China's mainland has a 48 percent tariff on imports, making it difficult for wineries to remain competitive in the marketplace. He said the pace of doing business in China is slower as well, and that the negotiations are very intense. Trying to price the products so that they can be competitive is another hurdle, he said, and most of Chinese population, around 700 million people or more, are still at the poverty level.

The individual bureaucrats in China can make trade difficult as well.

"The perception is that there is one person in Beijing who determines how the country operates," he said. "You could have leaders in Shanghai say, 'slow up imports a bit.' Then the process takes 14 days instead of five." Not every Lodi winery has enjoyed the same success as Van Ruiten. Miramont Estate Vineyards was on the inside track when owner Dave Pechan met with China's Consul General Gao Zhansheng in August 2008, when Zhansheng toured Lodi's Wine and Visitor's Center and sampled local wines, but sales never materialized. Pechan said he still has interest in doing business in China, but that the cost hasn't been cost feasible for him so far.

"The price points we have are as low as we can go," he said. "It's not the price they are willing to pay."

Pechan said he still has lines in the water when it comes to getting involved in the Chinese markets, but that things haven't come together yet.

"We haven't given up yet, but we are going to work on domestic and find another outlet," he said.

The Wine Institute, a public policy group that advocates on behalf of California Wineries, said California wines are in demand in both China and Hong Kong. Eric Pope, regional director of emerging markets, said informing the Chinese public about California wines is critical to future success.

"Educating the Chinese trade, media and consumers on the true wealth and diversity of California's wines is the best way to ensure that our wineries garner an appropriate price for their products in that market," Pope said in an e-mail.

Pope said California wines having limited history in China can actually work to their benefit.

"The market is still very young and immature, but Chinese consumers are very brand conscious and have no predispositions against California," he said. Pope said it creates an opportunity for Lodi wines to create individual identities.

Pope said he doesn't see China's tariffs as a major roadblock to trade. "The market potential in China is just too big," he said.

Members of Lodi's Chamber of Commerce and local wineries have tested the waters for the last several years and see potential for Lodi wines in China.

The Lodi Chamber of Commerce visited China in 2007 in an effort to create a business relationship. Pat Patrick, president and CEO of the Lodi Chamber of Commerce, said the efforts were successful and it's important for Lodi, a region that grows more winegrapes than Napa and Sonoma combined, to get itself into a marketplace with a growing middle class and booming population. He said it's important to the economic stability of Lodi to branch out to as many regions as possible.

"The more Lodi-based products we can sell, the more insulated we get," he said.

Patrick said wine consumption in China is up 40 percent this year and that the U.S. hasn't been getting its share of the market. Traditionally, French, Australian and South American wines have dominated the Chinese marketplace.

The wine sector is the fastest growing business sector in China, Tie Zhang, president of U.S.-China Business and Culture Association, said in an e-mail. He said Van Ruiten Winery is pioneering the way into China and that the business is progressing well. American wine has a bright future in China and the market for wine has seen double-digit growth in the past decade, he said.

Zhang said Van Ruiten's success in China is due to the personal touch its executives have conducted their business with and how they have been willing to fly overseas and meet with potential partners.

"You have to be here in order to win this market," Zhang said in an e-mail.