Dashui Wine, the company that was credited for expanding drinkers’ palate in China’s southern metropolis Shenzhen, has announced that it is closing its business for good at the end of this month, crushed by economic pains worsened by the pandemic.
Founded in 2001 in Shenzhen, the bustling metropolis in Guangdong province, its founder Li Hanqiang was revered by peers as “godfather of Shenzhen’s drinks world” for bringing for the first time branded Baijiu and wine into Shenzhen, at a time when a popular local drink, rice wine (米酒), was the singular alcoholic beverage consumed in the market.
In a letter sent out to the company’s clients and staff, Dashui Wine implored that the company’s fortune was severely impacted by economic downturn in recent years, and the economic fallout from the Covid-19 pandemic proved to be the last straw.
“In recent years, the company has experienced many difficulties such as continuous economic downturn and deteriorating market, especially since the beginning of 2020 to date, it has been seriously affected by the pandemic and the impacts have not yet subsided,” the company wrote in an announcement dated February 25.
“In view of this, the company’s shareholders have unanimously decided that Shenzhen Dashui Wine will cease operations from March 31, 2021,” it concluded.
The dissolution of Dashui Wine as Chinese media Jiuyejia describes is “a mirror that illuminates the weakness of the current distribution channels of the Chinese wine industry.”
Its demise marks an end of the wine and sprites company’s invaluable role in growing Shenzhen’s drinks market, which later made Guangdong the country’s biggest wine consumer by value. The southern province bordering Hong Kong and Macau is the biggest market for wine in China, with US$909 million imports in 2017.
For 20 years, Dashui Wine has grown from a small-time drinks and wine merchant in Shenzhen to become a key player in shaping trade and consumer market in Southern China.
Its distribution network sprawled across South China with a portfolio covering both key homegrown and imported brands. At one time, it had 150 distributors in the region.
Its founder Li is reportedly the first person to have introduced and later expanded Baijiu brands such as the now famed Moutai, Wuliangye and China’s state-owned wine GreatWall in Guangdong.
It’s credited for opening up GreatWall’s market in southern China to the extent it earned a moniker as the “kingmaker of GreatWall’s blue print in South China”.
Its influence in the market did not go unnoticed. Its founder was elected as head of Shenzhen Alcoholic Drinks Association, and Dashui was voted as one of the top 100 companies in China by 酒业杂志，the Chinese language publication under China’s official drinks trade body, China Alcoholic Drinks Association (CADA), in 2016.
However, its woes started in 2010 when domestically produced Chinese wines were tightly squeezed by imported wines, as consumers’ thirst for French clarets grew.
Bordeaux and other French wines were new favorites in the Chinese wine market at the time. In 2016 when China and Australia signed a Free Trade Agreement to gradually climate wine tariffs, interest for Australian wine surged, further cornering market shares by old guards such as GreatWall and Changyu, the country’s oldest and biggest winery.
Competition among wine merchants also intensified as more companies waded into wine and beverage business. The last decade’s shift online to popular e-commerce platforms such as Tmall and JD.com also elbowed out some traditional brick-and-mortar companies.
When China’s wine imports started to slow down in 2018, as a result of slowing economy and China-US trade war, China Chamber of Commerce of Import and Export of Foodstuffs, Native Produce and Animal By-products (CFNA) estimated that over 2,000 wine importers went bust in the first five months of 2019, as we reported before.
Despite China’s early successful control of the virus spread, government orders to close bars and restaurants for months on end, put the wine industry on a strangle- hold.
The country’s wine imports from January to November last year dipped by 29.7% to 423 million liters, while value declined 22.8% to US$2.47 billion.