Has Chinese wine market hit rock bottom?

China’s imported wine sector continued to decelerate on the back of already weakened imports from 2020, sending worrying signs that the prospects for imported wines are getting increasingly dimmed in the world’s sixth biggest wine market, as wineries bemoan the doors to the vast market is gradually closing.

The latest data showed that the country’s wine imports in the first 11 months of 2021 weakened further on 2020’s low comparing base.

From January to November, imported wines declined by 0.3% in volume to 388.6 million liters but overall value slid further by 13.7% to RMB 9.87 billion (US$1.54 billion) over the same period in 2020.

The decline worsened especially towards the second half of the year where flare-ups in economically well-off regions including Fujian and Guangdong provinces, and northern China prompted tightened social distancing measures that curbed on-premise wine sales.

Last month, the fresh round of lockdown measures in northwestern Xi’an of 13 million people and ensuing outbreaks in Beijing’s neighbouring Tianjin right before Chinese lunar New Year and Beijing’s Winter Olympics will most likely dent wine sales again in Q1 of 2022.

The persistent downturn that never seemed to have recovered since early 2020 signals tougher days to come amid prolonged border closure, omicron disruptions and aftershocks from Australia’s exit.

With already dampened wine sales, adding to the pains was the country’s tightened access due to recent changes to import rules.  

Last year, China’s customs authority announced new import rules in April stipulating all food manufacturing, processing and storage facilities abroad need to be registered by year-end for their goods to access the Chinese market.

However, the detailed procedures to get the required registration codes only came out in October, and the registration website for companies who are eligible to self-register started operating just in November.

After much complaint, the deadline has been revised and the new rules will only apply to wines produced after January 1, 2022.

But when talking to Vino Joy News, an export managers of a leading Italian family-owned winery who declined to be named for sensitivity of the matter, complained the lengthy and complicated registration process is designed to shun out imported wines in favor of domestically produced wines.

It took the winery about a month to successfully obtain the registration codes. Regardless of the paper works and bureaucracy, the thought of not accessing Chinese market would be too costly for the winery.

The winery counts China as its biggest market in Asia, ahead of Japan and just behind its traditional export markets in Europe and US. Mainland China and Hong Kong combined generated close to €6 million in sales for the winery last year despite the downturn.

Chinese Wine on the Rise

What seems to have emerged from last year is domestic wine drinkers’ growing interest in domestically produced wines. A few of the country’s wineries in Ningxia including Silver Heights, Xige Winery and Château Leirenshou all reported positive sales last year.

Marco Milani, CEO of family-owned Silver Heights in Ningxia, revealed that the winery saw its sales grew by more than 60% in value last year, driven by brisk sales in domestic market. Consistently one of the best wines produced from China, the winery expects an uptick in export market in 2022 as well. “There is a lot of curiosity around Chinese wine from abroad,” he affirmed.

The growing allure of Chinese wine also caught the eye of Tim Tse, founder of the swanky Shanghai private members’ wine club, House of Roosevelt, and chairman of Roosevelt China Investments.

House of Roosevelt for the first time launched a wine list featuring exclusively Chinese wines, 127 different labels to be exact. First unveiled last October, the reception for the wines so far has been positive, according to Tse.

“Chinese wines are getting better and better. We have over 2,000 labels on the list and [it’s] only natural for me to include interesting regions,” Tse replied when asked about the motive behind the wine list. “Chinese wine definitely has a place in the wine world.”

But suggesting Chinese wine will eventually replace imported wines in the domestic market is too premature, he notes.

“China is a big wine country. With all the wineries that I visited, they have superior equipment and very good technology, and winery owners are serious players. They have been around for 10 years now,” he says.

“Eventually they will be able to compete with their peers but right now, it’s too early to tell, and you need another 10 or 20 years for them to mature and grow.”