If China Matters in Five Years, Control Your Brand Today

China’s domestic demand has not recovered as many of us expected. The property market continues to weigh on household wealth and confidence, deflationary pressures remain, and companies across many industries are caught in “involution” – competing harder, cutting prices and earning less.

Beijing understands that China must ultimately rely more on domestic consumption, but it does not appear to see large-scale, short-term stimulus as the solution. Its approach is more patient and structural. This may prove right over time, but there is little reason to expect a strong recovery in consumer confidence soon.

For the wine industry, we should be honest about what this means. China’s old wine demand has collapsed. New demand has not disappeared, but it is smaller, more fragmented and harder to reach.

The previous market was supported by government and business entertaining, gifting, status and rapid economic growth. The emerging market is different. Consumers increasingly choose wine for themselves, seeking authenticity, value and enjoyable experiences. Wine must become easier to understand and more relevant to food, travel, hospitality, friendship and personal enjoyment.

I believe this transition creates an important long-term opportunity. China’s wine consumption remains extremely low by international standards. But long-term belief in China cannot justify pushing more wine into the market today. In a shrinking, deflationary market, discipline matters more than volume.

If China will matter to your brand five years from now, you must manage how it is sold today. Chasing volume in a weak market is one of the fastest ways to destroy pricing, partner profitability and long-term brand value.

Why China requires particular discipline

Understanding distribution, inventory and depletion matters everywhere. But weak market discipline becomes visible – and destructive – particularly quickly in China.

Digital platforms give customers immediate visibility into prices across channels. Deflation intensifies price competition. Distributors and online merchants operating on extremely thin margins may keep selling long after the economics become unsustainable. Once excess inventory enters this system, price erosion can spread rapidly.

Growth once hid these weaknesses. Today, multiple sellers compete with the same product, inventory moves into unintended channels, and differentiation disappears. One distributor discounts to generate cash and others follow. Margins collapse, and partners stop investing in education, customer development and brand-building.

The producer may still record a shipment, but the brand is becoming weaker.

A brand does not control its market simply by determining how much to ship. It has reasonable control when it understands where products are sold, how pricing is developing, how quickly inventory is depleting – and whether its partners can earn a sustainable return.

Some of China’s strongest brands are accepting less short-term volume for greater control. Nike is reducing third-party online sellers and concentrating business in official channels. Moutai has expanded direct consumer access through iMoutai while tightening oversight of allocation, pricing and distribution. Porsche is reducing a dealer network built for a larger market rather than preserving it through deeper discounting. International spirits groups have also allowed shipments to fall while distributors reduce excess inventory. They are protecting pricing, partner economics and long-term brand strength.

Wine cannot simply copy Nike, Moutai or Porsche. Our industry has smaller budgets, fewer people, more fragmented distribution and less control. But the principle applies. Treasury Wine Estates recently demonstrated it by temporarily suspending replenishment of Penfolds Bin 407 in China. Bin 407 is one of Penfolds’ best-selling wines in the market. TWE interrupted shipments of an important product so inventory could normalize and distributor profitability and market pricing could recover.

Supply discipline cannot manufacture demand or make an irrelevant wine relevant. But excess supply and fragmented distribution make a difficult demand problem worse.

A brand is not healthy if its partners cannot make money

At the Chengdu China Food and Drinks Fair earlier this year, I spoke to ASC’s wholesalers and potential partners about a critical industry priority: restoring sustainable profitability throughout the value chain.

A brand is not healthy because the producer achieved its shipment target. If the importer holds excessive inventory, the distributor loses money and the retailer relies on discounting, those responsible for building the brand will reduce investment or shift attention elsewhere.

Many producers have increased export prices while Chinese market prices stagnated or declined. Importers and distributors absorbed much of the pressure, squeezing their margins precisely when creating demand requires greater investment in people, education, experiences and channel development.

Investment must follow sustainable economics. An importer cannot continuously finance brand development if the producer protects or increases its own margin while weak demand prevents local partners from recovering those increases.

Importers should not be guaranteed a margin. They must earn their position through execution, transparency, responsible inventory management and measurable depletion. But brand owners must provide realistic pricing, supply discipline and support that make local investment possible.

Bordeaux illustrates the risk. The same château may be offered through several négociants to multiple Chinese importers, merchants and online sellers at similar costs. One importer may invest in the brand, only to find the wine offered directly to its customers through another route at a lower price. The château completes its sale, but inventory risk and financial pressure move downstream.

This does not mean every brand needs one importer or one channel. The test is clarity of role, execution, transparency, accountability and sustainable economics. Maximum availability is not a strategy. In a deflationary market, it can turn even a great wine into a commodity.

Importers must accept responsibility

Importers – including ASC – must recognize our role in the problem. During the years of rapid growth, our industry sometimes accepted excessive inventory, overly broad distribution and short-term practices that were unhealthy for brands and customers. We cannot ask producers to change while defending our own status quo.

Channel discipline should never protect an underperforming importer. Exclusivity, or any privileged position, must be earned through execution, transparency and demonstrable consumer sell-through.

In wine, the importer must often do more than distribute. Most wineries do not maintain large teams in individual markets. They provide global positioning, essential guardrails and agreed support, but rely on the importer to act as local brand owner – turning direction into choices about positioning, channels, customers and investment.

The importer’s brand team must work closely with sales teams, distributors and customers, who often have the clearest view of pricing, inventory and genuine demand. The approach should be brand-led but commercially grounded.

Perfect control is unrealistic. At a minimum, importer and producer should share a view of inventory and depletion; the channels and customers driving the business; material pricing changes; partner profitability; and where limited investment can have the greatest impact.

The producer must contribute realistic pricing and supply, clear direction and appropriate support. The importer must provide local leadership, transparency and responsible execution. Distributors and retailers must contribute customer knowledge and avoid relying on continuous discounting.

For ASC, this means we should not take inventory simply to secure a brand, satisfy an optimistic forecast or meet a producer’s shipment target. Nor should we transfer inventory to customers merely to record a sale. We must increasingly measure success through healthy depletion, repeat purchase, price integrity and sustainable customer profitability.

Building the next China wine market

My involvement in China’s imported wine market began 30 years ago, when I co-founded ASC with my father in 1996. After a decade focused on the US and international fine wine markets, I returned to China in 2024 and bought back ASC the following year. I remain convinced that China will be important to the global wine industry over the long term.

But we must end where we began: the expected recovery has not arrived. Consumer confidence remains weak, deflationary pressure continues and the pain is spreading across companies, channels and categories. The next wine market will not resemble the last, and time alone will not repair the damage being done today.

It will not be driven primarily by status, formal entertaining or the belief that every famous wine brand must be available everywhere. It will be built one consumer, occasion and experience at a time.

The answer is not to abandon China or simply sell less. It is to manage the market responsibly: tie shipments to depletion, identify pricing problems early, clarify channel roles and concentrate investment where it can create genuine demand.

As the downturn continues, the danger grows. Excess inventory accumulates, price erosion spreads through digital channels, and weakened distributors have less capacity to invest. A brand without visibility into inventory, pricing and depletion – or the right local partner – becomes more vulnerable each month. Once pricing collapses and capable partners lose confidence, rebuilding will cost far more than protecting the market now.

The brands that benefit when China’s consumer market strengthens will not necessarily be those that shipped the most wine during the downturn. They will be those that faced the market as it was, protected their integrity, chose the right partners and preserved the economics needed to keep building demand.

The market is not recovering as expected, and pressure is no longer confined to the weakest brands or businesses. That makes control, partner choice and sustainable economics more urgent. China does not need more wine pushed into the market. It needs brand owners and local partners prepared to face reality – and build a healthier market together.