China is the world’s biggest consumer of alcoholic beverages. For many years, the Chinese people preferred the products of their national industry, but recently the structure of demand changed rapidly. While the shelves of Chinese supermarkets are still filled with expensive ceramic jars with baijiu, nation’s most revered high-alcohol rice vodka, more and more Chinese are learning how to enjoy red wine or imported beer.
Evidence of drinking alcohol in China dates back 7000 years. It was always the indispensable part of religious ceremonies and important events, such as weddings and funerals. The traditional beverage was usually distilled from sorghum or rice, ranging from 20% of alcohol (huangjiu) to above 40% of alcohol (baijiu). Beer was introduced in China in the beginning of the last century, by the two big breweries: Harbin, owned by Russians, and Qingdao, owned by Germans. Wine was almost not known before the Deng Xiaoping reform period, but during the last 40 years the wine consumption has skyrocketed, and in 2013 China has surpassed France and Italy as the biggest consumer of red wine (2 billion bottles).
According to the recent data, China’s consumption of alcoholic drinks is expected to reach 84.37 billion liters by 2016. It has already risen from 46.52 billion liters in 2007 to 62.72 billion liters in 2012. In terms of consumption, surprisingly, the traditional Chinese liquor was surpassed by the red wine. Wine is very popular among the emerging middle class, expanding pub culture is offering more opportunities to consume it, and the Chinese women, who traditionally were not supposed to drink baijiu, are turning to red wine instead. What kind of business opportunities does it create?
Almost 80% of the wine consumed in China is produced domestically. But the remaining 20% is imported from foreign countries, including France, Australia, Italy, USA, Chile and South Africa. French wines are considered to be the most prestigious and occupy the high-end price range (above 400 CNY per bottle). Most of the Chinese customers are not very familiar with less common wines and are attracted by easily recognizable brands, which bear names such as Bordeaux, Chardonnay or Burgundy. The color of wine is important – the sales of red wine are bigger than the sales of white wine, mostly due to the traditional meaning of the red color (happiness, prosperity, wealth). Similar to many other products, it may be easier to introduce the wine labeled as “upscale” or “premium” into the Chinese market, than to compete with the local brands on the lower price level.
Establishing wine distributing company in China is not very complicated; like in the other sectors, wholly owned foreign enterprises and joint ventures are the most common form of business presence in China. The company should follow the regulations of the local Administration of Industry and Commerce and prepare labels according to the rules of China Entry-Exit Inspection and Quarantine Bureau.
Obviously, the most important risk is related with counterfeited alcohol. This problem is particularly serious in the case of high-end imported spirits, such as Johnny Walker, but wine and beer are also counterfeited on a smaller scale. In China, the proper intellectual property protection is a must and irrespective of the popular opinion, we can still enforce our rights. Enormous opportunities of Chinese alcoholic beverage market are attracting many foreign investors and with enough determination, we can also join them.