Aug 16, 2012
Chinese consumers' growing preference for imported wine is expected to pile further pressureon beleaguered domestic wine brands, according to industry analysts. Imported wine currently accounts for around 25 percent of the Chinese market, industryanalysts said. The nation imported 200 million liters of wine in the first half of the year, up 12 percent year-on-year, with a value of $1.1 billion, up 24.1 percent, according to www.haiguan.info. Wang Zuming, secretary-general of the wine branch of the China Alcoholic Drinks Association,said the rivalry between imported wine and domestic brands has never been so intense. France, Spain, Chile, Australia and Italy are the major sources of China's wine imports,accounting for 82 percent of the total. Between 2006 and 2010, wine imports grew from 114 million liters to 283 million liters, up 65percent. Zhang Zhigang, an analyst at Rising Securities, said domestic brands face challenges fromforeign wine brands in terms of price and distribution. Imported wines in China previously occupied the high end of the market but can now be foundon the shelves of local supermarkets after their prices were lowered due to the global economicslowdown, posing a major challenge to domestic brands. Given Chinese consumers' relative lack of awareness of foreign brands, their profit marginscan be a lot higher than local brands, Zhang added. He predicted that imported brands willeventually account for around half of the Chinese market. The impact of imported wines will be felt by the industry for at least three to five years,according to a report from China Merchants Securities. The report said China's wine importshave grown at an annual rate of 50 percent in recent years. The domestic wine industry has recently been plagued by quality problems, the growingpopularity of imported wine and a decline in consumption. Media reports said that, following tests conducted by the National Food Quality Supervision andInspection Center, residual volumes of germicides were found in some of the products ofChangyu Group Co, a long established wine producer in Yantai, Shandong province.Followingthe report, Changyu's shares on the Shenzhen Stock Exchange fell 9.83 percent on Friday to atwo-year low. Changyu said in a statement posted on its website on Saturday that the level of two germicidesfound in its wine duringthe tests was much lower than limits in the European Union. Leading domestic wine brands such as Changyu, Dynasty Winery Co Ltd and China Great WallWine Co Ltd have performed poorly in the past year. Changyu's revenue declined in the first half of this year for the first time in five years, falling2.51 percent year-on-year to 3.01 billion yuan ($470 million), according to the company'sinterim report. China Great Wall Wine Co Ltd's sales declined 2.1 percent year-on-year in 2011, and the Sino-French joint venture Dynasty Winery saw a 10.5 percent year-on-year slump in its income in2011. But the country is regarded as having great potential in terms of wine consumption. Per capita wine consumption was less than 0.5 liters in 2010, while the global average was 7liters, according to the 12th Five-Year Plan (2011-15) for the Wine Industry published byMinistry of Industry and Information Technology and the Ministry of Agriculture. By 2015, wine production in China is expected to reach 2.2 billion liters, an increase of 100percent, at an annual growth rate of 15 percent, according to the plan.
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