Lodi hopes to reap the benefits of China’s taste for wine

December 30, 2009

 

altIt’s been said that one in five children born in the world is Chinese. In my family, that would be my younger sister. But she looks as Irish as the rest of us, so I’m skeptical.

But China does have an abundance of people, more than 1.3 billion of them. Businesses involved in retail sales like to think of people as consumers, and China is the Holy Grail: potentially the biggest consumer market on the globe.

That fact has not gone unnoticed in the wine industry. The California Association of Winegrape Growers did a study of the Chinese wine market a year or two ago, and Lodi officials have been cultivating a relationship with China that has included trips there, and hosting Chinese officials here.

A Chinese contingent is expected to visit Lodi during the first week of February, and the Lodi Chamber of Commerce hopes to open an office in Shanghai to market wine, walnuts, cherries and almonds, according to Pat Patrick, Chamber president and chief executive.

Large valley wineries and some smaller ones are already selling wine in China. E.&J. Gallo recently held a wine tasting in Nan Jing that attracted 150 “industrial elites” according to Chinawine.com.

But the sales volumes for California wines in China are small so far, for several reasons. One is that China is not a wine-drinking culture – yet. Chinese per capita consumption of wine in 2005 was less than a liter, compared to France at nearly 56 liters, according to statistics from The Wine Institute. Even the United States, not known as a wine culture, consumed 8.7 liters of wine per capita in 2005.

The key words there are “per capita,” however. The French consumption is spread over about 61 million people. Chinese consumption is spread over 1.3 billion people. So, the Chinese drank about 1.18 billion liters of wine, while the French consume about 3.4 billion liters. And while the French consumption is relatively stable, the Chinese appetite for wine has been growing.

A U.S. Agriculture Department trade officer told Patrick that Chinese consumption of wine is growing at 40 percent a year.

So, China is a significant market, but there are lots of competitors, including those French folks, who make even more wine than they drink. The rest of Europe, Australia, New Zealand, South Africa, Chile and Argentina – the usual suspects – are also vying for the Chinese palate. U.S. wines, according to Patrick, rank about sixth or seventh in the Chinese market.

Among the obstacles for California wine producers who want to get into the Chinese market are gaining distribution, and overcoming the public’s lack of knowledge about foreign wines, according to the study by the California Association of Winegrape Growers.

A survey of Chinese stores done by the Winegrape Growers study found that some store clerks – in stores that carried California wines – didn’t even know they carried it. Others didn’t think California or the U.S. made wine.

Another potential obstacle: China has its own domestic wine industry. In fact, China ranked fourth in the world in estimated wine grape production in 2006, according to The Wine Institute, just behind the United States, at 6,100 tons. It also ranks fourth in vineyards at 1.4 million acres – just ahead of the U.S.

That could send a chill down the spine of the California wine industry, if China decides to export wine on a big scale.

The fear is that China could do to the wine industry what it did to the apple industry.

China launched an apple tree planting program about 30 years ago, and within 20 years had overtaken the U.S. as the top apple-producing nation in the world.

It now produces five times as many apples as the United States. Chinese apple sales to the Asian and Pacific Rim markets, and sale of inexpensive apple juice concentrate in world markets, have cut heavily into U.S. apple sales.

Could that happen with grapes or wine?

The Winegrape Growers study, done by Stanford researchers, states that while China’s grape wine quality isn’t great, it is improving rapidly.

“Chinese wine companies in many cases have brought in European expertise,” according to the study, “and are developing a sizeable domestic wine industry capable of turning out some very passable wines.”

If China develops “passable wines” it will be able to offer them at a low price because of the low cost of labor in China.

So, China is both exciting and frightening for the wine industry. Patrick acknowledges the double-edged sword, and quotes American Tycoon Warren Buffett:

“China will be your biggest nemesis or your biggest customer. You decide.”

Patrick just hopes to teach Chinese wine sippers to look for Lodi on the label.

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