Vintners approach fickle Chinese market with caution

Mainland China's wine imports have soared more than ten-fold in the past few years but foreign producers hoping to cash in on the boom are warning the market is fickle and not for the faint of heart.

Mainland China is on track to import 10 million cases of wine this year, up from 840,000 in 2004, according to the Hong Kong Trade Development Council (HKTDC), which did not provide separate figures for Hong Kong's imports.

Asian wine consumption, excluding Japan, is expected to double from this year to 27 billion US dollars in 2017, the council said, with much of that growth driven by cash-rich China.

In another sign of the growth of the market, last week's Hong Kong International Wine and Spirits Fair, the second such annual event, attracted 520 exhibitors from 34 countries -- double last year's number.

"Many people are shocked by the speed of the growth," said Raymond Yip, the HKTDC's assistant director. "But there is a lot of pent-up demand for wine."

The disposable income of an emerging Chinese middle class has grown and many of its members are choosing wine as a healthier alternative to spirits, Yip said.

"People are getting more health conscious and all of a sudden wine has become fashionable," he added.

But Raymond Signorello, proprietor of Signorello Vineyards in California's Napa Valley, said he has been struggling to find the right agent to market his premium reds on the mainland.

"It's kind of a gold rush," he told AFP from his booth at the fair.

"There are a whole pile of Johnny-come-lately types who want to make a quick buck."

"It's not as easy as everyone thinks," said Danny Kwok, whose firm Syba (China) imports Spanish wine for the Hong Kong market.

"China is still a developing country and it's hard to establish stable laws and regulations for wines."

Hong Kong and mainland Chinese officials announced last week they had reached a deal on improving customs procedures to ease the flow of wine to the mainland.

Still, producers have complained about a host of questionable activities by Chinese officials, including double taxation on imports, Kwok said.

Brendan O'Toole, managing partner of Hong Kong-based wine exporter Summergate, said the business environment for wineries selling to China was improving, but only slowly.

"Ten years ago, there were a lot of people who would have viewed it as a bit of the Wild West," O'Toole said.

"There was a lot of misbehaviour, speculators and rogues at all levels. There's more structure and things are more transparent now, but commerce bribery is still quite widespread -- there is significant corruption."

Another challenge, Signorello said, is appealing to a market in its infancy, which tends to focus on the best-known, old world wine regions.

The winery owner said he had seen blind taste tests where a Chinese drinker chose a California red as his favourite. But, "then they turn around and buy Bordeaux," he added.

Some wealthy mainland and Hong Kong drinkers are also turning to wine as an investment after wild swings in the stock markets and property markets.

Last month, auction house giants Sotheby's and Christie's both said Hong Kong was overtaking New York and London as the world's largest market for rare vintages.

At Sotheby's Hong Kong wine sale in October, mainland Chinese buyers accounted for more than a third of buyers, up from 10 percent at a sale just a few months earlier.

The auction results came as Hong Kong tries to position itself as a regional wine-trading hub.

Lack of storage facilities and few well-trained wine professionals are among the challenges ahead for the southern Chinese city, fair attendees said.

Hong Kong's ambition may outstrip its ability to be the dominant way station for wines flowing into China, Summergate's O'Toole said.

"As a fine wine hub, it's a realistic ambition, but beyond that, getting into the big volume market, the jury is definitely still out," he said.

However, there is little question that Hong Kong will ride the wave of what promises to be a "very large" Chinese market, O'Toole added.

"It is already a substantial market and it's going to get a hell of a lot bigger."