Discussion Section March 2, 2007 Brian Chen French Wine in China Discussion Section March 2, 2007 Brian Chen

Foreign wine boosts Chinese Import (2006) When talking about foreign wine, most businesspeople from Europe, Australia and North America consider China as their most important market. The Sino-Italian International Wine Fair was held in Shanghai from November 23 to 25. Paolo De Castro, Italian Minister of Agriculture and Hu Yanzhao, Shanghai Vice Mayor attended its opening ceremony, hoping to boost wine trade between China and Italy. Italian people not only promote their wine, but also their vermicelli, biscuit and coffee. Since the tariff duty of imported wine was decreased by 14 percent in January 2005, more Italian-made wine has been poured into the Chinese market. France is another country making huge profits by selling its wine in China. Dominique Bussereau, French Minister of Agriculture and Fishery, said on November 15 that China has surpassed Japan to become the largest market importing French wine. The total volume of French-made wine imported to China has increased by 60 percent by the end of 2006, taking up 36 percent of China's imported wine. Related survey indicates that there are three tendencies of Chinese wine market. More consumers of middle class and white collars are likely to take to drinking wine in booming bars and KTVs. Currently foreign wine has also occupied the market of some inland cities.

Beaujolais Nouveau exploits Chinese market energetically Date:2006-11-29 10:56:00 Having experienced test sale in China, French Beaujolais nouveau enters into Chinese market formally. Dominique Piron, vice-president of Inter Beaujolais( an Extension Organization of French Beaujolais Nouveau) said that low alcohol liquor ,such as wine and fruit wine, are popular among  Chinese academicians and the first drinkers. A great variety of French wine are making higher and higher market share in China, while the selling quantity of Beaujolais Nouveau carries low level. In 2005,France sold 80,000 bottles of Beaujolais Nouveau to Chinese. Currently, Beaujolais Nouveau is the popular product for good selling in Japan. Last year,12 million bottles are sold in Japan, which means one bottle Beaujolais Nouveau for 10 Japanese. In France, average consumption of alcohol every year is 57 liters, in contrast, Chinese people just 0.7 liter. So there has great potential in Chinese wine, especially Beaujolais Nouveau market.

Changing Consumption Behavior in China China has a long history of drinking alcohol, but it has only been in the last few years that wine has been widely accepted by Chinese. Compared with beer and white spirit, wine production and consumption are still very small. In terms of consumption, there are 33.29 million people drinking beer in China, 13.58 million drinking white spirit, while only 7.98 million drink wine. However, people are changing their consumption habits, and influenced by the government's policy control of the alcohol industry, the beer and liquor markets are shrinking. By contrast, wine production output has been experiencing year-on-year growth of over 10 per cent in recent years. And wine producers are making higher profits than those producing beer and spirits. CMMS statistics show that at present, domestic wine brands dominate more than 90 per cent of the Chinese wine market. And the top 10 brands in the market are all owned by Chinese wine producers. One of the reasons for the small market share of foreign wine brands is that imported wine sales were affected by counterfeit products and wine smuggled into the market. More importantly, Chinese-made wines are as good as imported ones in terms of quality and taste, but have cheaper prices.

Foreign wine competition in China Although domestic brands currently dominate the market, foreign winemakers hold advantages in production techniques, brand promotion and management. Meanwhile, with the deepening economic and cultural co-operation between China and other countries, wine culture is spreading quickly in China. This creates a favorable environment for foreign wines to explore the market. Domestic winemakers should prepare to fight off their foreign rivals. A government prohibition on half-juice wines from June 30 will be a heavy blow to domestic winemakers. Currently, wines mixed with water and other additives account for 40 per cent of the country's total wine production. But a much greater challenge facing domestic wine makers is the import tariff cut. According to China's World Trade Organization agreement, the tariff on imported wines lowers to 14 per cent this year from the original 65 per cent. With such a large-scale tariff cut, imported wine prices are expected to drop. Currently, some low-end imported wines have similar prices to domestic ones. Import statistics show Beijing alone imported 1,997 tons of wine in the first quarter of this year, a year-on-year growth of 46 per cent.

Vive le vin français! Grape Variety Regions Cabernet Sauvignon Bordeaux, SW France, Langedoc Cabernet Franc Loire Valley, Bordeaux, SW France Carignan Rhone Valley, Southern France Cinsault Rhone Valley, Southern France Gamay Beaujolais Grenache Rhone Valley, Southern France Merlot Bordeaux, SW France, Languedoc Malbec SW France, Bordeaux Mourvedre Rhone Valley, Southern France Pinot Noir Burgundy, Champagne Syrah Rhone Valley, Southern France

French Wine Laws and Labels Highly Regulated Appellation d’Origine Controlée (AOC or AC) VDQS (Vin Délimité de Qualité Supérieure) Vin de pays de … Vin de table

How to read a French wine label

Primo Palatum

Bordeaux

Left Bank: Rive Gauche Gravelly soil well suited for cabernet sauvignon. Most Bordeaux wines from this region have 60-65% cabernet sauvignon. More tannic. Haut-Medoc Margaux St.-Julien Pauillac St.-Estèphe (Listrac) (Moulis) Graves 1855 Classification Lafite-Rothschild, Latour, Margaux, Haut-Brion (Graves), Mouton-Rothschild

Right Bank: Rive Droite Further from the ocean, soil contains less gravel, more clay, so Merlot grows best Easier to drink when young than left bank wines Two most important regions St.-Emilion Pomerol

Château Lascombes

Lestrille Capmartin

Château Haut-Brion

Château Pétrus

Questions: If you were the French minister of Agriculture and Fishery, how would you promote your country’s wine in China? Identifying target consumers Creating demand for a new item in China Creating proper appreciation for French wine Would you change the way labels are printed for the Chinese market? What are the pros and cons? Would you try to change Chinese consumption behavior of French wine, or adapt French wine to Chinese consumption behavior? Would you try to encourage French wineries to form joint ventures with Chinese wine producers? Why or why not?