Navigating a very fragmented and dynamic Chinese wine market is challenging. Ian Ford, Founding Partner, and Nichole Mao, Partner of Nimbility Asia, help guide wineries to the right pathways for import partners and building demand in China. They also discuss how important domestic Chinese wine production is, the market for US wine in China, and the importance of wine education.  

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Detailed Show Notes:

Wine buying is very fragmented

• An importer can sell direct, with no middlemen
• With few regulations, one can buy wine everywhere, e.g., supermarkets, distributor friends, wine bars
• Online ordering important, ~10-20%, WeChat, Alibaba, Jing Dong

"Go to retailers"

• Sam's Club - known for wine sales to the mass market
• Leading grocery stores - Jing Dong, Hema

Promoting and selling in China

• Chinese social media platforms have integrated e-commerce (e.g., WeChat vs. Whatsapp, Douyin vs. TikTok), so people can immediately click and buy
• KOLs get commission or paid upfront to promote, lifestyle influencers are important
• Traditional wine media stays w/in the wine trade and doesn't reach the mass market
• Need good importer(s) for availability, no longer need to be exclusive
• View importers as partners, 1,000s of active importers, e.g., DTC importers (Vine Hu, Wiki Wines), big guys (ASC, Summergate, Torres) have extensive sales teams, operate omnichannel
• Wine trials are necessary - tastings at festivals, grocery stores, etc.
• Word of mouth is increasing in importance - as large KOLs are now often paid, people relying on smaller KOLs in their network more

Domestic production

• Majority consumed in China, exports growing off a small base
• Boutique wineries (50-100k bottles) - looking at more exports, most in Ningxia, the premium winegrowing region
• Guochao movement ("national wave") - Chinese supporting domestic brands

US wine in China

• 9th largest by volume, 6th by value
• Punitive tariffs hit imports, tariffs are more than tariffs, but a signal by the gov't not to buy the wines becomes a stigma
• US wine doesn't have the legacy or prestige of Bordeaux, Burgundy, or Tuscany, but have the prices
• Premium US producers are American centric not good at exports (Ridge being an exception)

Import duties

• Including import, consumption, and VAT duties and taxes
• Three levels: 
• Free Trade - ~26% - Chile, NZ, Australia (previously); wines ~1x US price
• Baseline - ~48.5% - France, Italy; wines ~1.5x US price
• Punitive - US, Australia (now); wines ~2x US price
• Australia went off a cliff since tariffs - France benefitted the most, then New Zealand and South Africa

Wine Education important for growth

• China's #2 largest student registration for WSET
• WSET had to stop in 2021 due to a corporate registration issue - almost back up and running

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