Chilean wine ‘riding a wave’ in China as import tariffs abolished

Chile will become the second country to see import tariffs on its wines abolished in mainland China on 1 January, in a move that importers and retailers expect will maintain strong sales momentum – even retail prices are unlikely to fall significantly.

China has gradually cut tariffs on bottled Chilean wine from 14% to just 1.6% since the two countries signed a free trade agreement in 2005. In 2015, tariffs will be abolished for both bottled and bulk wine imports from the South American country, as they were for New Zealand in 2012.

The move is part of China’s focus on bilateral trade deals. It recently signed a free trade agreement with Australia that will also see tariffs on Australian wine imports abolished within four years.

Market figures suggest Chile has already enjoyed significant benefits from tariff cuts in China in a generally sluggish sector. Imports of Chilean wine rose by 37% in volume in 2013, despite an overall drop in China’s wine imports due to government austerity measures. In the first nine months of 2014, Chilean wine imports rose by nearly 50% in volume, versus an overall decline in wine imports of 7.4%.

‘Chile is riding a wave in China,’ said Ian Ford, chief executive of Summergate, the Shanghai-based importer of wines for Chile’s largest wine producer, Concha y Toro. ‘It’s our strongest category right now, with sales of Casillero del Diablo growing in 2014 at close to 30% year-on-year, from an already large base. Other brands are also doing very well versus the market and versus competition,’ said Ford, who recently sold Summergate to Australia’s Woolworths, but who will be staying on as CEO.

Ford was less certain that zero import tariffs on Chilean wine would lead to lower retail prices in 2015.

‘Any impact on retail prices have already been realised over the past couple of years, so I don't expect to see any noticeable change in retail price as a result of this final stage of tariff reduction,’ he told DecanterChina.com.

‘Zero tariffs won’t bring too much impact to retail prices,’ said Yuan Jiang, founder and CEO of online retailer YesMyWine. ‘But,’ he added, ‘for e-commerce retailers, every little counts.’

Due to a price range of between CNY80 to CNY200 (£8-20), ‘Chilean wines are especially competitive in the mid-to-lower end market,’ Yuan told DecanterChina.com. ‘The affordable price gives the young drinkers a value-for-money impression.’

Zero tariffs could also raise the profile of high-end Chilean wines, said Mariano Larrain Hurtado, of La Cava de Laoma, a Beijing-based wine shop that specialises in family-owned, boutique wineries from Chile.

‘Chinese consumers sometimes think that cheap wines are bad wines,’ Larrain Hurtado told DecanterChina.com. ‘I hope the official bodies and distributors can transmit the idea that cheaper Chilean wines are a consequence of a free trade agreement and not because of quality.’

As of 2012, New Zealand has also enjoyed zero tariffs on wine exports to China, based on a free trade agreement signed by the two governments in 2008. The country’s wine exports to China have risen from CNY12.5m in 2007 to CNY127m in 2013. Export volumes have jumped from 268,000 litres to 1.93m litres over the same period, according to New Zealand Trade and Enterprise.

Competition in the market is likely to increase if Australia also enjoys reduced tariffs as agreed less than two months ago.

Ford said that, for now, ‘Chile is very clearly outpacing the industry overall, and total Chile shipments to China could very well overtake Australia in the number two spot in the months ahead,’ said Ford. ‘But Australia is now poised to respond in 2015, so it will be a very interesting year.’