Chinese wine importers entering ‘the Era of Warring States’

New figures suggest there is a large turnover of small-to-medium wine importers in China, underlining the recent uncertainty in the market.

Around 1,300 importers out of a total 4,936 dropped out of China’s wine market in 2012, according to the latest figures available, published by China Food and Drinks Fair (CFDF).

But, 2,071 new importers joined the market that same year, highlighting significant flux in the sector.

The report says China’s wine importers are in the middle of a restructuring process, which it likens to the ‘Warring States’ era of Chinese history; an analogy for many small players competing against each other without a leading brand.

As importers fight for market share, there is ongoing ‘pressure to destock’ amid an oversupply of foreign wine in China’s warehouses.

The latest customs figures show a 20.7% drop in wine imports in volume to Mainland China for the first three months of 2014, versus the same quarter of last year.

At last week’s Vinexpo Asia Pacific trade fair, there was speculation about the about how much wine is sitting in China’s supply pipeline.

Matthew Rouse, managing director of importer Shanghai YRC Wines Co, said several sources informed him that tens of thousands of containers of mid to lower-priced wine have been abandoned outside of warehouses in the past five years. A container typically contains 1,500 cases.

‘We don’t know how much there is. But, we are right in the middle of a major structural change,’ Don St Pierre Jr, outgoing executive chairman of ASC Fine Wines, told conference goers in reply to Rouse’s comments.

The CFDF report states that many importers of all sizes ‘are competing fiercely for a set amount of market shares by cutting down the price, so they can get rid of their stocks’. Destocking could last until early next year.

‘If we don’t bring the price down, the stock in our distributors’ hands will just keep on building,’ Alain Castel, managing director for wine at France’s Castel, was quoted as telling the Southern Metropolis Daily newspaper at Vinexpo.

Several of China’s biggest wine importers believe the sector will become more ‘professional’ in the next few years.

ASC’s chief executive, John Watkins, believes China’s wine market is witnessing the development of a middle market that will be healthy over the longer-term.

‘In the last five years, any type of company got to import some wine,’ Alberto Fernandez, managing partner of Torres China, told DecanterChina.com. There were ‘no barriers and lots of intrusion in the industry by non-professionals’, he said.

The future, he said, will be ‘a more mature market’.

(Additional reporting and editing by Chris Mercer)