Due to trade wars and a slow economy, Chinese wine importers are falling like flies. But is there cause for concern among South African producers who export to the Asian giant?
Last year, Vino-Joy.com reported that over 2 000 wine importers in China have gone bust, discouraged by ongoing trade wars between China and the US, as well as a slower economy, which has squeezed profits and dampened consumer interest.
The latest figures released by China’s official trade organisation paints a sombre picture. The China Chamber of Commerce of Import and Export of Food Stuff, Native Produce and Animal By-Products (CFNA) revealed that a total of 2 000 wine importers went out of business in the first five months of the year.
Of the 6 411 bottled wine importers in the country, the number decreased to 4 175 within the first half of 2018 – an alarming drop of 2 236 wine importers.
This is probably the country’s most severe industry reshuffling since the anti-corruption campaign in 2012 that quashed conspicuous spending and luxury gifting. The mass exit of wine importers also directly reverberated into the country’s imports volume and value.
Figures from CFNA showed that the country’s wine imported slumped 19.45% in value to US$1.22 billion for a total of 315.4 million litres of wine (-14.09%).
With escalating trade wars between China and the US and the country’s slowing growth from industrial output and investment to retail sales, wine is expected to face more headwinds.
But according to Marcus Ford, Wines of South Africa (WoSA)’s country manager in China, one has to look at the bigger picture. “If you study the chart below, you’ll see not only huge growth in imported wines to China, but an equally huge growth in the number of importers. In my view, a best guess would suggest that the top 20 importers would still only have a market share of less than 20%. Add to that the fact that China is still an immature market and things change very quickly.”
Marcus says that there are few barriers to establishing a wine import company in China. “With a tightening macro-economic situation in China, it’s possible that many of the non-wine specialists will rather focus on their core business and leave their ‘hobby’ wine business aside.”
However, there are some political analysts who believe that the current political crisis in Hong Kong is having some impact on wine importers in China. Marcus disagrees, saying that the Hong Kong situation is unique to Hong Kong and doesn’t affect the wine business in mainland China.
“The notion of Hong Kong as a logistical hub for access to China only really affects fine wine sectors like Bordeaux or Burgundy. However, the trade war between China and the US is having an impact on market sentiment, and is one of the factors causing the current slowdown. But again, this would probably have more of an impact on the non-wine specialists.”
He says that one had to take a long-term view, and the past 18 months or so have seen a significant correction in the Chinese market for all imported wines. “While volumes are down there has been a healthy increase of 12% in Rand per litre pricing that reflects a premiumisation of the South African category in the Chinese market, which bodes well for future growth.”