China’s Wine Production Drops 14.6 Percent Amid Anti-Graft Campaign

China's largest winemaker Changyu has seen falling profits as demand for red wine falls across the country. (Changyu)

A Beijing vineyard owned by Changyu, China’s largest winemaker. (Changyu)

Even though China surpassed France to become the world’s biggest consumer of red wine and second biggest consumer of high-priced wines last year, overall wine consumption in the country has fallen over the past year. According to a new Chinese-language report by the China Alcoholic Drinks Association (CADA), the effects of the decreased sales have rippled down the production line, causing some local winemakers to scale down production.

The CADA’s new report states that slowing consumer demand has led some local winemakers to cut back on cultivation. CADA says that wine production fell by 14.6 percent to 117.8 million liters from 2012 to 2013, and sales fell by 8.5 percent to 40.817 billion yuan (US$6.55 billion) during this time period.

This decline sharply contrasts with the period of 2011 to 2012, when production increased 16.9 percent and sales grew 14.4 percent. CADA reports that profits fell from 12.3 percent in 2012 to 10.7 percent in 2013.

According to Chinese news site China Daily, foreign wine imports have also slowed, most likely due to the ongoing anti-corruption campaign on excessive gifting, but domestic winemakers are not necessarily getting a break with lessened competition. CADA reports that China’s largest winemaker Changyu saw a 23.4 percent drop in sales revenue from 2012 to 2013, with a 38.4 percent decline in net profits.

CADA’s wine department secretary Wang Zuming notes that some local grape farmers are taking drastic measures to cope with China’s drying wine demand.

“Some are choosing to uproot their vines, or are simply not burying their vines to protect them over the winter season, as they have been wont to do in the previous years.”

However, CADA’s deputy secretary-general Li Mei says that the anti-corruption drive should not form a lasting damper on the wine industry.

“A few years ago, due to rapid growth in wine consumption in China, prices and profits were inflated, leading to an industry bubble,” Li says. “Unlike beer, liquor, and baijiu, which target very specific markets, wine actually has a broad consumer base which is not yet fully realized.” Li adds that unlike high-end wine, which is reserved for the elite, domestic winemakers should target China’s middle market and adjust their products and price points accordingly.

 

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Food, Wine, & Spirits, Industry Sectors