China: Top 10 improvements

The Chinese wine boom has been well documented. But are people being given a good deal? Gabriel Suk suggests 10 steps to improving customer appreciation.

CHINA’S RECENT surge in wine consumption is unique in many aspects. The rate of development, the thirst for first growths and dramatic upswing in the prominence and popularity of wine are all astounding. Yet lost in this rapid ascent is one crucial aspect that is the hallmark of any robust wine market: a fervent and dedicated consumer base.

People do buy wine and its status symbol is undeniable, but the current state of the wine market is full of pitfalls that prevent a large, dynamic group of consumers from forming a dedicated base. Here we look at 10 changes that could be made to improve customer appreciation of wine in China.

A version of this article first appeared in the inaugural edition of the drinks business Hong Kong.

1. CHINA CUSTOMS: CHANGE FROM PERCENTAGE-BASED TO VOLUME- BASED TARIFF

Current customs duties for wine add up to around 48% of declared value, plus the cost of shipping and insurance. The effect of a percentage-based tariff is to encourage the importation of cheap wine as the cheaper the declared value is the less impact the tariff will have on the wine’s final cost. This policy has been a boon for wine producers making €1-2 bottles (HK$10-21) of wine, but ultimately helps flood the market with cheap, barely quaffable plonk.

Switching to a volume-based tariff would discourage the importation of cheap wines and open up the market for mid-priced, high-quality wines. It would also open up an appropriate place in the market for low- priced, quality Chinese wines. Doing so would be a win-win as revenue would not be lost by the customs bureau, but the overall quality of wines would increase.

2. QUARANTINE: DROP THE ARCHAIC “INSPECTION” PROCESS

While the local market has grown enough to be able to thrive, often the greater barrier of entry to importing wine is the “quarantine” process through which up to three bottles of wine can be taken for “inspection”. While this is done under the guise of safety, it serves to corner the market of importation to a limited number of products and players. The policy not only puts a dampener on the above-board fine and rare wine trade, but also serves as an impediment for boutique producers to bring in a small number of bottles.
By streamlining and simplifying this aspect of the customs process, the market would be open to more products and producers and the diversity and quality of products available on the market would increase with this lower barrier of entry.

3. CHINESE WINE MAKERS: DITCH THE HOME-RUN APPROACH

Mrs. Liu Ning from Huailai Amethyst Manor Winery

Part of a vibrant wine culture includes having a quality selection of locally made wines. China is currently stuck between two extremes. On the one hand there are the mass-produced Chinese wines, and on the other hand there are “high-end” producers making a wine that in quality is relatively indistinguishable from the mass- produced wine but that comes with a price tag upwards of US$100 (HK$778) a bottle and a decidedly fancier package.

Faced with a choice of bad cheap wine or bad expensive wine the customer is ultimately left drinking something that does nothing to enhance their appreciation of wine.

4. RESTAURANTS: STOP TAKING BRIBES (“REBATES”)

While there are certainly exceptions, the rule is that when putting together a wine list a new restaurant will be offered a cornucopia of “gifts” that directly relate to the percentage of representation products can have on a given wine list. Seventy percent of a wine list at a major new hotel can garner millions of renminbi in upfront cash, promises of events, wine refrigerators, the list goes on.

When the focus of the importers is to win a wine list based on kickbacks, it draws attention away from what wine lists should be about: great bottles of wine that will match well with the restaurants’ cuisine. The customer is ultimately the one who comes up on the short end of that stick.

5. IMPORTERS: IMPROVE TRANSPORTATION LOGISTICS

With a few notable exceptions, almost all wine arrives in China via unrefrigerated container shipments. With shipping containers coming throughout the year and many crossing the equator on their way to Chinese ports, the damage to the wine is incalculable. Even after wine makes it into the country it is most often stored in dry warehouses or those with air-conditioned and not refrigerated conditions and ultimately leads to many wines not showing their true potential.

6. WINE SHOPS: IMPORT DIRECTLY

There is something magical about browsing the aisles of a well-stocked shop and actually feeling the bottle in your hands before purchasing it. Yet browse around most wine shops in China and all you will find is a replication of the same wines you find on the home delivery lists from local importers and thus also the same wines you will find on restaurant wine lists all around town.

The answer is for wine shops to set up their own distribution networks. While it does involve time and capital, the rewards will be worth the effort for both the shops and their patrons.

7. STATE-OWNED ENTERPRISES: GET IN THE GAME

At the local supermarket where most Chinese people do their daily shopping, wine selections are paltry at best. Major importers and distributors up to this point have geared their business around on-trade hotel and restaurant sales.

It is an undoubtedly daunting task for an existing distributor to establish reliable distribution networks to the swath of supermarket chains that serve China’s 1.3 billion people, and the obvious answer to fill this void would be for state- owned enterprises to start taking a major role in the importation and distribution of wine.

8. FOREIGN TRADE OFFICES: DON’T JUST PROMOTE, HELP

Government trade offices from the likes of Australia, New Zealand and Chile have all done a fantastic job of representing and promoting their products in China. The problem is, while they can help with brand exposure and access to trade fairs, what producers really need is a helping hand in accessing the market without becoming beholden to the major importers who control most of the market.

The more assistance trade officials can provide in helping producers bring their products direct to the market, the better off the wine community as a whole will be.

9. SOMMELIERS: PUSH THE WHITES

In Chinese the word most commonly used to talk about wine is hongjiu. Literally translated, it means red wine. If you want to talk about white wine you need to specifically say bai putaojiu or white grape wine. But colloquially if you want to ask someone if they’d like a glass of wine you say, “would you like a glass of red wine?” That is no language mistake though, as in China, wine is red.

Yet white wine can be a much easier wine to understand and enjoy at the outset think of the White Zinfandel craze in America). Further, it is easier to pair white wine with Chinese food.

White wine is held back because it is perceived as being inferior; sommeliers and waiting staff would be doing everyone a favour by introducing their clients to the beauty, diversity and quality that can be found in a great bottle of white.

10. LOCAL CONSUMERS: TRUST YOUR PALATE

The last and perhaps most important point is learning the simplest lesson of wine: if you like it, it’s a great bottle. The simplest path to improving appreciation of wine is for the consumer to stand up and realise that even if they haven’t been drinking wine for ages, the only opinion that matters and carries weight is whether or not they like a certain bottle of wine.

And finally… Kicking the gan bei habit 

The ubiquitous gan bei (a word composed of two characters meaning dry/empty and glass) has been the preferred method of consumption for all alcoholic beverages since long before bottles of red wine were ever found around the banqueting table. Yet it is in the recent surge in popularity of red wine that China might find an answer to ending the binge-drinking dinner banquets that are the hallmarks of business and social gatherings.

The gan bei almost makes sense when looked at through the context of the fiery sorghum-based baijiu that was red wine’s predecessor as the preferred drink to mark one’s social stature. Its fiery taste begs to be consumed as quickly as possible. Yet the exact opposite is true for a well-made bottle of wine that needs to be slowly savoured and sipped. As wine culture advances and the propensity to sip rather than skull takes hold, wine has a chance to pave the way in kicking the gan bei habit in China.