China set to become Chile’s number one

China is set to leapfrog the US and UK in a matter of months to become Chile’s largest wine market, according to Julio Alonso, Asia director at Wines of Chile.

Julio Alonso is director of Asia for Wines of Chile

Speaking to the drinks business at ProWine China on 11 November, Alonso stated confidently, “Give me four months and China will be first”.

His bullish forecast is based on the fact that Chilean wine exports to China are growing at 34% in volume and 32% in value over the past 12 month period ending September this year, while the UK is posting declines over the same period, and the largest market, the US, is stagnating, with a 2% rise in both volume and value.

“The problem is that the UK is going down and the US is not an easy market for us as the moment – there is a lot of competition and Argentina has a strong position there,” explained Alonso.

Explaining why Chile’s wine sales are increasing at a rapid rate in China, Alonso picked out the free-trade agreement between the two countries as the primary cause.

Recalling that it was signed in 2005, the agreement saw the import tariff on Chilean wines gradually fall over the past 10 years, until it reached zero in January this year (although Chilean wine is still subject to a 10% consumption tax and 17% value-added tax).

Alonso said that the removal of the import tariff, which is a 14% tax on bottled wine (and 20% on bulk), had encouraged importers and retailers to more strongly promote the “high end” of Chilean wine, allowing them to make greater margins on the imported products.

He also said that Chile was doing well in China because the wines being imported are “consistently good”, adding, “People in China like Chilean wine, and we have recorded a 36% re-purchasing ratio in China, which is higher than Italy or France”.

Alonso noted that Chile is China’s biggest bulk wine importing country, although he highlighted the increasing competition from Spain, commenting, “We [Chile] may have the tax advantage, but the currency benefits Spain,” referencing the weaker Euro relative to the Peso.

Finally, he praised the good work of Chile’s leading brands. “Concha y Toro is really our hero because it is building a network of distribution in the on-trade in China, and Errazuriz are doing good things too.”

Australia, which is China’s second largest wine importing country after France, has also negotiated a free-trade agreement, although Australia won’t enjoy a zero import tariff for its wines exported to China until January 2019, according to Willa Yang, head of China for Wine Australia.

Finally, as a sign of China’s growing importance to the Chilean wine industry, the Annual Wines of Chile Awards (AWoCA) will be held in China for the first time next year, with Shanghai becoming the host city.

“By awarding our wines in China, not in Chile, it is a symbol to China that the market is really relevant to Chile,” commented Alonso.

Click here to see China’s biggest wine importers by country, while Chile’s largest export markets can be seen below:

1. USA
Volume: 6.826m cases (+2.43%)
Value: US$198.8m (+2.27%)

2. UK
Volume: 6.264m cases (-6.17%)
Value: US$164.5m (-11.8%)

3. China
Volume: 4.963m cases (+34%)
Value: US$150.2m (+32.15%)