COFCO slashes 2016 EP purchases by half

China’s leading wine importer COFCO has slashed its 2016 Bordeaux en primeur purchases by 50% in volume compared to the 2015 campaign, a direct result of this year’s price increases and lacklustre demand from domestic consumers.

“China is not a vintage-centric market. Most consumers are more sensitive to price than vintage quality,” commented Aline Bao, fine wine purchasing director of COFCO Wine & Wine, a state-owned leading wine importer in China that claims to have imported about six million litres of wine last year through its own channel and a logistics company called C&D.

Despite talks of the pound’s depreciation creating favourable conditions for exports, domestically in China, Chinese yuan has experienced several rounds of depreciation starting from last year, promoting caution among merchants, another reason behind COFCO’s cutback.

The 2016 vintage from Bordeaux, which in general is believed to be a stellar vintage, has seen average price increases of 15% price versus the 2015s, said Bao, although in terms of quality, the two are more or less on the same par despite some appellation variations. In the 2016 vintage for example, overall Pauillac performed better than it did the year vefore, while for the 2015 vintage, the Right Bank and Margaux seemed to excel, added Bao, who was in Bordeaux during this year’s en primeur tasting with wine critic James Suckling.

“For us, we think the prices for some of the châteaux are already too high for the China market. In addition, some wineries have cut down allocation as well,” she added, which means “profit for importers is not going to be high.” The merchant rolled back on en primeur purchases by 50% this year without revealing specific figures.

The continuous upward trend, despite being relatively moderate this year, is expected to prompt back vintage wine sales. “Comparatively, the ready-to-drink wines look to be better value,” she commented.

“But some wines still have great value. After all, the vintage quality is a guarantee and Chinese market is developing towards a more quality-centric wine market. We cut down our volume and made adjustment to our portfolio and structure. This helps us to provide our clients more choices for grand cru classé château and services, while avoiding high price risks,” she explained.

In China, there are talks of overstocking in the market and Bao confirmed that she had heard industry chatter that some importers are still depleting their 2010 stocks. But for COFCO, she claimed, overstock is not a problem.

Asked if there’s general withdrawal from 2016 en primeur from merchants in mainland China, the wine merchant said: “In China market, the few leading online wine selling platforms in recent years such as JD.com and Tmall.com are not en primeur buyers because of their structure. Whereas traditional wine merchants are reluctant to invest money in en primeur since en primeur is not a guarantee for future high returns.”

COFCO Wine & Wine’s wine sales from open-market fine wines totalled more than RMB 100 million (US$14.5 million) last year, said Bao at this year’s Chengdu Wine Fair in March, referring to non-exclusive fine wines priced more than RMB 300 (US$43).