Unfiltered with Castle Li of COFCO

Castle Li is the man who sits atop China’s biggest wine importer, COFCO Wine & Wine – the wine and spirits importing arm of China’s biggest foodstuff conglomerate COFCO – as well as the state-owned company’s flagship Chinese winery, Great Wall, and is perhaps one of the most watched personalities in China’s wine industry – and for good reasons.

With mainland China’s expanding imported wine market, COFCO Wine & Wine in a short span of just four years since its founding in 2014 has grown to be the biggest wine importer by volume in the country. In 2017, the company imported over 10 million bottles of wine, compared with 7.5 million in 2016, Li revealed to dbHK in an interview late last year, a number that saw it surpass its main competitor ASC Fine Wines.  

The same year, Li was named as the general manager of China’s leading Great Wall winery, also owned by COFCO, bolstered by his strong performance with COFCO Wine & Wine. Since the new appointment, Li has been vocal about his ambition, determined to turn Great Wall into a, “world-class wine that could represent China”, a strong sentiment that he brought up a few times in our full interview below.

There are signs that Great Wall is going to embark on a more dynamic, diverse and export-oriented approach in the coming years. For the first time, the state-owned winery is participating in international trade shows including upcoming ProWein in Germany and Vinexpo Hong Kong in May. Li has been advocating a more open-minded approach to competition from imported wines. But how successful will the revamp be? Li and his team will be watching closely.

Speaking to dbHK, the executive mapped out in detail Great Wall’s international growth strategy, the perils of combatting counterfeit wine in China, both imported and domestic wines, and his love for football.

Click through the pages to read the full interview.

Castle Li at Great Wall’s relaunch event of its Chateau SunGod wine range in Beijing earlier this month

What are your thoughts when you won Man of the Year Award at our drinks business Asian Awards 2017?  

I was quite surprised, and wasn’t really prepared. I think this award given by the drinks business to COFCO is a vote of confidence in our imported wine business and our domestic wine development as well, which will inspire us to achieve more in the future.

You studied Economics and Foreign Relations at Beijing University, so how did you get into wine industry? 

I did double degrees in Economics and Foreign Relations, and I have been doing consumer products afterwards with Unilever, and wine is a type of consumer product.

What was the first wine you’ve drank when you joined COFCO? 

The first wine I drank when I got to COFCO was Great Wall Cabernet Sauvignon A Zone and Great Wall Cabernet Sauvignon Huaxia Reserve. I don’t drink much really, and not to mention wine. I thought the wines were great though, and was impressed with their aromas and structure.

What are you hobbies outside of work?

I love football, sports and reading. I love the Barcelona team, and when we started with our imported wine business [in 2014], I planned our business strategy around the concept of football as well. We call our portfolio ”Super Star Club”, which means that we pick star performers from each country to form the best possible lineup. Doing wine business is not a short sprint, or one man’s work, rather a team effort. But everyone plays different roles, and has different responsibilities. As for our portfolio, some brands target volume sales, others are for the overall portfolio diversity. We actually designed a football team inspired portfolio lineup map, using McGuigan as a forward and some other products as centre forward etc. This analogy with football is easy for distributors to understand. So we have always said that we are looking for star performers like Lionel Messie and Cristiano Ronaldo.

How long have been a fan of football? 

More than 30 years, like 32 or 33 years since I started playing football at the age of 7 or 8. I was quite good at it as well. But I haven’t been playing much since I started working. When I was in high school and university, I was playing for our school’s football team.

Do you have any hidden talent? 

Nothing special or unknown to the public yet. I like sports and hiking, and I used to do that quite frequently when I was in Beijing University.

What’s your motto in life? How does it inspire you? 

Chateau SunGod Chief Winemaker’s Selection, a wine range made with consultant Michel Rolland

I don’t follow a specific motto, but I am always a strong believer that hard work and perseverance can lead to success.

Not long ago, you were appointed as the general manager of Great Wall winery. What main challenges do you think Chinese wineries face in gaining international recognition? 

I think there are mainly two challenges: Firstly, I think Chinese vintners have to be more open minded because only when you are willing to learn and keep an open mind, will you be able to have a broader international vision. Secondly, I believe leading Chinese wineries such as Great Wall and Changyu have to lead the wine industry in China to the global stage, not these boutique wineries. Even if we have a Chinese wine made by LVMH, it can’t revive the domestic wine industry. Only when leading brands like Changyu and Great Wall can fully commit to growing the wine industry, can the whole industry be improved. We need big brands behind this cause to push it forward. For brands that only sell about 10,000 or 20,000 bottles, it’s hard for them to cause any significant ripples effects for fellow wineries. It has to come from large scale, leading wineries, then the impact will be much bigger.

What new wines will Great Wall’s ‘SunGod’ be launching this year? 

We will be hosting a relaunch event of Great Wall ‘SunGod’ on 3 Janaury, 2018*. The goal is to build a world-class wine that could represent China. This is our premium brand wine, and we have cut back quite a lot of lower range wines. Since I took over, we have cut more than 40% of our wines. These include not only lower range wines, but also wines that were not clearly defined or were repetitive. I think in the future, SunGod is surely going to be a premium Chinese wine because we have a strong base and impressive scale as well.

What wines will be in the SunGod range? 

We are making a Cabernet Sauvignon and Merlot blend, a Shiraz and a Riesling. It all started in 1972 when premier Zhou (Enlai) called out nationally to select plots to make dry wines, and it was in 1978 that we decided on the vineyards in Hebei province. From then on, experiments in vine selections were conducted, and this is perhaps the only place in China that has vines of nearly 40 years old, quite rare. The oldest vines I know in Ningxia province are probably only 19 years old. This is also the wine that was drunk by Donald Trump during his state visit to China in 2017, along with a Chateau SunGod Great Wall ‘The Chief Winemaker’s Selection’ Cabernet Sauvignon. We made the last range with wine consultant Michel Rolland (who has worked with Great Wall since 2011).

*The interview was conducted late 2017, so the relaunch event hadn’t happened.

How would you comment on COFCO Wine & Wine’s performance in 2017? 

Our performance was quite good: our sales grew about 120%, and we have added new brands to our portfolio including Santa Rita and have also hosted the Great Wines of the World event with wine critic James Suckling. For us, it was a great year to consolidate our base. We have grown in terms of portfolio, team member, distribution network, and I believe that in 2018, we would grow even further,

How many wines you imported in 2017? 

We imported about 10 million bottles of wine, compared with 2016’s 7.5 million. We surpassed ASC officially in 2017, and in 2018, the lead is expected to be more obvious.

How did COFCO Wine & Wine perform during the massive Singles’ Day online sale [on 11 November]?

Compared with last year, our sales increased 680% in value.

Problem of counterfeit wines looms big in China. How does COFCO deal with it? 

This is something we care about very much. It provides an opportunity for us, but it’s also a challenge. There’s a big mix of wines out there in the market, and we guarantee authenticity for the wines we sell. This is also why our Lafite and Penfolds wines sell so well, because consumers trust COFCO. In order to guarantee our wines’ provenance, we source our wines directly from châteaux or wineries, so no middle man, not to mention smuggled wines, not even one bottle. In addition, from sourcing to storage, we monitor the whole process. Once wines are in our warehouse, we will slap on our own slip for anti-fraud purpose, and recently we have just upgraded our anti-fraud technology. Moreover, in September, 2017 COFCO and China National Association for Liquor and Spirits Circulation have formed an alliance with distributors to pledge only to sell authentic wines. We united all the major distributors nationwide, and COFCO alone invested RMB 10 million (US$1.55 million) into this as an incentive to reward distributors.

What about counterfeit wine for domestic brands? 

Frankly, in the past 30 years, we always had problems with fake wine. We have a team specially working on combatting counterfeit Great Wall wines. Our wines are almost ubiquitous in each village and town, probably with better distribution coverage than Moutai. Five years ago, the Great Wall brand was probably more influential than any imported wine brand. Great Wall’s production capacity is 150 million bottles a year, and we take about up 30% of domestic wine market share.

How many members are there in the alliance?

Chateau SunGod wines

We have around 100 members and standing members. To be a member, the distributor’s annual purchase order has to be over RMB 1 million (US$154,700), and RMB 3 million (US$464,000) for a standing member. All of them are the biggest and most influential distributors across provinces and cities in China.

Do you think in the next 10 or 20 years, there would be a globally renowned Chinese wine? 

We invited James Suckling, Peter Gago (of Penfolds) and Edward Chadwick (of Viña Errazuriz) to our SunGod winery, and they all spoke highly of it. If they have to rate the wines there, no doubt they will get 90 points or above. I can use one example to explain Great Wall’s wine quality. We have a vineyard in Ningxia, and the vines are still young, about six to seven years old on average. I tried a Cabernet Sauvignon and was really impressed with the quality. We have about 20,000 mu (1,333 hectares) of vineyards in Ningxia, all estate grown. I have tried Ao Yun before, but this wine [from Great Wall’s Ningxia vineyard] is very promising. Given time, we can definitely make great wines.

Is Great Wall exported enough? 

Not really. In the past, we lacked marketing, but we are actively changing that. In March, we will be exhibiting at ProWein in Düsseldorf, and in May we will be at Vinexpo in Hong Kong as well. Then we will be rolling out a comprehensive export road map for Great Wall. We really want to introduce Great Wall to the international stage. Wine is a cultural product and it has be communicated. We can’t isolate ourselves any more. This is also why, as I said before, major Chinese wineries like us have to really lead China’s wine industry. Great Wall represents China, Great Wall wine should be the most representative, influential Chinese wine as well. More recently, you have heard talks from China National Association for Liquor and Spirits Circulation, local governments in Ningxia, Shandong provinces resonating with this idea as well.

The first internationally traded Chinese wine on Liv-ex is Ao Yun from LVMH. What do you think of that? 

To be frank, before I took over Great Wall winery I visited Ao Yun in Yunnan, a personal trip actually. I inspected their vineyards and winemaking facilities and stayed there for one night. The conditions there are indeed quite challenging and vineyards are quite spread out. Ao Yun is not the first Chinese wine to be internationally recongnised. Many Chinese wines have won awards abroad but marketing efforts are not there yet. Ao Yun, however, is a good start, and generated interest for Chinese wine.

Wine critic James Suckling holding a bottle of Chateau SunGod wine in Beijing

China’s domestic wine production has been declining for the past few years now. What do you think is the leading cause for decline? 

Imported wines will inevitably have some impact on domestic wines especially in the early stages. I think this is a good thing. Relaunching a Chinese wine brand [like Great Wall’s Chateau SunGod] to some degree marks a new start for the domestic wine industry. The rise of Great Wall will usher in changes for the whole industry. China is a big country and we have quality winemaking regions, sound winemaking facilities and can produce good wines, but only if you are willing to embrace competitions from other international brands.

You have to change your close-mindedness. This is similar to Napa as well. It only took 30 or 40 years for Napa to gain international recognition, so you see it won’t require 100 years. Also, some international rules can restrict wine industry’s development, and relatively New World wines don’t have too many constraints. In the past, when we spoke of fine wine, we thought of France, now it’s a much broader concept.

How many vineyards does Great Wall have in China? 

We have wineries in Ningxia, Hebei, Shandong and Xinjiang provinces. I have to say the winery in Shandong’s Penglai is the best managed winery by far. We have the largest vineyard of Marselan, a grape that is quite compatible with China’s northeastern region where rainfall is slightly higher. The vineyards compared with the ones in Ningxia, do not require burying in the winter and we have been making wines there for 20 years.