Industry report warns of smaller profits from wine sales in China

A joint report by China’s national drinks trade organisation, China Alcoholic Drinks Association (CADA), and a Chinese research firm has warned of smaller profit margins for merchants in the wine industry as the country’s economic growth slows, coupled with uncertainties over the ongoing US-China trade war.

Young woman shopping in the supermarket, wine shelves

The report, compiled by the CADA, the country’s official regulatory and trade association on alcoholic beverages, and research firm ExactData, surveyed 79 large-scale wine companies in China and collected data on both offline sales and online sales over a period of five months.

The report’s goal, as stated, was to outline China’s current wine market landscape and offer predictions of its future trends.

It states that despite growth in imported wines, a few large-scale wine companies have reported negative growth in wine sales turnover. The country’s overall growth rate for wine sales also slowed in pace in 2017 and “it’s expected that the trend will continue,” mainly as a result of slowing economic growth, it added.

China’s economy in the third quarter this year grew at the slowest pace in a decade and is likely to slow further in the coming months, following slower exports amid the escalating US-China trade war.

The country’s GDP in the third quarter slowed down from second quarter’s 6.7% to 6.5%, slower than expected, according to data released by the statistics bureau in Beijing, the slowest quarterly growth pace since the global financial crisis in 2008, wrote SCMP.

However, the report highlighted that countries along the ‘One Belt, One Road’ project are expected to see more growth opportunities in Chinese wine market.

Citing Georgia as an example, a country with some 8,000 years of winemaking history in the Caucasus region of Eurasia, which is covered by Chinese president Xi Jinping’s ambitious ‘One Belt, One Road’ project, saw exports to China grow more than 40% last year.

The two countries also signed a Free Trade Agreement which will see import tariffs on its wines drop from 14% to zero, effective from January 2019. Announced at the ‘One Belt, One Road’ forum last year, the deal is expected to further boost Georgia’s wine exports to the mainland, which had already become its second most important wine market after Russia.

In addition, the report noted that imported wines consist of the majority of wines sold online, accounting for more than 70% of wine sales, led by French wines. The top three most popular brands online are DBR Lafite, Changyu and GreatWall, says the report.