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Wine’s Orient Express

winespectator.com by 27/04/2017  

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Robert Yang is a Chinese wine success story—the self-made man who brought the chain wine shop to the world's most populous country.

For nearly 20 years, the former hotel manager rode China's wave of thirst for Western wine & spirits, by becoming a distributor, retailer, Internet impresario and direct importer. His company called 1919 (a Chinese word play for "I want wine. I want wine.") has grown from one store in Sichuan Province's capital Chengdu in 2005 to a network of 1,000 shops in 600 cities with annual sales expected to top $2 billion this year.

"Ten to 20 years ago, imported wine and liquor were luxury products in China," says Yang, 43, one evening at a cafe in Verona, where earlier this month he helped launch this year's Italian wines trade extravaganza, Vinitaly. "Now almost everybody can drink affordable wine."

So, how did Yang get started? What drew him to wine? Don't expect a reflective answer about love for Burgundy or Barolo, though those are some of Yang's favorites (along with Prosecco and Australian Sauvignon Blanc).

"Initially I just wanted to be rich and have a good life," says Yang. "Wine brings a lot of happiness and fortune."

Twenty years ago, Yang says, he was a young man from a rural town who dreamed big. Through his hotel job and part-time work in a bar he says he learned "the logistic flow of liquor." At the time, wine markups were abusively high, Western-style package stores were rare, and the market was riddled with counterfeit wines.

Yang saw an opportunity and jumped into distribution, with the idea of offering good service and reasonable prices. By 2005, Yang and his investors settled on a business model for China's first retail wine and spirits chain, with small bottle shops throughout urban areas. Then, the 1919 app allowed customers to order from their smart phones. The company now guarantees delivery of orders within 19 minutes in specified zones around its stores.

Fine imported wines occupy the higher end of an alcoholic beverage market still dominated by Chinese rice wine (70 percent of sales), Yang says. About 15 percent of the market share is imported wine, which he expects to more than double in the next five years.

"Rice wine is very high in alcohol, and imported wine is healthy," says Yang, reflecting market perception. "Everybody is getting wealthier, and they want to be healthier."

When it comes to imported wines, France—the first to enter China in a serious way—is the leader, with a 40 percent share of imports, followed by Australia at 30 percent. Italy, a recent arrival, has only about a 5 percent share—about the same small piece as the United States.

"Italian wine has been unacknowledged by the consumers," says Yang, who pledged to work with Italy's wine industry to boost exports over the next three years. "There is room for growth. There's a lot of different varieties and tastes in Italian wine, so everybody should like it."'

Growth of 1919 has been phenomenal. The company late last year teamed with investors to create a new company to directly import wines. Yang says he plans to open another 1,000 stores by the end of this year, and to open 4,000 stores and more next year, while expanding elsewhere in Asia. About 60 percent of sales are walk-in, but the higher end orders are concentrated in the 40 percent of company sales booked online.

When pressed about the sustainability of such growth, Yang shrugs, saying that most stores are profitable after a year and that he's never had a store in the red after three years.

To the Chinese, wine remains more a symbol than a gastronomic pleasure. As Yang puts it: "In China, the most important thing is not the palate—it's face. I have a good wine, I share it with you, and you want to drink more. This is good face."

"In the West, the wine pairs with the food. In China it's different," he adds. "You get a good wine and you pair the food to it. Wine in China is more important than food. It's more a kind of entertainment."

A few years ago Yang considered expanding into the U.S. when American online retailer Wine.com was considering a sale. He balked, though, when he considered the byzantine web of U.S. state and federal alcohol laws. Even for a Chinese capitalist, in America, he says, "There are a lot of restrictions."