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Bordeaux Luxury Wineries May Lose Half Their Exports To China

www.forbes.com by Thomas Pellechia 13/07/2017  

The Golden Goose—or the Imperial Peking Duck—may have finished laying eggs. That is to say, Chinese importers are re-thinking French luxury wine.

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French Prime Minister Bernard Cazeneuve (L) and Chen Yixing Deputy 

It's been said the first foreign wine imported into China with the economic reforms of the 1980s was French. The trade has been growing ever since, especially in the luxury wine market. As the West gained more and more interest in "lesser" wines, major French label proprietors looked east. Bordeaux futures did quite well.

In 2011, International Wine and Spirits Research (IWSR) claimed China the world’s fifth-largest wine consuming nation. At the time, China had been placed among the top ten wine markets globally.

Last year, China’s National Cereals, Oils and Foodstuffs Corporation (COFCO) is believed to have imported more than 3,000,000 cases of wine (California’s Wine Instituteclaims over $70 million worth of those imports).

Also last year, the Chinese yuan suffered a few depreciations. Chinese merchants began to hold back, despite favorable monetary conditions for European exports. Then came an average 15% increase in Bordeaux wine prices for the well-respected 2016 vintage, along with some French producers straining Chinese merchant profits by scaling down wine allocations to China. For COFCO, it appears to have been the last straw.

The Chinese respond to price hikes. It’s also the case that the Chinese imported wine inventory is heavy and needs to be drawn down. Both conditions have stimulated COFCO to cut Bordeaux imports by 50% beginning with the 2016 vintage. The plan is to move older vintages in the company’s inventory at better prices.

While Chinese merchants shy away from the Bordeaux futures market, and there’s plenty of regular wine action online at jd.com and tmall.com, the Chinese government has begun an effort to promote premium home-grown wine.