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China’s wine and spirits imports pummeled by Covid in Q1

vino-joy.com by NATALIE WANG22/05/2022  

It came as little surprise that China’s imports of wine and spirits dipped in first quarter of this year amid the country’s strict adherence to ‘Covid-zero policy’ and global supply chain disruptions.

But the slide seen in the first quarter of the year has pushed the country’s wine imports to its worst performance since 2019, showing no indication that the market is close to recovery.

According to latest data released by China Association for Imports and Export of Wine & Spirits (CAWS), the country’s wine imports declined by 21.96% in volume to 83.7 million liters from January to March, and its import value contracted by 19.8% to US$347.9 million.

To put it in perspective, the performance is worse than the same period in 2020 when pandemic first hit the country and halted economic activities. It was the equivalent of only 72% of the import value and 67% of the import volume recorded in Q1 2020, based on available data.

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China’s dogged covid-zero policy has suppressed wine and spirits market (pic: iStock)

All the top 10 wine suppliers to China experienced drops in the period except Georgia. What’s also notable is that Australia has completely fallen out of top 10 list, the first time since China announced punitive tariffs on Aussie wines in August 2020.

Since China formally announced up to 218% punitive tariffs on Australian wines last March, Australia’s wine exports to the market including Hong Kong and Macau plunged 79% to AU$214 million, during the 12-month period.

Aside from wine, the country’s spirits imports were also hit hard. Its value dropped by 13.1% to US$392.9 million and volume was down by 19.3% to 24.5 million liters, according to CAWS.

The only imported beverage that defied Covid and lockdown is beer. Imported beer grew by 4.6% during the period to US$145.3 million, fueled by consumer demand for high-end, craft products.  

WORSE IS YET TO COME?

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Shanghai lockdown has lasted for nearly two months (pic: file image)

What’s more alarming as industry insiders warned is that the nearly two-month lockdown from end of March till May in Shanghai, the financial and wine hub of China, will exacerbate the decline in imports and consumption for Q2 and rest of the year.

Shanghai government aims to return the city to normal by mid or late June, its Vice Mayor said on Monday. By then, it would have missed Q2 growth.

Surge of cases in political capital Beijing this month stoked fears of Shanghai-style lockdown, sending more economic uncertainties for the country’s consumer spending.

Economic indices thus far already are painting a dire picture. Consumer spending in the country slid to worst levels in April since the beginning of pandemic. Retail sales nationwide contracted 11.1% in the month, worse than expected, wrote Bloomberg.

Importers who talked to Vino Joy News complained about logistics, shortage of supplies and challenges to access warehouses in Shanghai, describing the situation as worse than 2020.

A managing partner of a leading wine importer in mainland China revealed that its sales in the month of April alone plummeted by 80%, due to lockdowns. Chief of complaints being importers having limited or no access to warehouses during lockdown, which means they can’t supply retailers, online stores and clients.

Home consumption exists but is hobbled by logistics and much lower demand. “The big difference [between mainland China and] Hong Kong or Korea/Japan is that when F&B is closed, 90% of sales disappear… Home consumption is really little, the volumes in China are social drinking/gifting/ganbei…. Home consumption is just for those travelled ones,” he explained.