Facing sustained surpluses and sales stagnation, a growing number of China's fine wine producers are turning to grape spirits like brandy to broaden their appeal – often with surprising twists.

This is no surprise given China's massive spirits industry, led by the national alcohol, baijiu. In 2024, baijiu revenue totaled 113 billion US dollars versus $28 billion for beer and $2.6 billion for wine, per government statistics.

Brandy is a modest part of that scene. Changyu, the most notable producer, had $110 million in brandy revenue in 2024 – roughly one-third of its wine revenue – down from $163 million in 2023, according to the company's annual reports.

But imports are a different story, as brandy has also long been China's top imported spirit, dominated by France. Imports totaled $1.8 billion in 2023, before falling to $1.2 billion last year due to excess inventories, cautious consumer spending and uncertainty surrounding potential tariffs. Through October this year, imports were $520 million.

Despite the slowdown, winery owners see long-term opportunity.

"China has a solid foundation of spirits consumption, with a longstanding baijiu culture, and consumers are highly receptive," says Chen Lizhong, founder of Tiansai Vineyard.

Tiansai released 10-year, 8-year, and 6-year brandies this year, with its VSOP, using a mix of white grapes, retailing for just under $50.

"The market response has been fantastic," says Chen. "We're almost ready to start production of the second batch and customers have made substantial pre-orders."

The tariff factor

Trade policy also gives local wine producers hope. In July, China imposed anti-dumping tariffs up to 35 percent on European brandy following an investigation that concluded European producers were dumping. Producers like Hennessy, Martell and Rémy Martin – plus 31 others – avoided the duties by agreeing to minimum price commitments

The belief this will benefit local producers might seem like déjà vu. China's punitive duties of up to 218 percent on Australian wine, from March 2021 through March 2024, were seen as an opportunity for domestic wineries. In practice, however, clear and lasting gains proved elusive.

In any case, for some producers, spirits also offer a practical solution to excess wine inventory, including vintages aging beyond their commercial window.

"I think that for most wineries, producing distilled spirits is more out of necessity than anything else," says one veteran winemaker in Ningxia. "Distilling it into brandy makes it more suitable for long-term storage."

The local brandy scene

The emerging brandy scene is a quirky blend of long-established producers and newer boutique ones.

Changyu, founded in 1892, has over a century of brandy experience. That includes its premium Koya operation in the coastal city of Yantai, which unveiled a sculpture this year declaring itself the capital of Chinese brandy. Based in a sprawling two-hectare facility launched in 2019 and using Ugni Blanc grapes, Koya has invested heavily in pursuing world-class brandy.

Other veteran producers include GreatWall's SunGod operation near Beijing, which uses Longyan aka Dragon Eye, a grape with 800 years of history in the region. And pomace-based spirit makers like Yunnan Red in the southern province of Yunnan, featuring hybrid grapes brought by nineteenth-century European missionaries, and Xi Xia Wang in Ningxia, founded in 1984.

? Jim Boyce | The new brandy by Xiaoling in Yunnan.

The new wave of producers

What is new is fine wine producers launching their own grape spirits. Some have been in the works for a decade or more, others are much more recent, and most offer distinctive stories.

Several Ningxia wineries focus on Marselan, a signature grape of China. At Huang Kou winery, late-harvest grapes are sun-dried to release a dried fruit character that evokes the character of the sauce-aroma baijiu exemplified by brands like Moutai. The wine is double-distilled with a Cognac-style still to 66.6 percent and aged 12 months in barrel.

"Wine gives many consumers an impression of being 'aloof' and lacking the warmth of everyday life, making it hard to integrate into daily dining," says founder Zhang Xueyan.

"In contrast, baijiu is ubiquitous, an essential companion for celebrations and deeply rooted in our culinary culture."

Puchang in Xinjiang, with a quirky portfolio that includes Rkatsiteli, Saperavi, Cabernet Sauvignon and Pinot Noir, released a grappa this year by Italian winemaker Loris Tartaglia. Using the hybrid grape Beichun, it packs a kick at 55 percent alcohol and sells for $28 for 500 ml.

Brand manager Kevin Yang says this is part of a broader Beichun-focused line that includes white and "orange" wines, with a port-style product in planning.

And in Yunnan, Xiaoling winery – best known for high-altitude Chardonnays and red blends that receive mid-90s scores – first dabbled in grape spirits in 2015 after part of its production became oxidized and, in turn, distiled. This year, Xiaoling released samples of this 10-year-old barrel-aged Cabernet Sauvignon brandy, to be sold in 370-ml bottles for $100.

Since then, Xiaoling has made the pomace-based spirit Marc, using Xiaoling's most prevalent grape, Cabernet Sauvignon.

"The skins of our Cabernet are thinner, like Burgundy's Pinot, and the Marc tastes better," says owner Bertrand Cristau, who ties production of this Marc – triple-distilled using local equipment –to supporting the community.

"Local farmers traditionally distil qingke [Tibetan barley]," he explains. "And our project's first object is to give more work to the local population so this product is a perfect solution."

There are plenty of other new local brandies, with more on the way, including from Nine Peaks in Shandong, founded in 2010 by Karl Heinz-Hauptmann.

"We are doing a brandy from a cuvee of our best varieties in order to get a very complex aroma profile," he says.

The bigger brandy picture

These brandies are part of a greater diversification by local fine wine producers, who once focused on Bordeaux-style grapes and wines, but now increasingly reach out to consumers with sparkling, white, orange and natural wines as well as wine-based cocktails and tea- and fruit-infusions.

Some have gone further, blending wine and spirits. In fact, Penfolds famously released a fortified Shiraz and a white blend incorporating baijiu for the China market in 2018.

But Yunnan producer Pabala seems to have found a more palatable option: at this year's Wine to Asia in Shenzhen, it poured samples of its icewine mixed with a Moutai-style baijiu. What might seem an odd pairing deftly married the wine's sweetness with the baijiu's savoriness, with a good response from attendees.

Perhaps, as with brandy, it will serve as a delicious bridge between the wine and spirits categories, while leveraging more traditional consumers.

The wine industry does much hand-wringing about appealing to younger generations, who increasingly drink for pleasure. But a substantial slice of alcohol sales are still made for entertaining, gift-giving and celebrating major events, and this new wave of brandy producers still see potential there.

"[Our brandy] has received enthusiastic market response, with the first batch selling out quickly," says Zhang of Huang Kou. "The second batch is now being planned for bottling, with the goal of being available before the Spring Festival."