WSET: China – has the bubble burst?

on 15 December, 2014

Or does it just need to be pumped up, asks Ian Harris – CEO of WSET

The WSET’s international team has once again been in Asia – for two weeks – covering Japan, Hong Kong and, finally, Shanghai. The main focus was on expanding WSET’s educational presence, starting with thanking members of the Japanese government for their support of the new WSET Award in Sake, through to running educator training programmes in Hong Kong, and culminating in welcoming the first crop of seven graduates from the inaugural Diploma programmes in mainland China. So, three markets at different phases in their evolution as consumers of wine, but the market in mainland China was the hot topic in most of my conversations, and there was a consistent theme: the honeymoon period for imported wines is over, and now the hard work starts.

Kiki Yang (a partner in consultants Bain & Company) stressed that GDP in China was still growing – at a rate of 7.7% pa – but the growth of FMCG spending was slowing down, with expenditure on food and alcohol only 5% up on the previous year. She cited the anti-corruption measures as the main reason for the slow-down in the luxury market, but her company’s research was indicating that there was light at the end of the tunnel.

Ian Dai (of consultancy Vinsanity) put China into perspective by spelling out the difference between mainland China versus Hong Kong, where the average income was nearly five times higher than the mainland. But he stressed the opportunity in lower-tier cities, where many consumers were just buying their first watch, their first cars, but they aspired to sophistication, so a reason for optimism.

Ian Ford (CEO of Summergate, one of the biggest distributors in China) spelt out the realities of the current situation in first-tier cities, where the anti-extravagance measures, announced in December 2012, were taking a heavy toll on the market for imported wines into China, producing “real deceleration”. The market had seen a decline of imports of wine by 5.7% in the first six months of 2014, and 778 importers had dropped out of the business in China in the last 12 months.

It seems the ban on gifting within officialdom had been accelerated in early 2014, with the statistic that a staggering figure of 182,000 government officials had been punished for corruption in 2013. The measures included a ban on hospitality in 5-star hotels, resulting in many hotels deliberately ‘downgrading’ themselves so they could still attract government spending. In spite of this, the major hotels in Beijing and Shanghai were reporting wine business down 25%-30%.  

At the time of the Chinese government’s anti-corruption drive, the Chinese economy had reached a plateau, and more recently there was the virtual collapse of the Bordeaux en primeur market. James Miles (of Liv-Ex) described the market for fine wine in Hong Kong as “falling off the cliff” in 2012 & 2013 and, as a result, everyone working in the China wine market has had to reappraise their approach.

ABOUT

Your window into the world of a drinks journalist - from cocktails competitions to financial results, we've got a view and we're not afraid to share it.

NEWSFEED

RSS
Click the RSS icon to grab our feed and follow the DIgestif blog via your news reader.

Digital Edition

Drinks International digital edition is available ahead of the printed magazine. Don’t miss out, make sure you subscribe today to access the digital edition and all archived editions of Drinks International as part of your subscription.

Instagram

Facebook