Wine column for week of 23 December 2013

In the world of wine, Shanghai and Hong Kong have long been rivals. Hong Kong remains Asia’s main wine hub – helped since 2008 by zero taxes – but Shanghai is mainland China’s most international city and its major wine market because of its economic power and huge population.

To help us understand Shanghai, Debra Meiburg MW has published Meiburg’s Guide to the Shanghai Wine Trade. Her co-author is Sarah Heller. Meiburg is a highly respected wine judge and journalist based in the region for more than a quarter century. Last year the drinks business magazine named Meiburg as the wine world’s seventh most powerful woman.

Meiburg described Shanghai as one of China’s most mature markets. Six of Meiburg’s staff worked for almost 24 months assembling the list of suppliers in the book, phoning and emailing for clarification.

The book is aimed at wineries around the world seeking to enter the Shanghai market, along with wine marketing boards, consulates and trade commissions – the people who need to know what is going on. “We love wineries and do not want to see them make expensive mistakes,” Meiburg said.

Be prepared to be patient when selling wine into Shanghai, she said. The process can take four or five months, often longer, because “the regulations change every day”. Meiburg described the process as convoluted and lined with pitfalls, but noted many groups were willing to help.

The International Wine and Spirit Research company (IWSR) predicts the wine industry will return to growth levels observed between 2000 and 2005 in about 2016, after several years of declining consumption in Europe.

Asia – particularly China – is seen as the main driver of growth, which explains why so many wine professionals are focusing on China. This year China became the world’s fifth largest wine-producing nation behind France, Italy, Spain and the United States. By 2016 IWSR predicts that China will produce 166.6 million cases a year.

Yet very little of China’s production is exported. Indeed, 85 per cent of all wine drunk in China is made locally. And wine remains a luxury. Average incomes in Shanghai are about 30,000 RMB a month (about US$5,000). While this is a good salary compared with the rest of China, it is not enough to pay for expensive wines.

Meiburg’s book is refreshingly frank. She points out that “only the foolhardy would try to get wine into China without an importer lined up”. And trying to do marketing and public relations on your own, or with a non-Chinese branding partner, “can only end in disaster”.

Wine in Shanghai is heavily taxed compared with Hong Kong, which abolished tariffs in 2008. Taxes effectively add 48 per cent to the cost of a bottle. Meiburg believes those taxes will be “adjusted” over time but it was unlikely they will be removed entirely.

Meiburg said very few wine reviewers had influence in China, which made social networking platforms like Weibo powerful. People in Shanghai used word of mouth to influence others.

Sarah Heller said some of the larger wine companies had brand ambassadors whose job was to post on Weibo to develop discussion about wine. “Make use of your existing fans in China because they will get the word out for you,” Meiburg said. “Find creative ways to encourage them to post on your behalf.”

It costs money to develop any new market. As with any investment, the critical thing was to ensure return on investment, Meiburg and Heller noted. Their book provides an excellent guide to a complicated market.

Published in Wine Times HK. Find a link here.

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