French Wine Distributor

Trend Analysis on 2014 Chinese Imported Alcoholic Drinks Market

1. Regulation & Policy

Norm on Terminology of Imported Wines Officially Released

China’s imported wine market has grown by leaps and bounds. The import volume in 2014 reached 288 million liters, which was 1.366 billion USD in value. However problems come with growth. The rapid expansion of the market coupled with the diversity of supplying countries has led to confusion with the coexistence of different translations to one wine-related terminology or norm. The divergence of translations creates huge difficulty for the education and promotion of imported wine in the Chinese market. What is worse, the information asymmetry also provides grounds for forged label, origin fraud and price gouging.

To correct this situation and guarantee a healthy development of imported wine industry, China Association for Importers & Exporters of Wine & Spirits (CAWS) was commissioned by the Ministry of Commerce of the People’s Republic of China to lead the drafting of the Norm on Terminology of Imported Wines. To ensure the standard is science-based and authoritative, CAWS invited Mr. Li Hua, renowned wine expert and vice president of Northwest Agriculture and Forestry University to be the head of the drafting group. Since the project was initiated in June 2013, a lot of work and effort was delivered in the following one and half year until it was completed.

Norm on Terminology of Imported Wines consists of four parts, namely Normative References, Basic Terminology List, Wine Grape Varieties, and Major Producing Areas and Wineries List. Basic Terminology List is a collection of related terms that may appear on wine labels. Wine Grape Varieties includes main wine grape varieties (excludes China) worldwide, with such information as species, country of origin, aliases, translation and color.

Norm on Terminology of Imported Wines is a recommended industry standard, which could be widely applied to labels of imported wine, inspection and quarantine clearance, distribution, regulation and etc. It will be a great help to importers, suppliers, consumers, research institutions, individual researchers and imported wine lovers in getting more accurate information. The release of this Norm filled in the blank of translation standard in the Chinese market. Nearly every field related to imported wine, such as trade, distribution, education, research and promotion will benefit from the unity of translation.

The drafting and reviewing of the Norm have received great support from embassies and relevant organizations of France, Australia, Spain, the United States, Argentina, New Zealand and etc. In a word, Norm on Terminology of Imported Wines is a work of cooperation. We believe that with your support and cooperation, we will make further contribution to trade in the future.

2. Industry Opinions Imported Bottled Wine: Dipping and Regrouping

2014: Bottom Seems Reached

After years of fast growth, the imported bottled wine entered its first negative growth year, while the drop range is not very big, which may be a sign of reaching the bottom. In 2014, more than 50% bottled wine importers of 2013 left the market, but more importers joined, this big shuffle is a reflect of 2 opposite judgments: those who quitted thought the market’s winter had not gone yet, while those who joined

thought it had been already the bottom. One important indication is that: some of the new comers were the magnets of other industries, as the mixed business is very common nowadays, the judgment of these successes from other industries should be valued.

The low-end wine had been rising last year, as the consumption of the high-end wine dropped very badly. This rise is a result of the recessions of the irrational exuberance of the Chinese imported wine market in the past, and it’s also a sign of a more mature market.

The e-commerce played a more and more important role in wine market, like it did in other markets in China. 2 specific advantages for the e-commerce of wine are: 1. the new generation, who are more familiar with e-commerce and imported wine, are entering their drinking age; 2. Chinese consumers usually buy low-end wine through internet, and the consumption of low-end wine is rising.

2015: To Rebound? The performance of the sparkling wine is quite shining among this hard times, its rising is partly due to the rising of the number of female consumers.

In the last few months, the exchange rate of Euro:RMB was dropping, but as the deals during that period are usually set according to the pre-agreed price, the effect hasn’t shown yet.

After the first negative growth year, and a big shuffle of the market players, the imported wine market is showing some signs of rebounding. While as the Chinese economy doesn’t increase as fast as before, for the imported wine market itself, if you want it to go back to the good old days like 2010 (Imported Value increased by 73.98%) or 2011 (93.87%), the prediction may not be optimistic. On the other hand, after the market have spent 3 years looking for the market bottom (2012, 8.11%; 2013, 0.5%; 2014, -1.27%), it appears that it can’t get worse.

One of the key points of this year’s market is still the low-end wine, as the Chinese economy is slowing down, the consumers want to spend less money, while the daily drink demand of the imported wine is still increasing. The only way to resolve this contradiction is to import more low-end wine.

After the bubble times, the promotion, publication and education need to become closer to the ordinary consumers. The wineries or companies who want to sell their wine to China should put the focus of the promotion on the good cost performance of its produce.

In November, 2014, the Auswan Creek’s successful on-line marketing showed us a new way of wine e-commerce. If you have a produce with some eye-catching specialties, a reasonable price and an

excellent marketing plan, you may have a chance to make a sale on internet in China.

In 2014, the lowered exchange rate of Euro: RMB is an advantage for the increase of import from the Europe, as the new exchange rate for the new deals, it’s effect is going to show.

3. Market Analyses of 2014 General StatusForm 1 The following statistics included but were not limited to spirits, beer and wine.

According to the above form, the total import value year-on-year of Alcoholic Drink in 2014 was nearly the same to last year. The drop range of spirits ended at -14.95%. The growth rate of import value of beers was quite high. The imported wine shrank a bit.

Among them, the status of wine is as follows:

2014 is a good year for sparkling wine, despite the poor performance of the whole imported wine market, sparkling wine has an growth rate of 27.69%. Bottled wine entered its first negative growth year with a drop range of -1.27%, while considering its increasing rate of 0.5% in 2013, it didn’t drop much this year. The bulk wine has another bad year, the drop range gets bigger.

Commodity Import Quantity (Liter) Import Value (USD)

Quantity Y/Y Value Y/Y

Spirits Total 52,820,237 892,831,645 - 10,90% -14,95 %

Beer Total 338,153,762 403,477,962 85.51 % 74.17%

Wine Total 384,044,308 1,518,155,838 1,94 % -2,43 %

Total 820,005,728 2,876,253,156 29,70 0,24 %

Commodity Import Quantity Import Value (USD)

Quantity Y/Y

Sparkling Wine 19,956,170 82,740,129 60.53 % 27.69%

Bottled Wine 288,275,640 1,365,833,619 3.35% -1.27%

Bulk Wine 81,812,498 69,582,090 -8.18% -35.48%

�Value Y/Y

The Original Bottled Wine Status Importing source conditions:

Compared to last year, as 2014 is the first negative growth year for imported bottled wine, the market became divided by the growth rate. In 2013, 10 of the top 12 biggest importing sources beat the market’s average growth rate, while in 2014 only 5 did that. Australia, Chile and Spain took 2nd-4th position in the Top 12, New Zealand and Germany, advanced in the ranking list.

The Beer Status Importing source conditions:

Compared to last year, the increasing rate of imported beer market is still going up, Holland is the key player to this increase. Striking back from the only slipping one in 2013, Holland had a growth rate of almost 600%, surpassed Belgium and left it behind. Holland’s rapid increase also influence Germany’s market share, dragged its market share down to 48.4%, usually Germany took over 50% of the market share. The followers, France and Spain, also saw a rapid growth in 2014.

French Wine Distributor

China Association for Importers & Exporters of Wine & Spirits March 28, 2015

source: China Association for Importers & Exporters of Wine & Spirits.