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April 18, 2021

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In the midst of chaos is opportunity

Wining and dining in cosmopolitan Shanghai is reaching new heights in 2021, so one may be forgiven for imagining that all is rosy with China’s wine industry.

It isn’t.

China’s wine market hit a record low in 2020, according to recent statistics published by AskCIData. Imports by volume fell 28.8 percent over the previous year and the domestic industry saw yet another double-digit drop in production and sales.

This China wine industry outlook will be a two-part series with this week’s focus on international imports and domestic wines. Next week, I’ll look at retail sales and new initiatives.

So why are imports and domestic production falling?

COVID-19 would a reasonable reason.

But that doesn’t tell the whole story.

According to my go-to industry expert, Mia Meng Zhang, director of PR and Communications for the Beijing International Wine and Spirits Exchange, “many blamed COVID-19 for all the troubles in the wine industry, but I believe that the outbreak only accelerated the declines rather than being the source of the problems.”

“It is a wake-up call, especially when the wine industry realized that it was among the slowest to recover, lagging behind the baijiu, beer and, amazingly enough, even the rice wine markets.”

Her observations are spot-on.

While COVID-19 adversely affected all alcohol beverages, in truth, it only exacerbated an already distressed wine industry. Just look at recent industry headlines: imported wine leader Australia hit with punitive tariffs; fine wine merchant Sarment leaving the China and Asia markets; top management shake-ups at leading wine importers.

All of this at the same time as domestic producers struggle with declining production and sales.

On the surface, things seem decidedly gloomy. But scratch the surface and there are reasons for optimism.

Many industry experts view the recent drops as a healthy correction from the overheated days preceding 2018, when everyone and their mother was entering the industry. In other words, this shakeout was long overdue and the present turmoil is actually fostering innovation and new approaches.

Zhang has her own take on the winners. “Importers are looking for a wider selection of SKU (stock keeping units) and styles, and wines from Chile and South Africa are currently projecting upward,” she said.

As for domestic production she’s upbeat on tourism and social media.

“Estate producers are trying to engage in a direct-to-consumer approach by introducing an array of wine tours, whether its relaxed cellar tastings or exclusive guided tours with dining and lodging options,” she said. “It is encouraging to see many producers being proactive in customer outreach and investing in social media.”

I agree that increased wine tourism and social media are positives.

And I also see some other promising developments. While many domestic producers have significantly upped their games in terms of quality, their communications and marketing capabilities remain limited.

Branding has long been the Achilles’ heel of the industry and while recent attendance at major trade shows is helpful, much more is needed.

A Shanghai investor and entrepreneur believes he has a better approach.

O Koo is an entrepreneur who has invested in a range of hospitality and technology companies in China and abroad.

Reacting to the dearth of professional marketing and communications capabilities, he is working with leading producers in the Ningxia Hui Autonomous Region and Yunnan Province to create his own brand called Harmene.

“Last year, I visited Ningxia twice and was amazed at the quality of their wines, but I realized that market awareness and presence were problems,” he said. “The price point of Ningxia wines is relatively high so this puts a premium on advanced design, branding and communications capabilities.”

“I saw this void as an opportunity so I put together a team of designers, marketing specialists, social media KOLs (key opinion leaders) and industry professionals to create and launch the Harmene brand.”

“I invested quite a lot in design with 20 well-known domestic and international designers submitting label and related brand designs. We short-listed three and finally picked one from a renowned Italian designer that depicts the geometric desert and vineyard topography of Ningxia. We chose the Harmene name as it typifies those moments of bliss in life we all aspire to and represents a harmonious relationship between man and nature,” he added.

His 2018 Harmene Cabernet Sauvignon was launched last year and is sourced exclusively from the premium Qingtongxia sub-region of Ningxia where top producers Xige, Imperial Horse and Chateau Huahao are making some of China’s finest wines. For Harmene, this is just the start.

“Next month, we’ll pre-launch our Ningxia Cuvee Blanc white and Rose wines and in September our Cabernet Sauvignon Reserve. Yunnan wines will also become part of the Harmene portfolio,” he said.

To further differentiate the brand and appeal to domestic and international consumers, the Harmene business will implement socially-responsible actions by committing a percentage of revenue to children and poverty-related causes in Ningxia and Yunnan where future Harmene wines will be sourced.

Whether you’re enjoying the excellent price/quality ratios of imported Chilean and South African wines or savoring the fine qualities Harmene and other muscular Ningxia wines, there’s much to be deliciously optimistic about.

As Sun Tzu said: “In the midst of chaos, there’s also opportunity.”




 

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