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April, 2018

Counterfeiting casts shadow over China's winemaking industry

Original article: Xinhua

For years, China has sought to develop a strong homegrown wine industry. Even though most Chinese consumers still prefer beer, sorghum liquor or yellow wine, tastes are changing - particularly among the young. Although counterfeiters mainly target wine imports, Chinese producers are also at risk. 

Analysis:

Foreign wine dominates wine culture in China's most developed cities. Whether it's a formal dinner, a tasting, or a visit to a wine specialty store, one is likely to encounter old-world, Australian or South American wines in Shanghai, Beijing, Shenzhen or Guangzhou. 


However, domestic wine sales account for 70% of the overall market, according to a 2017 research report by the Technical University of Madrid. It seems hard to believe - until we consider the vast distribution channels of domestic brands like Great Wall (Changyu). Great Wall is not especially palatable, but it can be bought cheaply at almost any retail outlet in China that sells alcoholic beverages. For banquet guests three sheets to the wind who don't need to impress anyone, it's a good ganbei (bottoms up) choice. We don't usually recommend guzzling wine, but with Great Wall, the faster it goes down, the better. 


Overall, China's wine market is growing steadily as the country gets richer. China has been the world's top consumer of red wine since 2013 and the No. 5 overall wine market since 2015. Per-capita wine consumption remains low, however, at just 1.16 liters in 2014. There's plenty of room for growth. That figure is 2.75 liters in Japan, 6.75 liters in Russia, about 14 liters in the U.S. and 43 liters in wine-loving France. 


Counterfeiting of wine has moved in tandem with the burgeoning market. By some estimates, 70% of wine in China is fake, notes the University of Nottingham's China Policy Institute in a January 2017 report. It's not just pricey foreign wine that's affected. To be sure, certain entertainment establishments do peddle phony premium foreign wine - sometimes unknowingly - but domestic wine sold in low-end retail outlets is often fake too. 


For China's domestic wine brands to tap market opportunities, both wine production standards and IP protection must improve. In 2015, Ning Gaoning, the chairman of Cofco, the state-owned grain company that runs Great Wall, said at a conference in Switzerland that the company's wines "aren't very good." Sometimes the truth hurts. 


Of course, China's winemakers will inevitably improve, giving them more reason to value brand protection. Chinese consumers "are seeking higher quality, and they prefer more diverse, personalized choices, rather than following big brands. We need to change fast to capitalize on this trend," Great Wall general manager Li Shiyi was quoted as saying in a November Decanter China report. 


 As the products get better, commanding higher prices, counterfeiting will surge. "Evidence has shown that the Chinese government makes every effort to fight alcohol counterfeiting," wrote the researchers at the China Policy Institute. "However, weak administration, local protectionism and corruption have hindered these efforts."


Technical University of Madrid researchers recommend that China upgrade its wine product quality standards, quality control and inspection systems, as well as establish a wine quality and safety traceability system. Everledger, a tech-focused risk consultancy, recently became the first organization to secure a bottle of wine’s provenance on the blockchain. "For the fine wine industry this means the opportunity to add a layer of transparency to every stage of a bottle’s journey across the supply chain," Leoni Runge, Everledger’s Head of Fine Wine, said in a statement. 

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