In the past few years, the capacity of our country’s vintage market has been continuously increasing and the average annual growth rate is more than 10%. The output of wine reached 0.3673 billion liters with a growth range of 14.7%. Our country‘s vintage market kept an active status in the first period of 2005. Some experts thought that the output could reach 0.2billion liters, which means it could keep up a steadily increasing pace.

The large inner country market
In our country, wine only occupies 1.1% of vintage products, only one-tenth compared with foreign countries. The huge developing space and profit space undoubtedly will attract more vintage importers to compete in the market. The tax barrier of importing vintage has decreased from 4436% to 14% from 1st, Jan., this year. Owing to the low cost of vintage in foreign countries, they will have the advantage of price when their wines come into our market. Besides, though the profit growth rate of our own vintage is quite high, it is not such a high price as it seems to be. We can learn that it has provided a developing space for the importing vintage with their comparatively good quality. Or we can say that the cost performance of our own vintage is not as good as the importing vintage. With the passing of time and the maturity of China’s consumers increasing, imported wines could probably achieve success from the top market.

The inner people pointed out that the importing channel is becoming more and more important with the surge in capital. Though the wine industry increased last year, it could not change the status of the industry, which means it is still in a probationary period and has not formed the famous brands needed for top-level competition. And it has still not formed a vintage consuming culture in China.

Thus, the competition of this industry is still at the stage of management and acquiring channels.

From this angle, the old companies of China’s wine industry, such as Changyu, Dynasty, Great Wall and Longhui, can still keep their leading positions. But at the same time, some foreign-owned brands will encounter these old brands in importing channels when they come into our market. It is wise for those international companies to cooperate with the large Chinese vintage factories; therefore they can set up their corporate brand on the basis of mature distribution routes of established factories.

It is not very hard for international vintage companies to enter into China’s vintage market. However, you must have a comprehensive assessment first. You can prepare to come into China’s vintage market if you have the following characteristics:

First: qualified goods are the first priority
A large part of Chinese companies believe in such marketing concepts as “The good quality of products surpasses everything.”; “Good products are more important than after-sales services.” ;” No service is the best service.”; “The best product itself is the most excellent advertisement.” They have laid emphasis on designing and manufacturing the best products and got a lot of achievements in their market. Also they are looking top partner with top vintage with such characteristics.

Second: weaving a web diligently and silently
Several experts pointed that the marketing web s the most valuable assessment for corporations at the age of global phenomenon. “Weaving a web diligently and silently” is a far more effective method than investing a huge amount of money in advertisement and public relations. “Weaving a web diligently and silently” means to weave a wide, tight and firm marketing web, that is to say, those products you have made can be available to millions and billions of consumers right now. They can appreciate, taste, try and purchase as they like. We regard this as the most important thing of all.

International companies are facing the problem: setting up their agencies in China. Then they can recruit excellent salesman and accumulate international sales presence. The existing vintage sales presence has been put into use, but it is still not very mature. We believe that the international wine marketing apparatus will be closer with the increasing development of the Chinese wine market.

The current crisis and opportunities of Chinese wine producers
The first crisis of Chinese wine producers
The quality of Chinese wine is comparatively low and it currently cannot compete with the imported vintage on the quality. In our country, the cost of manufacturing excellent wine is higher than in foreign countries. The direct cause is that there are few good vineyards in our country. It is closely tied to land ownership. In our country, land belongs to the country and farmers have right to use it. Farmers are judged by their annual harvest and they require a high output, which results in the weakness of grape vines, besides, the wine producers only sign contacts with farmers and it is hard for them to control the quality of grapes. Therefore, a lot of Chinese wine producers directly import bulk wine from foreign countries, especially from new vintage countries such as Chile, Argentina and Australia.

The second crisis of inner vintage factories
We are very clear that the products of inner vintage factories are spreading into circulation through distributors of different districts. In the past, the relationship between wine producers and distributors is like father and son. However, some distributors are not satisfied about these relationships and they decide to make it by themselves. So producers should maintain cooperation with distributors by all means and keep the routes of supply smooth while all the while trying to increase their reach.

The distributors of other districts will have more and more opportunity to contact with foreign vintage providers, thus they will be more familiar with importing wine. Gradually, imported vintage will have local distributors, allowing the medium and low international wines to be more competitive.

The opportunities of inner vintage factories
Naturally, inner vintage factories are not facing an immediate crisis, they also have good opportunities. Today, the market is still dominated by inner brands and the importers still need time to rise. Besides, Chinese wine producers already have markets all over the country and have a wide coverage.

Inner vintage factories should think ahead if they want to avoid future crisis and have better opportunities for development. I think opportunities include two aspects: first is purchasing vintage factories or vineyards in foreign countries. In my opinion, Chile and Australia are our best choices, for their vintages are popular with the tastes of Chinese people. Second, the vineyards of these two countries are comparatively cheaper. For example, wine is now oversupplied in Australia, while in Chile the price of vineyards are comparatively cheaper and the cost is comparatively lower than China. And we can assure the quality of the vintages.

Some problems for international wine merchants to develop wine markets in China:
First, learning the distribution characteristic of the wine market in China
In China, the output of vintage is comparatively concentrated in large vintage companies such as Great Wall (Sha city Great Wall, Huaxia Vintage Ltd. Company, Yantai COFCO), Changyu, Dynasty, Xintian, Tonghua, Mary, Huadong, Fengshou, Weilong, and Yunnan Red. Each year the vintage market is like a spindle, the distribution shows the tendency of “large in middle, small in two heads.” The market is developing towards medium and top markets. The top wine market is developing rapidly and it is expected to occupy 35% of the entire market, especially ice wine, which has been a highlight among the top consumers. Medium vintage continue the original pattern and occupy 60% of the market. The market share of low vintage has decrease a lot and it is expected to occupy less than 5%.

Owing to the different economic development and consuming level of different districts of China, the increasing speed of consuming is not balanced. According to the sample survey for East China District (Shanghai, Nanjing, Hangzhou, Suzhou, Ningbo, Hefei)., South China District (Guangzhou, Shenzhen, Xiamen, Foshan, Fuzhou, Nanning, Haikou) and North China District (Beijing, Tianjin, Jinan, Qindao, Taiyuan), the relationship between vintage market shows: the market starts from January and February and it especially increasing a lot during the Spring Festival with an increase of sales. It keeps increasing till March and April, during this period, the consuming growth speed is steady, the tendency decreased a nit and it will maintain till the end of May. June is the turning point of the vintage market. It shows in the insipid market, increasing storage, unsteady price, difficult sales and it will continue to the second half of a year.

Second, the inner vintage prices ups and downs
The price index of vintage market reaches highest in the first season. The market starts in February and March. It reaches its highest price in the first part of the year between New Year’s Day and the Spring Festival. The price of top vintage changes apparently and they are sold better than medium and low vintage. Then in April the price decreases a bit. At the turning point of spring and summer, the price shows a small increase. When it comes into June, the price continues to decrease.

Third, new changes have emerged in the market and consuming structure, the consumption is quite unbalanced.
Dry red vintage occupies 80% of the market consumption; dry white vintage occupies 20%. The consumption of red vintage is far higher than that of white vintage. We can analyze the consuming structure: the first part is the white-collars with high income of large companies; the second part is groups using public funds; the third part is foreign citizens and guests of top hotels; the fourth part is fashionable youngsters and middle-aged consumers with high income. They make up the majority of wine consumption. They usually consume in hotels, nightclubs, discos and bars (at these places they drink wine directly) supermarkets and shopping centers (they buy wine as presents). The consumption markets usually concentrate in the east and south coastal developed big and medium cities. In the west district the capital city like Chengdu, the consumption for the first part of the year has increased a little bit, but the sales are still not very large and the price is low.

Then the contradiction of our unbalanced vintage market will be relieved, the west and the east part will increase at the same time. As of now, the district for consumption of wine is mainly in east and south coastal district. In these advanced districts such as Shanghai, Beijing, Guangzhou, Nanjing, Xiamen, dry red wine occupies a large proportion of the wine consumed.

Fourth, the large country market
The growth rate of farmer’s annual income will increase by 6.5%, which provides conditions for the exploitation and cultivation of the wine market.

The key point of enlarging the wine market is the country. It is not wise to enlarge the vintage market in the crowded and limited markets of cities. Therefore, the exploitation and cultivation of the wine market in the country would attract a lot of attention. Our country has a population of 1.3 billion and 0.9 billion of them are in the countryside. The potential of the countryside market is very large, but the capacity of the wine market is far from enough. Lacking effective orientation to the consumers and investments and efforts, the market capacity is still about 0.37 million tons after a lot of changes.

Fifth, the top vintage market has been formed.
Recently, the quality and income of consumers have been greatly increased and they have become more familiar with wine culture. They associate wine with luxury, culture, symbol of status and position. The expensive ones, in this view, are the best vintages. Therefore, the top-tier vintage market has been formed. Meanwhile, our market is short of the most popular vintages in the international markets, especially those markets for top wines. So our market is beginning to develop the popular vintages for international markets. Besides, the adjustment of the structure of the wine industry, the classification of wines and the new standards of it will enlarge the demand for high-level, qualified vintages. With the decrease of the space for low-grade wines and the increase in the market for top vintages, Chinese wine companies have changed their focus to the top wine market. Medium and low vintage have changed their packages and accelerate the development of their top new products and put them into the market as soon as possible. In the second half of this year, the top market will be the main focus of competition. Vintage companies decide to lay “high grade, good quality” images as an important way to be accepted by consumers. Of course, we must realize that the continuously competitive international vintage market has made the Asian countries, including China, become the main battle fields for competition. And the imported vintages usually pay attention to the top market of our country.

Sixth, the terminal competition of vintage market will be much fiercer
Hotels, nightclubs, discos and bars (at these places consumers drink wine directly), supermarkets and shopping centers (where wine is bought as presents) are main battle fields for competition in the wine industry. In the age of an economically oriented market, Hotels, nightclubs, discos, bars and supermarkets and shopping centers are naturally becoming the key points for their competition. According to the survey given to consumers of terminal markets, 41% of consumers tend to purchase wine at large supermarkets and shopping centers, hotels occupy 28% of it, while retailing stores cover 4%. The competition for the terminal wine market will be much fiercer, possibly resulting in underhanded business practices. But the trend of exporting vintage will be better. With the increasing demand for wine driven by the revival of the world economy; an enormous increase beyond our expectation emerged in exporting vintage of some vintage companies in the first half of this year.