Talking to some people about the China wine market, you’d think it was game over. With China Customs reporting an increase of just 15 percent in the number of cases imported between January to March 2012 ahead of the same time last year, people are wondering if the market is slowing. Sure, the Chinese wine market has grown by 40 percent per annum over the last two years, and sure, there is now a nonsensical number of so-called ‘importers’ blurring the edges of the industry, but these numbers don’t tell the whole story.

The China wine market has seen corrections before – about three years ago – when the volume of wine in warehouses, stores and restaurants did suggest the supply lines were rather full.  Anecdotally, it took less than a year to correct. Yes indeed, the supply lines, like a maze of crazy plumbing, are fuller than usual right now, but let’s not under-estimate China’s ability to redress that. Every day more Chinese people become wine drinkers, and there’s a huge number yet to adopt wine that certainly will. Incredibly, wine only accounts for 3 percent of the alcohol consumed in China, against a global figure of 18 percent. Most Chinese haven’t heard of it yet. Per capita wine consumption is a trifling 0.7 l/year against 3.5 l/year globally and around 30 l/year in Australia. Plenty of room for growth here!

And while China is currently the world’s fifth largest wine consumer, it’s the massive middle class that is most quickly turning to imported wine. While estimates of its size vary, around 300 million are currently considered as middle class, a number expected to increase to around 430 million as soon as 2015.  Much of this is happening in second and third tier cities, where again, there is plenty of room for growth!

The affluence of the Chinese market is again evident in an increased value per case of imported wine, which rose by more than 10 percent from the first quarter in 2011. Add this to the increase in volume and the imported wine market becomes 28 percent more valuable than it was 12 months ago. Given the amount of attention being paid to the ‘slowdown’, this is still a pretty impressive figure!

Campbell Thompson, head of major importer The Wine Republic, acknowledges that while he has observed a slowdown, the figures of the first quarter of 2012 might actually be affected by an early Chinese New Year, since some wine might have been exported earlier than usual to be available for this important holiday period.

There is no argument, however, that the current number of wine importers to China is not sustainable. Brought into the country by Chinese citizens seeking permanent residency in countries like Australia, or by those trying to sell it to their networks of high-end connections within Chinese business and government, there’s a massive volume of wine that ends up in China’s ‘black hole’ for wine, as I have heard it called. While it’s usually fully paid for, often in advance of shipment, nobody knows where this wine goes, how it’s stored or transported, where it ends up and who drinks it. As a means to build a brand it’s nothing more than a short-term injection of cash for wineries, and it could well have damaging consequences for their brand if the wrong people (ie the right people) end up buying it and drinking it.

A few years ago there were 800-odd registered wine importers into China, a number that hit 4,000 in 2011 and is considerably higher again today. Miguel Torres, the Spanish wine producer and one of the leading importers of wine into China, estimates that the market share of imported wine by foreign suppliers into China has fallen from around 50 percent a decade ago to around 15 percent today. This not only reflects the mushrooming of Chinese participants in the wine industry but the positive and inevitable outcome that the Chinese wine market will indeed be controlled by Chinese participants. Once companies like COFCO, which has indicated a desire to use its supply lines for wine as well as for food, get serious about their intentions to lead wine distribution in China, this trend will move even more quickly.

Allied with concerns over the number of importers into China is the issue of fake wine, which anecdotally has been getting worse, not better. While Chateau Lafite produces only around 200,000 bottles each year, yet unconfirmed reports suggest that nearly 600,000 bottles of the wine were traded in China in 2011. I have heard at first hand that the Chinese Government is currently establishing a new set of protocols and offices to carry out a more detailed process for the authentication of wines and importers.

This won’t happen quickly enough for owners of key brands like Henschke, whose wines were faithfully imitated (on the outside at least) at the TopWine China show in Beijing a couple of weeks ago, under a fake ‘Hill of Glory’ label. Perhaps even the less-informed Chinese customer would eventually have picked up the spelling mistakes of ‘Austalia’ within the otherwise expensively produced brochure!

Having just returned from Vinexpo in Hong Kong as well as TopWine, I can safely report to any Australian wine producers concerned over the talk, that the Chinese market is as alive as ever it was. It’s just taken on a little too much a little too quickly, something each of us has done before, yet have managed to recover from the following day. ■