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Chinese demand for wine has increased in tandem with the global demand for it over the last few years. China is on track to be the second-most-valuable wine market in the world by 2021, trailing only the U.S. Ultimately, the sheer number of people in China who want to drink fine wine, and increasingly can afford to do so, provides investors some insurance that wine investing will likely continue to be profitable.
Growth in the wine market
Since 2003, the Chinese wine market has shown double-digit growth:
- From 2003 to 2013, China’s wine market grew by 60% per year – from 600,000 cases of wine annually to 31 million.
- From 2007 to 2011, Hong Kong, the main hub for wine imports, saw a dramatic increase in the value of imports, from US$200 million to US$1.2 billion.
- From 2010 to 2015, Chinese wine sales increased by 132%, to a value of US$38.2 billion.
- From 2011 to 2017, Chinese customs statistics show an average increase of 12.6% per year in wine imports, growing from RMB9.28 billion (US$1.38 billion) to RMB18.87 billion (US$2.81 billion). In terms of volume, wine imports increased from 370 million litres to 750 million in the same period, an average annual increase of 12.8%.
Still wine, in particular red wine, is the most popular type, accounting for 96.8% of the total wine market value in 2014. The popularity of red wine stems from the Chinese perception of it being healthier than other kinds of wine. Also, the hue of red wine is symbolic of wealth, power, and good luck in Chinese culture. Note that white wine sales increased by 68.6% between 2010 and 2014, while the sales of rosé increased by 105% during the same time period.
Guillaume Deglise, CEO of Vinexpo, has predicted that by 2020, China’s wine sales will outpace those in France and the UK. He estimates that the net value of the imports will be US$21.7 billion, second only to the US (US$38.6 billion). In addition, he expects that China will take first place as the world’s largest market for non-sparkling wine in 2020. Moreover, he predicts that over 94.5 million cases of non-sparkling wine will be imported into China, an increase of 79.3% over 2017 imports.
The attraction of imported wines
Imported wines accounted for 39% of the wine market in 2017. They’re primarily sold in the tier 1 mainland Chinese cities (e.g., Beijing, Shenzhen, Guangzhou, Shanghai), which account for more than 53% of such sales. These cities harbor a large number of expatriates, Western-educated young professionals, and consumers with preferences for and knowledge about foreign wines.
Another factor pushing up sales in the imported wine industry is that Chinese wine drinkers are quite concerned about food safety, as a result of the many food and product safety issues publicized by mainland Chinese media. Their concerns about food poisoning contribute to their attraction and desire to purchase imported wines, despite their higher prices. Imported wines are viewed as less likely to be contaminated with poisonous or harmful ingredients.
Pop the cork and toast to smart investments
Ultimately, as the mainland Chinese become more prosperous and the middle class gets larger, the demand for fine wine will grow. The affluent mainland Chinese are paying more attention to fine wine, their health, and the status symbols associated with the elite. Given that the potential number of wine drinkers in China may rise to 580 million people, the mainland Chinese market is key to the growth of the wine market, and a potential cash cow for fine and premium wine investors.
As an investor, this may be an ideal time to add wine to your portfolio. The strength of the market, its rapid growth to date, and its room for further expansion suggests that your investment likely won’t fizz out.
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The information provided is for general information purposes only and is not intended to be personalised investment or financial advice. Alisa Hopkins doesn't own any shares mentioned.