Analysis of Influence of Imported Wine on Domestic Wine

Recently, CIC Securities organized a wine industry seminar on Impact of Imported Wine on Domestically Produced Liquor. The meeting invited Zhu Sixu, Secretary of the Guangdong Provincial Liquor Monopoly Bureau, to give a special speech. The summary of his speeches is as follows for reference.

Investment Highlights:

The Chinese wine industry has a vast space and is expected to become an Asian wine center in the next decade. From the proportion of the consumption structure of each wine, Chinese wine accounts for 2%, while the international level is 11%. From the per capita consumption point of view, China's per capita consumption is 0.75 liters, and the international is 7.5 liters. It indicates that the Chinese wine industry is very spacious. The main driving factors for the development of the wine industry come from the upgrading of consumption, the rise of the population after the 1980s, aging, and other demographic trends. From the history of beer development in China, it can also be seen that Chinese wines are expected to become mass consumer goods; in addition, China has vast land. Suitable for growing wine grapes laid the foundation for the great development of the wine industry. Therefore, China is expected to become an Asian wine center in the next decade.

Imported wine enters China through three stages and there are still 3 to 5 years of business opportunities. From 2005 to 2009, the tariff of imported wine dropped, resulting in the development phase of profiteering; since 2009, with the popularization of imported wine in the coastal areas, the prices have dropped, and they have begun to penetrate the Mainland. With the use of information asymmetry, the development of imported wine has entered a speculative stage; import of wine is expected. The promotion from the coastal areas to the Mainland will gradually enter a rational stage, so imported wines still have 3 to 5 years of business opportunities.

Analyze imported wines from resources, brands, and channels.

Resources Imported wines have resource advantages and thus have quality advantages, while China's wine grape vines are planted at a later time, and it takes 10 years to reach the golden age of 30 years. Therefore, it will take 10 years for Chinese wines to significantly improve their quality. During this period, the impact of imported wine will be threatening, and the possibility of further decline in tariffs will increase the risk of imported wine.

Brand product level: Imported wine has advantages in the high-end market, and it has also started to impact on domestic wine in the low-end market; Corporate brand: Imported wine manufacturers rarely have brand operation, but large-scale distributors actively operate their own brands to enterprises. The brand takes the place of the operation of the product brand; the brand of the production area: the imported liquor works together in the government, industry associations, and enterprises to create a brand, which is different from the means by which domestic wines only create brands through advertising.

Currently, the channel has gradually formed three types of imported wine operation modes: First, the form of chain stores, represented by Chunde, Fulong, and ASC, expanding through group tastings to open up group purchases; second, e-commerce and other capital support, actively made Force network direct sales; third is to establish a professional wine market as a platform, such as the Guangzhou International Wine Trading Center, using the bonded policy to provide imported wine display, trading platform.

Domestic wines are recommended to take measures in three aspects: First, attention to quality; Second, actively explore the localization of wine culture; Third, government subsidies for grape growing support.