Chinese wine producers feel profits pressure


China’s domestic wine industry is going through a particularly difficult period, with reports that some growers have ripped out vines due to lower consumer demand in the country.

A report released this month by China Alcoholic Drinks Association (CADA) and seen by showed that, in 2013, a total of 1.18bn litres of wines were produced in China, down by 14.6% from 2012. Sales of Chinese wine fell by 8.5% to reach RMB40.8bn ($6.55bn).

The figures mark a reversal of gains made in 2012, when production rose by 16.9% and sales increased by 14.4%. Producers’ profits have also come under pressure, and CADA said the average wine industry profit margin fell to 10.7% in 2013 versus 12.3% a year earlier.

Its report suggests that domestic wine producers have suffered alongside higher-priced imported wines as part of a general slowdown in China’s alcoholic drinks sector over the past year. China’s biggest wine producer, Changyu, saw net sales and profits slide by 23.4% and 38.4% respectively in 2013, which it blamed on government austerity measures.

The situation has started to affect vine plantings in China, according to Wang Zuming, secretary general of the wine division of CADA.

Fewer purchases from wine companies have caused grape prices to fall in some areas, making it hard to justify planting. Wang told Beijing-based publication that some growers have pulled out their vines, or simply left them untended over the winter.

Li Demei, vice secretary general of the wine division of CADA, warned against blaming government austerity measures for all of the industry’s problems.

‘The high-speed growth of the industry in the last few years covered up the fact that wine hasn’t yet obtained a consumer base as solid and extensive as beer, yellow wine and baijiu in China.’ Li Demei told ‘Too many producers are making high-end wines, which are not for daily consumption at all,’ Li said.

‘Now there’s a consensus in the industry that wine needs to change its high-end image, and approach a broader number of consumers.’

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