During the late 1990s, there was much snickering among the wine aficionados in Europe and America, pointing to the Chinese mixing red wine with coca cola and sprite. If the Europeans and Americans at the time had occasion to drink some of the plonk that was dumped on our shores, they might have reached for a can of coke too! 

 

It may be difficult to believe, but the value of Hong Kong’s re-exports of bottled wine to China in 1997 was greater than that in 2007. Pre-1997, the world’s wine producers dreamt of all the Chinese drinking a bottle per year and importers practically had wine dollar signs as their eye-pupils! By any definition, Hong Kong was already China’s wine hub more than 10 years ago. In 1997, Hong Kong was supplying the majority of China’s bottled wine imports while in 2007, Hong Kong’s re-exports only accounted for 24%.

 

1999 was a landmark year for Hong Kong’s still nascent wine industry. Finally, the 90% wine duty was lowered to 60%. But it was not meant to last and the duty was hiked up again to 80% in 2002. Despite the lack of consistency and clear strategy, the Hong Kong government expressed its desire in 1999, and again in 2000, to become Asia’s wine distribution centre. The Hong Kong Trade Development Council as well as the Commerce and Industry Bureau gave public presentations on their vision of a wine distribution centre in Hong Kong. However, with prohibitive duties and the lack of industry support, the idea was quietly shelved.

 

Fast-forward to 2008 where the script from the Hong Kong government about a ‘wine hub’ sounds surprisingly like a replay of the one from 1999. At least in the same breath, the significant step of eliminating duties, provides hope. There has also been a flurry of activity in the fine wine segment, with more wine auctions held in Hong Kong within one year than all the previous wine auctions held in the past. While the government did not specify that the hub would benefit the traders, importers and consumers of fine wine, the results over the past twelve months, post-wine duty elimination, firmly point to a small segment of the industry that has so far benefited from the move. The trickle-down effects have occurred to some extent in the retail sector, but not in any meaningful way in hotel and restaurant lists. 

 

China has undergone even greater change than Hong Kong in its wine scene over the past ten years. Since joining the WTO in 2001, China lowered its wine duties and for many years had a lower total import tax regime than Hong Kong. However, the high non-tariff barriers, the strict import requirements and stringent labelling regulations for all imported wines still posed high barriers to entry. 

 

In 2006, for the first time, China overtook Hong Kong to import 2.2 million cases of bottled wine, 200,000 more cases than Hong Kong. In 2007, bottled wine imports more than doubled from the previous year to reach nearly 5 million cases. This does not include the 12 million cases worth of bulk wine imported in 2007. The 2008 year-end figures will no doubt affirm that the volume and value of imported wine into China has leaped way ahead of Hong Kong. 

 

The wine world in 2019 in China and Hong Kong will be very different from 2009. Its growth will no doubt somewhat parallel the financial markets. However, like the art and watch industries, the wine industry will develop a chasm between the top, coveted wines and the less desirable wines. The bottom end will feel the economic movements quite sharply while the top end of the market will be somewhat sheltered and continue its upward climb as the finite number of wines produced diminish with the passing years and continuing consumption. Given this background, below are 10 predictions for Greater China’s wine world in 2019:

 

1.   Growth of wine consumption in China and Hong Kong will continue steadily over the next 10 years despite the uncertain economic environment. This will occur in both the top and bottom end of the market, especially given the marketing and distribution push by the domestic wineries. The consumer base is optimal: Growing middle class, the majority between 20 years to 40 years old and openness to western influence. 

 

2.   Wine consumption will plateau in China when it reaches between 2 litres to 3 litres per capita consumption. Japan has never hit 5 litres per capita and looks unlikely to do so in the future. China and Hong Kong will likely follow the same pattern. One of the most convincing reasons for this in Japan is the competition from domestic alcoholic beverages such as sochu and sake. In China, the quality of traditional alcoholic beverages such as bai jiu and huang jiu will likely improve at all price points and quality levels. 

 

3.   Chinese buyers will become the most important buyers of super premium prestige wines. Fine wine traders from London such as Farr and Berry Bros & Rudd, suggest that currently, at least a quarter of their business is in Asia, with the majority in Hong Kong and China. Sales of premium whiskey and cognac in the mainland and Hong Kong have always been strong, and the wine industry is trailing behind closely. Further evidence includes the recent spate of auctions held in Hong Kong, the growing number of fine wine traders based in Hong Kong and Shanghai and the increasing number of large, Asia-based fine wine funds. 

 

4.   Wine will become affordable for the majority of Chinese. The bifurcation between fine wine and everyday wine will be even more exaggerated, with both sides growing in parallel. At the supermarket level, wine pricing will be fiercely competitive and good, everyday wines will become more widely available. Wines will be priced to compete with premium beer, juices, soft drinks and bottled water. In Hong Kong, this is already happening and good, reliable wines from Spain, Italy, Chile, Argentina, Australia and South Africa can be found at under HK$50 per bottle. In China, the duties and higher cost of importing will mean affordable wines will likely come from the domestic wine industry. 

 

5.   For everyday wines, domestic wines will dominate. About 90% of consumption in China currently is of domestic wines. As Chinese domestic wineries continue to expand and learn to produce quaffable, well-priced wines, consumption at the lower end will continue to grow. Unfortunately for exporters, this end of the market will continue to be dominated by domestic producers who understand the complex distribution channel and aggressively market their wines. Everyday wines will be competing with premium beer, bai jiu, huang jiu, sake, sochu and other locally produced alcoholic beverages made from grain or other fruits. In China, popular grape varieties such as Long-yan and Cabernet Gernischt will become widely known. For Hong Kong, everyday wines will continue to come from around the world.

 

6.   Changes in dining culture will make more room for wine. With the growing number of western restaurants in China and Hong Kong, wine is being accepted as part of the dining experience. This influence is filtering down to local Chinese restaurants. In Hong Kong, most mid- to high-end Chinese restaurants have wine lists. In China, this is happening along the major coastal cities and is moving to the secondary cities.  

 

7.   French wines will reign supreme in China and Hong Kong over the next ten years. For both Hong Kong and China, French wines make up one-third of imports. In a more mature wine market like Japan, French wines continue to enjoy 40% share of imports with no sign of losing to New World countries. The refined and reserved flavours of French wine styles, mainly in the premium end of the market, will continue to find an appreciative audience. 

 

8.   Internet and word of mouth will be the most influential methods of effectively reaching Chinese/Hong Kong consumers. With the majority of the population below 45 years old, internet usage will continue to grow. In a country as diverse and large as China, this channel will be the most influential in reaching end consumers. The influence of the internet will be somewhat less in Hong Kong, with word of mouth exerting greater force. 

 

9.   Several Chinese food & wine personalities will emerge to reflect the different needs of a very diverse country. One might reflect the needs of novice Chinese wine consumers, while another targets connoisseurs and focuses just on fine wine. By 2019, at least one influential food and wine personality will emerge from China.

 

10.   Hong Kong will become the fine wine hub for China. By 2019, Hong Kong will account for at least one-third of all fine wine imports into China. This does not include the wines stored in Hong Kong for mainland collectors. However, by 2019, Hong Kong is unlikely to be a wine hub for everyday, lower priced wines.