China The New Frontier for Canadian Wines (October 24, 2002)
Sam Lee is an evangelist. He believes he can sell container-loads of
Canadian wine to his native China.
From his Mississauga, Ontario, base he convinced his cousins Ricky and
Miranda Hui in Hong Kong to form a company called Chican Cellars and to
take booth space at the first China Wine & Spirits Products Trade
Fair in the city of Guangzhou (formerly known to us English speakers as
Canton) in Guangdong province.
The fair, which opened on May 30th, was held in a five-storey facility
called The WineMark, the first of its kind in China. A Hong Kong developer
had put up a 25-storey building in a popular shopping area of Guangzhou,
population 6.7 million. The first five floors are dedicated to show space;
the twenty floors above are luxury condominiums. The man in charge of
The WineMark is Benjamin Cheng, who told me, "We had two choices
on what to do with the space. Either we make it into a Book City or we
sell wine. My dream is to build a 21st-century Silk Road between East
and West for wine."
The WineMark covers an area of 13,000 square metres. The ground floor
is mainly devoted to local Chinese products, with a spirits supermarket
and a wine shop with a climate-controlled room to house the more prestigious
international wines. The second floor is all permanent booth space for
Chinese and international companies to exhibit their products. The third
floor is more of the same. Eventually the fourth and fifth floors will
be given over to restaurants, a museum, and business, press and cultural
The halls will be open 365 days a year and, since the area where The
WineMark is located is transformed into a pedestrian thoroughfare after
5:30 pm, the walk-in traffic should be impressive. Benjamin Cheng estimates
that 58 million people pass his doors in one year, and he projects 10,000
visitors a day to the centre.
Sam Lee had managed to convince five Ontario wineries to fly to China
to participate in The WineMark's inaugural fair. Representatives from
Colio (Doug Beatty, Marketing Manager), King's Court (Joseph Zimmerman),
Konzelmann Estate (Herbert Konzelmann), Lakeview Cellars (Murray Marshall,
Chairman of the VQA) and Reif Estate (winemaker Robert DiDomenico) accepted
his invitation and flew to Hong Kong, where they took the local bus to
The idea of doing business with China is very attractive for Canadian
wineries given the potential volumes involved but dealing with
Chinese bureaucracy is not easy. That's where Sam Lee and his partners
come in. They know the players and how the system works in China. To get
your wines into Guangdong province you need five different permits, which
means negotiating with five different bureaucracies.
After 15 years of negotiations of its own, China officially joined the
World Trade Organisation (WTO) on November 9, 2001. Which meant they had
to lower their import tariffs. Before 1996 there was 125 per cent duty
on imported wines. This was lowered to 60 per cent in '96 and will soon
be down to 20 per cent. Forty per cent of wines available in China are
imported: Spain is no. 1, with 27 per cent of the foreign wine market;
then come Chile (26 per cent), Italy (20 per cent) and France (15 per
cent but the French wines have the highest dollar value). Canada
lags behind the USA, Argentina and Australia with a mere 1 per cent share.
To give you some idea of the market potential for Canadian wines in China,
consider this: 60 per cent of China's 1.3 billion population are adults
of drinking age. Currently, they consume 0.23 litres of grape wine a year
roughly what doctors in the West suggest as the recommended daily
intake of red wine if you want to protect yourself against heart disease!
The beverage of choice in China is beer, accounting for 77 per cent of
all beverage alcohol consumed. According to Liu Jin Lin, a former Vice
President of the China Liquor Industry Association, in 2004 China will
become the world's largest producer of beer and its largest consumer.
The Chinese government is concerned that the amount of spirits consumed
(distilled rice wine) is having an impact on food supplies, and it is
doing what it can to encourage the population to turn to fruit-based wines.
Which means opportunities for aggressive Canadian marketers. And what
did those Ontario winery executives expect of their visit to China? For
Doug Beatty, Colio's Marketing Manager, it was a real eye-opener: "I
expected that we would just get a feel of how they run their retail operation
and the level of interest in Canadian wines by both the trade and the
consumer. For Colio, we expect we'll see a substantial increase in exports
to that market. We are doing business in Korea and Japan, but nothing
to speak of in China... I think the level of interest shown by the consuming
public was incredible."
I had my own experience of this interest when I held wine tastings in
a space adjacent to Chican Cellars' booth. As soon as the events were
announced, consumers swarmed to the area and clogged the aisles. Hundreds
of people gathered around, glasses pressed forward, wanting to taste Ontario
wines, hanging on my every translated word.
And what did they enjoy most from the range of white, red, sparkling
and dessert wines we poured?
Icewine. They couldn't get enough of it which brought a huge smile
to the face of Sam Lee.