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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 centres.

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 Guangzhou.

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.




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