Italy's winemakers see China as new top destination

MILAN Tue Nov 11, 2008 6:45am EST

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MILAN (Reuters Life!) - Only a couple of years ago producers from Tuscany, the wine heart of Italy, used to say China was not mature enough to embrace their top quality labels.

Now, with recession hovering over their main markets in Europe and the United States, makers of premium Italian wines are turning to China where wine is becoming increasingly popular and the newly rich easily splash out on a top-price bottle.

"The economic crisis hitting Italy and other traditional markets of our wine has been felt much less in China which, therefore, has gained more importance (as an export market)," Alessandro Mugnaioli, head of foreign relations at Italy's wine promotion body Enoteca Italiana, told Reuters on Monday.

Enoteca Italiana and makers of famous Tuscan red Chianti and its upmarket cousins Nobile di Montepulciano and Brunello di Montalcino opened The House of Tuscan Wine in Shanghai in July to promote their output in China's major industrial center.

A 1.2 million euro ($1.55 million) investment put together by Tuscan administrative bodies, chambers of commerce and Italy's oldest bank Banca Monte dei Paschi di Siena would pay off as wine imports to China were set to rise after liberalization of import licenses in 2007, Mugnaioli said.

Wine consumption in China has been growing by 8 percent a year over the past few years and is expected to hit 1 billion bottles in 2011, the Consortium of Brunello producers says.

Industry experts say China may become the world's eighth largest wine consumer by 2012.

CORKING COMPETITION

The French and other major wine producers have been faster than Italians in realizing the huge growth potential of the Chinese market. The competition is fierce for carving out market niches, Mugnaioli said.

"It's good that there is competition. Every competitor, every wine producer is bringing Chinese consumers closer to wine," he said, fresh from taking a group of Chinese buyers and reporters on a week-long wine tour of Tuscany.

Italian winemakers have analyzed the Chinese market and changed their previous consumer target which was in the age group between 40 to 60 years old and was considered to have the best purchasing power, Mugnaioli said.

"Our new target is in a range of 20-35 years old: graduates with stable jobs, well-paid and with a Western model of lifestyle and food habits," he said.

Red wine is a symbol of class and luxury in China where it accounts for 90 percent of consumed grape wine, experts said.

Enoteca Italiana has started its promotional activity in China with Tuscan wines. However, it hopes other wine-making regions will join the initiative, overcoming their long-standing reluctance to work together, Mugnaioli said.

Italian wine exports to China remain tiny at about $20 million in 2007 compared with total Italian wine exports of about 3.5 billion euros a year, according to industry data.

But exports to China jumped 64 percent last year, making Italy the fourth-biggest wine exporter there after France, Chile and Australia.

SORTING OUT U.S. WOES

While export hopes are pinned on China and other emerging markets, Italian wine sales in the United States, one of the world's biggest wine markets, dropped 3.6 percent in the first half of 2008. Exports were hit by investigations into authenticity of wine made by some producers from Montalcino and Montepulciano.

Italy has avoided a halt of wine exports to the United States after the agriculture minister and winemakers pledged to tighten quality and labeling controls.

In October, Italian prosecutors cleared makers of well-known Brunello of Castello Banfi and released the 2003 vintage seized on suspicion that grapes other than Sangiovese, the only variety allowed under local standards, were used to make the wine.

The U.S. market absorbs a quarter of Brunello's 6.5 million bottle annual output, with total sales at about 120 million euros. About 12 percent of Montepulciano wines are sold in the United States.

After the Brunello investigation made international headlines, some local producers talked about the need to ease stringent standards. But 96 percent of Brunello makers voted in October to keep the 100 percent Sangiovese purity, the Consortium has said.

(Editing by Paul Casciato)

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