The Chinese love their vinos – as well as imports from popular grape-growing areas like the U.S., France and Australia – and they are becoming a force to be reckoned with in the wine industry.
Wine sales in Hong Kong and the Chinese Mainland have already become a $1 billion business as consumption has doubled twice over the last five years. Even with the annual growth slowing, China has emerged as the world’s fifth-largest market for wine consumption.
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What’s more, industry analysts believe that China’s thirst for wine will only get bigger as households become wealthier. Some suggest that Chinese consumption could double again by as soon as 2016 to 400 million cases. That would put it on par with U.S. consumptions levels, which now rank No. 2 in the world, only behind France. At these growth rates, China is on track to become the world’s largest wine market inside of a decade.
Though the Chinese produce 180 million cases of wine annually, China has become one of the top import markets for U.S. wines. Last year, California alone saw export sales to Asia double as more than $74 million worth of wine was delivered to China.
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Entrepreneurs like retired NBA star Yao Ming are capitalizing on this cultural shift. The former Houston Rockets basketball player launched his own label two years ago using grapes grown in Northern California’s renowned Napa Valley. His proprietary blends are pricey at $400 to $1,200 a bottle.
This year, Yao Family Wines brought out a cheaper wine – a 2010 blend of Cabernet Sauvignon, Merlot and Petit Verdot grapes – that retails for about $87, still out of reach for most Mainlanders.
Yao’s wines, like most premier vintages, are sold and served at the prestigious House of Roosevelt on the Bund, Shanghai’s famous waterfront. The exclusive Roosevelt Club, established by the great-grandson of U.S. President Theodore Roosevelt, boasts of 4,000 wine labels, easily China’s largest. Some 10% of those labels are American. The House of Roosevelt’s commitment to the Mainland underscores the growth potential for wine sales.
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“Roosevelt’s Chinese investment is interested in the domestic consumption retail business in China,” says Tim Tse, president of the House of Roosevelt in Shanghai.
Other companies like the Kerry Group, a newer five-star hotel brand in the Shangri-La Group, is getting in on the China wine craze by setting up its own wine company. Kerry Wines sells a wide range of quality wine through several sales channels, as well as stocking a large number of wine at its Kerry and Shangri-La hotels. The company is also looking to expand its wine sales to restaurants and directly to the consumer.
“I think you have to be very conscious of the local palate and what the local consumer is looking for from a price-point standpoint and from a flavor standpoint, but also understanding where the trends are going,” says Crystal Edgar, Kerry Wines’ brand manager.
Despite such aggressive growth and interest in U.S. wines, Hong Kong and Mainland China remain a complex market for foreign wine importers and investors who must consider their involvement in terms of generations, not just years.
“It definitely is a long-term relationship,” says Edgar. “It doesn’t happen quickly, it doesn’t happen immediately.”
But there’s no question the Chinese appetite for wine is only going to get bigger.