Wetting China's Whistle
Wed January 30, 2013
Northwest Winemakers Hope To Entice China's Emerging Middle Class
Originally published on Tue January 29, 2013 4:38 pm
WALLA WALLA, Wash. - Northwest winemakers are trying to wet-the-whistle of China's emerging middle class. Demand for wine is growing significantly there. And that’s drawn Chinese business delegations, restaurateurs and tourists to our region. There even may be a reality TV show that would feature Northwest wineries.
Back when the economy was rolling in mid-2000s, Long Shadows Wineries was jumping.
“We would sell out of the current vintages within six months of release and have to wait another six months for the next vintage," recalls Dane Narbaitz, Long Shadows Wineries’ national and international marketing director. "And that’s what it was like for the first three vintages.”
So the company decided to make about 30 percent more wine. But just as they started crushing more grapes, the economy crushed sales. Long Shadows was stuck with 60 percent of its product. The choice: Discount the high-end wine or find new customers.
“So we started looking to other channels to sell the wines and China approached us at just the right time,” Narbaitz says.
More and more Northwest wineries are finding new opportunities in China. In fact, the Washington Wine Commission says Washington and Oregon wineries have sold nearly 80 percent more wine in China every year since the 2008 and 2009 season.
All that has occurred since China eliminated an 80 percent excise tax in 2008 that stifled imports.
But to sell wine in China, U.S. wineries have to put in extra efforts. Before any bottles are shipped – the Chinese customers want to know exactly what’s under the cork. So that means chemical tests in science labs. For example, one test at Long Shadows shows how much sulfur dioxide (SO-2) -- a compound used to preserve the wine -- is in there.
It’s all worth it, Narbaitz says. Even a value-brand of U.S. wine is sold for premium prices in China.
But being successful long-term in China will take a lot of consumer education and time. Narbaitz says while visiting restaurants there, he found that drinking wine isn’t yet firmly stitched into the dining culture.
“We didn’t see a lot of bottles on the table," Narbaitz says. "We saw a lot of nice cellars, but we didn’t see it out in public where people are consuming it.”
Still, Northwest winemakers are building their wine lists and inventory in Chin, so they will be ready when the thirst for wine increases.
Al Portney spends about 70 percent of his year outside of the U.S. in his role as vice president of International Sales for Ste. Michelle Wine Estates in Woodinville, Washington. Portney says that China’s potential is almost mind-bendingly huge.
“Estimates are that it’s about 30 percent of the population is considered middle class," he says. "So you take that number, or even close to it and you’re already dealing with a population that’s greater than the entire population of the entire United States.”
Portney and other wine industry importers are keeping a very close eye on the tastes of the emerging, young, middle class in China. He says they see drinking and collecting wine as part of a desirable lifestyle. And the Northwest brand there is known for high-quality food, beautiful scenery and desirable wine.
But China isn’t just interested in buying better wine, they want to grow it too.
Just outside of Benton City, Washington, Kevin Judkins slides open the door on one of his massive, bitterly-cold greenhouses at Inland Desert Nursery. Anytime now, Judkins is going to ship 10,000 wine grape plants to China.
To become certified by the Chinese government, the nursery had to host a delegation of business people, government officials and wine experts. But Judkins said he faced a steep learning curve. During a tense tour of his operations, there was supposed to be a gift exchange. But he didn’t know that. He did have gourmet pizza ready afterward though.
“I didn’t know what was going on because I didn’t get many smiles out of them," Judkins says. "It was really hard to read, and the language barrier played a lot to that. And at first they didn’t really want to drink wine. But then they thought, oh we’re in the Northwest, we need to try some Northwest wine. They tried some wine, and had some pizza and I think the rest of the day went along a lot easier.”
Wine exporter Portney says there are still more wine suppliers entering the market than China’s wine drinkers can absorb. And business there can be chaotic. There are unconfirmed stories of wine stuck in warehouses, wine not paid for, wine ruined by improper temperatures.
But the interest is there. In fact, a U.S. TV production crew in partnership with the Chinese government, will film a sort of reality-TV roadshow. It’s still in development, but some of it is planned to happen in Northwest wineries.
And for Northwest wineries there’s no slowdown in sight. Many are scrambling for even a sip of this emerging market.