Cases of Fine Wine Collects in China Warehouses as Demand Depletes

Nov 03, 2015 06:00 AM EST | By Mikey Blanco

China became the darling of the wine industry a few years ago. In fact, in 2010, stellar growth encouraged basically anyone and everyone who had a stake in wine to do business in China. The reason for this was pretty obvious. The double digit rise in wine consumption in the country needed suppliers, dealers, and merchants to effectively distribute the product to where it would sell the most.

But that was then. Nowadays, even the country's top wine sellers are facing a major slump. For example, some decent Bordeaux wines like Chateau Brehat had been sitting idly in warehouses for three years until the owners decided to cut their losses. The result? A fire sale that saw the prices of the $50 bottles drop by 75%, Reuters reported.

Xavier Grangier, sales director at Europasia that runs a 4,000 sq meter warehouse in Shanghai, said, "When we started, there was huge demand so we could control prices. Big margins, no problem." The warehouse stocks 250,000 bottles of mostly European wine. The products are more than likely to remain where they are as selling them off has become a huge headache.

The situation is quite dire for these businesses. Grangier added, "In Shanghai alone, 2,000 firms in the wine business just vanished over the last couple of years." Pierrick Fayoux, Shanghai-based marketing manager at VGF China Ltd, a French wine importer, added, "In 2010 everyone was screaming from the rooftops that China was the El Dorado for wine and you could become a millionaire by jumping into the business."

Fine European wine may be hitting a dip but for a market relatively new to the culture of wine, the much more affordable New World wine from Chile and South Africa is becoming a hit, South China Morning Post reported. Wine from these places average $15 per bottle.

To address this, ASC Fine Wines, China's largest wine importer, has had to cut prices as well. But it is not the end of European wine in China. Bruno Baudry, CEO at ASC said, "We are expanding our entry-level wine selections to meet the changes in consumer demand." That is a nice way of saying that the Chinese middle class, the largest in the world, is curbing its spending.

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