China wine warning for NZ exporters

China's fast-growing thirst for foreign wine has seen a rush of Kiwi wine-makers gaining access to the market, but a new report warns of gaps in the market.

The Chinese wine market is structured differently to what most foreign wine suppliers are accustomed to, according to Rabobank's 'China wine market - mind the gap' report.

Rabobank estimates the total number of global wine importers to China has increased by 35 per cent in 2011 to roughly 3,000 companies.

But many of these suppliers are marketing relatively small volumes of wine to a select market of business and political contacts in China, said Rabobank senior analyst Marc Soccio.

"An influx of new wine importers into China has seen even the smallest foreign wine companies gain access, but many brand owners are struggling to gain access to the level of distribution that they'd ideally like," Soccio says.

According to the New Zealand Winegrowers' March 2012 export statistics, Kiwi wine exports to mainland China grew 52 per cent in the last 12 months, with exports to Hong Kong growing 16 per cent in the same period.

NZ Wine CEO Philip Gregan said there is exciting opportunity for growth in China but there are big challenges.

"It's a big country and is new to wine so you're seeing a rapidly evolving distribution market," he said.

"The distribution system is highly fragmented and remains a significant problem."

Bottled wine imports to China are dominated by French wines, with Australian producers in the number two spot, the report said.

China only consumes around one per cent of New Zealand's overall wine exports, but represents a much more significant 10 per cent of the country's red wine exports behind the UK, Australia and the US.

And as Kiwi wine makers look to expand in China, the competition is predicted to get tougher, Rabobank predicts.

Local Chinese domestic wine companies, which have been largely caught off-guard by competition from foreign wine importers, are restructuring their businesses to ensure they get a share of the market, the report said.

Gregan said the Chinese growers are certainly hungry but the market is big enough to cope with the competition.

"We believe there's plenty of opportunity for both the domestic growers and exporters to succeed there," he said.

Wine consumption has increased in China for a combination of reasons, Soccio said.

"The ongoing economic and social development of China generally bodes well for wine suppliers as Chinese consumers continue to demand a higher quality and wider choice of food and beverage products."

This is aided by the growth of the modern grocery retail channel across China and a growing number of younger, wealthier Chinese consumers are increasingly exploring wine as an alternative to traditional grape wine, he said.