Reverse Delocalization for Wine Industry

Take an industrialized country. Then consider China in the framework of globalization. First thing you can imagine is to delocalize production in the Asian country and sell the products at home. Tens of thousands of multinational companies did that. The wine industry is an exception.
China is sourcing resources abroad to produce high-quality wines to be sold at home to its well-offs. As unusual it might appear, it is taking place at a considerable speed. COFCO Wine & Spirits – a unit of COFCO, the state-owned giant for production and distribution of foodstuff – has recently inked the acquisition of Chilean winery Biscottes, one of the largest of the South-American country. The winery has a production capacity of 14,000 tons per year. The move is considered the first of a series by COFOCO.
In addition, Dynasty stated its intention to buy huge acreage in France and Australia. The two countries, with a longstanding reputation for wine making, have been selected after a scrutiny that involved twenty countries. Soil and expertise abroad will be used to cater the needs of sophisticated consumers at home.
Wine consciousness moved from a fashion to an industry. Consumption is on the rise, despite low quantity per capita, i.e. 0.5 litres per year (vs. a world average of 7.5 litres). More important is the speed of change: consumption almost doubled in 10 years.
Chinese still prefer rice wine, but the popularity of grape wine is gaining momentum. It is ordered during official banquets, celebrations, local festivities. The market grows annually in the range of 35% and looks finally mature. Distribution channels are working properly, trade fairs are established, wine club for connoisseurs are booming.
Tree actors dominate the scene, Dynasty, Great Wall, and Changyu, the first two listed in Hong Kong and the third at Shanghai Stock Exchanges. Still, their offer is insufficient for an increasing demand in quality. Import is the solution. Bordeaux wine’s export to China doubled every year from 2005. Now China, in the first half of the current year, overtook UK and Germany to become its first destination, both in value and volume.
Wine is also an investment. Auctions in Hong Kong are popular among the traditional buyers of luxury items, like jewellery and antiques. Finally, the Industrial and Commercial Bank of China sold barrels of wine to its main customers. The produce guarantees an annualized yield of 5%.
In conclusion, market and dynamism grow together. Chinese entrepreneurs proved that you can make profit even if you are not familiar with a specific product or it does not belong to your tradition.

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