China: The Next Big Thing In Wine and Continued Totalitarian Oppression

Vinted on September 1, 2010 binned in commentary

Asia, as most of you are already aware, is THE NEXT BIG THING in wine consumption.  China, of course, is the current big thing in Asia, which means that the Chinese market is THE NEXT BIG THING in wine consumption.  So big, it must be stated IN ALL CAPS!

This is not news – it’s all over the place in print and on-line.  Most of the talk of the Chinese market in the wine community is cloudy, amorphous, and short on understanding of the real scope of the potential dollars involved.  And the real scope is real, real BIG.

Here’s a recent quote from Wines-Info.com on Chinese wine consumption trends, to give you some perspective on what a bold, capitalized and italicized BIG represents:

The current situation in China is that domestic wine production doesn’t meet its market’s need, which has resulted in surge growth of imported wine. Statistics show that imported bottled wine to China has increased 2368% since 2002 to 2009. With bigger number of Chinese enterprises joining to wine importing business, more foreign vintners and wineries from France, Italy, Spain, Australia, U.S., Chile, Argentina, etc. also step into Chinese market, sharing the hope of wine bonanza in China.”

No, that’s not a typo. That’s an increase of over two thousand percent of wine coming in from other countries to fill the demand created by the emergence of a bona-fide middle class in the Chinese economy. In less than ten years. YOWZA.

My bruthah-from-anothah-muthah Jeff Lefevere over at the award-winning GoodGrape.com, recently highlighted some of the Chinese wine market numbers – and they’re similarly downright shocking:

It’s anybody’s guess how China will impact the domestic wine business, but we know that the existing auction market and Bordeaux futures are largely being driven by the Chinese. According to reports, US wine exports to Hong Kong totaled $49 million in 2009-2010.  And, it’s been said that the U.S. wants to be the number one exporter of wine to Hong Kong and mainland China.

That’s a fair chunk of change – and an impressive commitment by the U.S.  And one in which I think they should be deeply cautious, because our businesses are so busy looking at the dollar signs that they aren’t seeing the imprisonments, tortures, and executions that made those dollar signs so big…

In my view, China’s is not an open market economy within a Communist government, contrary to what you might be told in the news; it’s a totalitarian regime that is trying to integrate aspects of a free-market economy.

It’s a much larger difference than you might think.  If you believe that using the totalitarian tag is a bit harsh, then you ought to check out the more recent human rights reports on China from Amnesty International.

An estimated 500,000 people were subjected to punitive detention without charge or trial through “re-education through labour” and other forms of administrative detention. Progress on legislation to reform “re-education through labour” remained stalled in the National People’s Congress. Police extended the use of “re-education through labour” and another form of administrative detention, “enforced drug rehabilitation”, to “clean up” Beijing in the run-up to the Olympics. For an estimated 11-13 million people, the only practical channel for justice remained outside the courts in a system of petitioning to local and higher level authorities, where the vast majority of cases remained unresolved.

The picture on the Chinese human rights front remains far less rosy than its wine consumption outlook.  Now, my position is a bit biased and I’ve been known to say things like “a copy of the U.S. Constitution – italicized, bolded and in ALL CAPS – ought to be stuffed into every case of U.S. wine bound for China.”  So here are some more interesting – and telling – tidbits from the AI report to help prove I’m not totally insane for my views:

  • Human rights defenders and their relatives, including children, were increasingly subject to harassment, including surveillance, house arrest and beatings by both government officials and unidentified assailants. Lawyers were particularly targeted, and an increasing number had their licence renewal application rejected.
  • Millions of people were impeded from freely practising their religion. Thousands remained in detention or serving prison sentences, at high risk of torture, for practising their religion outside of state-sanctioned channels. Falun Gong practitioners, Uighur Muslims, Tibetan Buddhists and underground Christian groups were among those most harshly persecuted.
  • Cases of domestic violence increased 120 per cent in the first three months of the year — a rise attributed to a greater willingness to report such abuses to the police…

Still want to give China our wine business?  Let’s take a look at another example that hits closer to home for those of us who fancy ourselves writers – the case of Chinese journalist Hairat Niyaz, from a late July 2010 AI report:

Hairat Niyaz, a journalist from China’s ethnic Uighur community, was sentenced to 15 years in prison on 23 July 2010. He continues to be held incommunicado and has been denied access to legal counsel of his choice.   Hairat Niyaz  was arrested at his home on 1 October 2009. At the time, the police told his family that he was detained because he had “given too many interviews”…Hairat Niyaz was last known to be held in Tianshan detention center in Urumqi, although his current whereabouts are unconfirmed.

Arrested for giving too many interviews.  By that account, I’d already have been put away for life.

I know that the economic and human rights situation for both the U.S. and China is far more complex than it appears in AI reports, and that our respective economies are ridiculously interconnected (and that you’d have an easier time with alchemy than you would trying to find a piece of U.S. consumer electronics that wasn’t made in China).  And I fully realize that the first major focus of the wine push is likely to be Hong Kong, which is nowhere near as poor on their human rights record as mainland China (yet).  And that the Chinese human rights record is not the fault of the average Chinese consumer.

But

Ask yourself this: will the situation change if we don’t help to give the growing Chinese middle class enough reason to demand it to change?  Like, say, giving China less business, and less wine to fill those thirsty gullets?  If you think a wine boycott wouldn’t impact things, I’d argue that you might be thinking too narrowly given the potential product volumes we’re talking about.

At the very least, maybe some Bill of Rights back-labels are in order on a few of those bottles being sent to quench the Chinese wine thirst?

Cheers!

(images: sanooaung.wordpress.com, daily skew.com)

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    Comments

  • Unmitigatedgaul


    Dude, I agree with your analysis of conditioms in China, but the idea of punishing countries by not selling them stuff punishes no one but our own exporters. Everyone is jumping in and if we don't we will just miss out on our share of the pie. If Google couldn't win that fight what makes you think Constellation or Gallo will?
    Your line of reasoning would lead us to just playing in our own sandbox once again when we really need to be more aggressive establishing an export market for our wines business. As it is the French, Aussies, and Chileans are eating our shorts over there.
    The real danger is counterfeiting. Every brand that has gotten a foothold has been u dermined quickly with little policing. Exporting countries need to get together to make the Chinese gov take action.
    SpL

    • 1WineDude


      Hey SpL – it would be great to see a more united front among wine exporters wrt China. I do understand and appreciate your point, but I also strongly believe that pressure has to come in some way/shape/form, or else the ones that will continue to get punished the most will be Chinese citizens.

    • lazahn


      I definitely agree with Unmitigatedgaul; the biggest problem with capturing the wine market in China is definitely counterfeit and fraudulent wine — from all levels and qualities of wine. Australia in particular has been the victim of such actions. In addition to lost revenue, many vineyards also experience risking their product name and perceived quality among new customers. Until proper regulations can be implemented, this will be a difficult market to pursue.

    • Lindsey


      I definitely agree with Unmitigatedgaul; the biggest problem with capturing the wine market in China is definitely counterfeit and fraudulent wine — from all levels and qualities of wine. Australia in particular has been the victim of such actions. In addition to lost revenue, many vineyards also experience risking their product name and perceived quality among new customers. Until proper regulations can be implemented, this will be a difficult market to pursue.

  • Mel


    I also applaud your firm stance on this issue. If only the large wine companies would actually follow suit – but, it all comes down to money, and as you said, those numbers are huge; too huge for any corporation to ignore. I've chatted with many wine importers/exporters and pretty much all of the big ones have stated that their current marketing plans are centered around the Asian markets, particularly China and Hong Kong. Sue is right; we are all complicit and I just don't see that changing anytime soon. Sigh.

  • 1WineDude


    Sue – thanks for that!

    I work for a big company with lots of presence in China. The people are great. The government sucks – in fact what are the chances that those people will get to se this web page and read our rants? Probably zero.

    • Susan Guerra


      Joe- Agreed. The people are great. The government sucks.

  • Nick Perdiew


    Joe, I love your idea of "constitutional" themed labels. Heck, even Tea Party themed labels. Maybe it's all you can muster with big brother's boot on your throat, to subtly pour a glass of Bill of Rights wine.

    I agree with Sam in another respect–in many ways it's now easier to do business with China than it is to do business across state lines in wine. The US 3-tier system has its roots in the healthy soil of allowing states to make their own laws in matters of local importance. However, the Founders kinda sorta thought of this being a problem where Federal issues were involved, as is the case in inter-state trade. When they, in their wisdom, scrapped the Articles and drafted the Constitution (in Pennsylvania of all places, the irony!), section 1 (yes, Section 1) called for no state to regulate trade with other states. Do you think maybe they had a point? That MAYBE they knew a little something about why govt systems fail?

    Fast forward to the unfortunately vague language in the repeal of Prohibition, fast forward again to the internet-empowered global economy, and we're in a world where it's arguably easier to do business between California and Hong Kong than California and Maryland (not to mention Canada).

    Not that our FUBAR domestic alcohol regulations (hello Pennsylvania!) are on par morally as locking people up, but before we do a wholesale rant on the Chinese government, let's spend some time in the mirror, friends. We need to get our own house in order. Monopolistic statism (if not totalitarianism) is alive and well here in the USA too.

    A modest proposal. If it weren't for the constant drumbeat of laws proposed to kill or stifle innovation and industry growth in the direct-to-consumer wine market, the domestic wine business could easily be dramatically larger than it is. I say for every bottle not able to be sold domestically, we take a bottle and sell it to Hong Kong. Forget starving China. Let's starve Maryland, Pennsylvania, and all those control states along with them. :-)

    • 1WineDude


      Starving the monopoly wine distro states… Nick, that is AWESOME! :)

  • 1WineDude


    Thanks, Sam – maybe we can convert them with a few choice bottles… :)

  • Lenn Thompson


    The way the Chinese government treats the citizens is horrible — that's not news to anyone. But as other have mentioned, I think you're conclusion is a bit off…

    Why would the wine industry turn its back on China while other industries aren't? That's not economic reality Joe.

    Your current employer does big business in China — does that mean you should quit your job and only work for companies that do NOT do business in China? Unless you quit immediately, you are perilously close to "hypocrite" territory, no?

    Something to think about. Nice job writing an SEO-friendly post on a hot topic though ;)

    • 1WineDude


      Lenn, I'm either in hypocrite territory or not – there's not really a middle-ground when it comes to hypocrisy.

      The point is not to provide a glib, meaningless "solution" but to get people to think about what any industry is doing going headlong into China without looking at the bigger picture. That includes the wine industry, which is quicker than most to tout a good-for-everybody, going-green, peace-love-and-marsha-brady persona – so if it takes no stance on China's human rights record at all while going into business there, then that's definitely IN hypocrisy territory.

  • RichardA


    I too agree that China has some very significant human rights problems, yet I don't see the wine industry as capable of preventing such issues merely by refusing to ship wine there. There would never be a united front, so those who did choose to ship to China would benefit financially. Plus, it is hypocritical to call for just the wine industry to act, when so many other companies are doing business with China, including your own. You benefit financially from the human rights abuses of China so should do something about your own complicity first.
    But you are not alone in the complicity. The U.S. government is complicit as well, and has not done enough to put pressure on China. Plus, most consumers are complicit, including myself, by purchasing Chinese made items, which are everywhere in the marketplace. We all play our part and should not ask any single industry to make a stand, when we are not willing to step forward and make our own sacrifices.
    If we look beyond China, we can find abuses in our own backyard, such as wineries in California abusing illegal immigrant workers. It may not be as bad as China, but it is still a significant harm. Should we boycott those wineries as well?

    • 1WineDude


      Hey Richard – You are of course right about the average U.S. consumer being complicit – but the average U.S. consumer, and probably the average business employee, including wine industry folk, likely *don't know* they are complicit. So the first step is even generating some kind of awareness, I suppose (hence the post – in which I should have been clearer on that aspect). you know, exploring your thought about bringing this closer-to-home, I *do* think calling attention to wineries that abuse illegal immigrant workers could be effective. Very effective, actually. I'm kind of wondering why it doesn't get more press.

      • RichardA


        So now you have a topic for a future post, on wineries that abuse illegals. :)

        • 1WineDude


          Ah, I'm goin' back to talking about wines now…. :)

  • david


    was that 'American change the world' mentality – i am just so surprised that even wines could change the world! – no jokes man, human rights is not your business

    • 1WineDude


      I prefer to look at it as "citizens of the world changing the world".

      But your point is well-taken – I am stretching the boundaries (deliberately) of the wine conversation here… not too successfully, probably, but trying!

  • rjswineblog


    very interesting article, joe. i'm late to the show for any meaningful comment that someone else hasn't already said, so i'll leave it at – thanks for pulling it together.

  • Shwan


    The first photo is actually showing Napalean policemen not Chinses policemen attresting a Tibetan monks (just examine the skin color and uniform) . The Tibetan exiles have used this photo for propaganda for years. This has been exposed in 2008.

    • 1WineDude


      Hey Shwan – thanks for the correction!

  • RoyalAmericanWines


    Having lived in China exporting wine for the past year and a half I couldnt disagree with your article more. Once you live in China and become immersed in the culture you begin to see what it is really like. A great place.

    • 1WineDude


      RoyalAmericanWines – I have certainly taken criticism for this controversial post, and I can appreciate your viewpoint and thank you for sharing it here. I have no doubt that China is an amazing place. I personally also have little doubt that their human right record is poor. I do hold out hope that the greatness of the place, people and the culture can eventually change the those spects of the government there that do not reflect that greatness.

  • 1WineDude


    Thanks, Jeff – when China takes over, I plan to buy my way out of imprisonment (for too many interviews) using wine samples…

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