Optimistic wine importers making spirited attempt to go local

Worry not about escalating trade disputes and such mundane things. It's party time at this wine bar, which is "disguised" as a cave dwelling in the arid hills of Yan'an, Shaanxi province.

The windows of the bar are pasted over by paper cuttings in the likeness of Alberto Fernandez, managing partner of wine import company Torres China.

He's having a party to launch his new wine at a time when some of his peers are sipping something considerably stronger to calm their nerves, which have been affected by the Chinese government's anti-dumping investigation into wine imports from the European Union.

As one of the main wine importers in China, Fernandez is like the other 2,000 or so importers and traders in the country's wine industry, the world's fifth-largest market. All stand to be affected by possible tax and price rises resulting from an investigation launched by the Ministry of Commerce on June 5.

The ministry has said that the investigation was launched in response to a joint petition by several Chinese winemakers in 2012, complaining about unfair government subsidies received by their European counterparts.

The investigation was announced right after Brussels' decision to impose tariffs on Chinese solar panels.

If Fernandez was worried, he was not showing it. "Business must go on," he said.

"Of course, we have learned about the news, and hopefully with all the documents we present to prove we are not dumping, we cannot be affected. But we also carry wines from many other places," he said.

Fernandez said his company has been representing Chinese wine for 10 years. He added that domestic wine will be a major focus for the company, and the market's growth driver, in the next decade.

Two-thirds of the wine sold by the Spain-based company every year in China is from Europe. In 2012, Chinese wine accounted for 10 percent of the company's sales.

The Chinese wine now being offered is called "People's Series", with a label featuring Chinese workers wearing Mao-style green uniforms.

This kind of marketing is thought to appeal to young urban consumers who are into retro culture. They are the target buyers of the wine, priced at about 100 yuan ($16.27) a bottle, and potential mainstream drinkers.

"Wine is very chauvinist, or patriotic. In the end, people will drink wine from their own country," Fernandez said. "It's not happening in China yet because there are not quality, affordable Chinese wines in the market."

But Wang Jiaqi, business development director of the Shanghai Wine Exchange, is less optimistic.

"Wine aficionados usually don't change for another wine. The taste matters the most, as it cannot be duplicated," she said.

She added that they have not seen any fluctuations in the market yet and expect little difference even if a tax is imposed.

Maximilian Spitzy, general manager of Ezee Beverages in Shanghai, the sole importer of several wines from Germany and Austria, said that his company is pursuing increased marketing differentiation of its products.

"An increased tax will not be a big issue for luxury wine consumers who are willing to pay 2,500 yuan ($400) for a bottle of wine," he said.

But Spitzy stressed that "higher taxes are never a good thing". For one thing, consumers will not be able to enjoy wines of very good quality at reasonable prices.

"Ultimately, higher taxes will exert the most impact on small European wine brands, which cannot afford higher costs. It is a great loss to Chinese consumers. But certainly for big brands, it won't matter as much," he added.

According to the London-based research institute International Wine and Spirit Research, China imported 266 million liters of bottled wines last year, up 10 percent year-on-year. More than two-thirds came from the European Union and French wines alone accounted for 48 percent of the imported wine last year.

Euro Shop Trade SRL was the first company in Shanghai to import wine from Romania in 1996. It was also the first company in Shanghai to import wine from Moldova.

"Romania is a member state of the EU. Once a higher tax is imposed on wines imported from the EU, our price will of course be affected.

"For Moldova, which is not a member state, there would be no difference. But after all, international companies like us are the source of such wines. We can lever the prices and thus raise the prices in the market," said Tian Yu, general manager of Euro Shop.

"There are a growing number of Chinese consumers who can understand wines and have a demand for those of good quality. The market for French wines in China is overdeveloped. Therefore, some consumers would opt for lesser-known wines, where they can make sure of the quality.

"That is also a reason that wines from the New World have been expanding their reputation rapidly in China over the past few years," she said.