Ten quick takes about China's tariff on U.S. wines, plus Penfolds' dodgy competitors, our annual April Fool's joke, and more. Please forward this newsletter. Anyone can sign up here.
Grape Wall of China
Greetings from Beijing,

So, a fellow nation put a 15% tariff on your wine. That's not a nice way to start the week, is it? Then again, it depends on who is tariffing (word?) and who is being tariffed (another word?). In the case of China and the U.S., I've included ten quick takes below.
Also, check out my piece on the dodgy wines faced by Penfolds in China. My analysis of what Xi Jinping and Kim Jong-Un were drinking--one had red, one had white--at last week's Beijing confab. And this year's April Fool's post, featuring waijiu, a wine and baijiu blend. 

As usual, please pass this newsletter to others who might like it. You can also follow Grape Wall via Facebook and Twitter.

Cheers, Jim Boyce

China tariff, US wines,
10 Quick Takes

Ten initial reactions to news that China slapped a 15-percent tax on U.S. wines this week.

1. The amount of U.S. wine involved is small. The U.S. only exports about 12.5% of production and, in 2017, only 3.7% of those exports went to China. That means about 0.4% of total production or 1 out of every 250 bottles.

2. As perspective, the U.S. exported six times more wine, by value and volume, to Canada.

3. But the tariff attracts attention because wine is tangible. Mention a steel tariff and I imagine huge coils of shiny metal illuminated by a smelter in some rough part of America. But wine? I can hold a bottle. And now it's going to cost rmb115 instead of rmb100? Nooooo!

4. Also, the amount of U.S. wine in China has shrunk. U.S.-based Wine Institute puts exports to China at 16.1 million liters in 2011 versus 14.2 million liters in 2017. China Customs stats show the U.S. share of imported bottled wine slid from 5% in 2011 to 2% in 2017. This when the overall market more than doubled and the U.S. faced no extra tariff. More details here.

5. Then again, the issue in China is less about current consumers and more about potential ones, the dream of moving toward a market where a billion people one day vociferously scream for Screaming Eagle.

6. That doesn't mean the tariff won't hurt right now. One China-based distributor told me this afternoon she has a container of U.S. wines arriving tomorrow and has fingers crossed it gets through sans extra tariff.

7. But it will be less painful than expected, in part because U.S. wine has some price insulation. You don't see it in the bargain bin, or listed online as the cheapest option. Like New Zealand wines, U.S. labels cost a bit more.

8. I think U.S. wine fans understand this. France is the top source of wine but a huge amount is tied to status—gifting and entertaining. I think a higher proportion of people buy U.S. wine for taste. Maybe they visited, worked or studied in the U.S., or are wine aficionados, but they seek these labels. You often hear this from people doing U.S. wine promotion in China. There is lots of focus on "premiumization", which tends to be a longer game.

9. You could argue there is even more price insulation with the very best U.S. wines. This brings us to the Hong Kong duty free factor. Wine Institute reported exports of 9.4 million liters to Hong Kong in 2017 (versus 14.2 million for China) worth USD118.8 million (versus USD78.7 million for China). Many of those pricey wines make their way to continental China. Let's see if people who spend rmb1,000 for a bottle balk at, say, rmb1,150.

10. A bigger worry is the tariff getting tied to nationalism, that consumers, retailers and distributors turn their backs on U.S. wines as a political point. We saw this happen to some South Korean products in recent years and it had a major impact, although, as noted, the amount of U.S. wine in China is relatively small..

None of this is to say the tariff is inconsequential. The U.S. faces wine competitors who have free trade deals with China, including Chile, New Zealand and Australia. Paying an extra 15% alongside the current 14% tariff is an extra burden.

But China is a small market where U.S. wines carry a premium compared to those of many other nations and attract buyers who are less price sensitive than those simply seeking the cheapest bottle. Perhaps it's best to chill out—with a bottle of Schramsberg bubbly, Twomey Merlot or Hermann J Weimer Riesling—and figure out how get even more wine fans trying those tasty U.S. wines.

Penfolds Schmenfolds
Australian brand Penfolds has long faced dodgy competition in China, from clear-cut fakes to labels leveraging the brand in misleading ways. It’s no surprise more examples were spotted at the China Food & Drink Fair in Chengdu last month or that English-language reports arose last week of 50,000 bottles of fake Penfolds being seized in central China. More here.

Booze Clues
Photos from a banquet featuring leaders Xi Jinping of China and Kim Jong-Un of North Korea yesterday had people wondering what exactly was in their glasses, as Xi held a red liquid and Kim a “white” one. More here.

Perfect Pairing?
Our 2018 April Fool's post featured PuKao Distillery in northern Hebei province, which launched ‘waijiu’ at the China Food & Drinks Fair in Chengdu.

“We took the ‘w’ from wine and ‘aijiu’ from ‘baijiu’,” PuKao president Lianghe Gao told a packed room of distributors. “Also, ‘wai’ means ‘outside’, so it’s perfect for our outreach to international markets.”

Full post here.

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Note: The content of this newsletter is general information. I make no guarantee as to its completeness or accuracy. Use it at your own risk. In other words, I try hard to be accurate, but mistakes can happen, so reader beware! Also, I'm not a fan of spam and aim to send this newsletter only to people who signed up at Grape Wall blog or agreed by email or in person to receive it. If you did not request it, but are receiving it, something has gone awry. You can unsubscribe at the bottom or let me know at grapewallofchina (at) Cheers, Jim Boyce
02 April 2018
Grape Wall covers China's wine scene. Winery visits, tastings, news, reviews, and interviews .Since 2007. Administered by Jim Boyce. Get the newsletter here.
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Back issues. Check out the most recent ones.

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Imports vs local wines, Bruno Paumard's "new frontier", Mike Gadd on Ningxia, China's "other" wine

Issue 38
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Issue 37
Lu Yang first master somm from China, Grace Vineyard turns 20, farewells to Patricio de la Fuente Saez and Mike Peters

Issue 36
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Issue 35
Have imports passed local brands? Plus Interwine Beijing and Spanish, Chilean & California wine promotion

Issue 34
Producers doubling as importers, Torres turns 20, the unimaginable wine region

Issue 33
Ningxia Botmobile, Million Bottle Wine Club, wacky labels, Shanghai retail with Alberto Fernandez, Campbell Thompson
Events. When we put down our wine and organize stuff.
Grape Wall Challenge
Chinese consumers become judges in this annual blind tasting. See a few examples herehere and here.
China Wine Tour
The tour covered four bars, a Chinese red and white wine at each. Details here.
North by Northwest
Wine experts, chefs and journalists try Chinese wine. See here for the results.

Ningxia vs Bordeaux
Five wines from each region were blind-tasted by ten experts. The results were a bit controversial. Details here
I started World Baijiu Day in 2015 to introduce people to this nation's top drink, a grain-based spirit with over 10 billion bottles sold per year. The event is back with dozens of events planned in London, New York, Los Angeles, Paris, Sydney and other cities. Details here.
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