California labels fill glasses in China

By Anne Gonzales
Bee correspondent
Published: Sunday, Aug. 7, 2011 - 12:00 am | Page 1D
Last Modified: Sunday, Aug. 7, 2011 - 12:02 pm

About a dozen years ago, Chinese wine drinkers were mixing Chateau Lafite Bordeaux with Coca-Cola, Joan Kautz recalls.

"They didn't like the taste of wine yet, and they wanted some sweetness," said Kautz, vice president of international operations for her family's vineyards in Lodi, CA. which has been shipping to China for almost 15 years.

Today, thanks to an emerging, increasingly thirsty middle class, more Chinese are drinking California wines without cutting it with cola, including labels like Lange Twins, Ironstone and Michael David, all from the Lodi region.

"Now the Chinese market isn't just about expensive French wines," Kautz said. "Their taste preferences have evolved. It's a population that's becoming more affluent, they're Internet-savvy, they're reading up and wanting to embrace Western culture."

California vintners are raising a glass to this news, and concerted efforts in Lodi, Napa, Sonoma and Paso Robles are dovetailing with statewide campaigns to crack the lucrative Chinese market. Scattered wineries throughout Sacramento and the foothills are also pursuing sales to China.

Along with the opportunity, however, come pitfalls in the form of shady business people looking for a quick buck, Kautz cautioned.

Still, the potential is alluring. In 2011, sales of imported wine in China are projected to surpass $1 billion, up from just $60 million in 2004, said Frank Gayaldo, a Lodi wine grape grower and international wine broker.

France, with its long tradition of winemaking, dominates the export trade to China, and Italy and Spain are also significant players, Gayaldo said.

The United States has a minor share – about 5 percent of that market – with California representing 90 percent of the U.S. wines being exported.

Exports of U.S. wine to China are rising, however. They reached $45 million in 2010, a 27 percent increase from 2009, according to the Wine Institute.

The reason: A bulging middle class in China. China has 1.3 billion people, approaching 20 percent of the world's population, and much of that growth is in an increasingly wealthy and Westernized middle class, Gayaldo said.

"As they reach that certain economic plateau and want to spend their discretionary dollars, part of that is going to wine culture," Gayaldo said.

Linsey Gallagher, international marketing director for the Wine Institute, said the target for wine exports in China is about 15 million drinkers of legal age who can afford to buy imported wine, up from 12 million last year.

About 90 percent of the wine consumed in China is domestically produced, Gallagher said, but the varieties grown and crushed into wine in China are diversifying, broadening drinkers' tastes and creating a path for them to upgrade to imported wine.

The Wine Institute, a trade group of California wineries, has offices in Shanghai and smaller provinces of China. The group hosts retail and on-premise promotions centering on restaurants and hotels in China. Trade missions have been taking California vintners into China for about a decade, expanding in size and scope, Gallagher said.

The Wine Institute recently launched its global marketing campaign, "Discover California Wines," which touts the state's lifestyle, she said. The group hosts Chinese media and chefs to visit California wineries.

Chinese wine imports are 95 percent red varietals, making Lodi and Paso Robles prime export areas, because of those area's plantings of zinfandel, merlot and cabernet sauvignon, Gallagher said.

The Lodi Winegrape Commission and the city's chamber of commerce support local vintners' forays into China by hosting trade missions and teaming with federal agriculture and commerce departments to research and promote the market.

Randy Lange, co-owner of Lange Twins Winery & Vineyards in the Lodi area, entered the Chinese market two years ago. He and twin brother Brad are fourth-generation grape growers, and their children have joined the business. Lange Twins doesn't export to other countries and has limited case distribution in the United States, mainly selling bulk wine.

Exports to China are key to the future, he said.

"We feel it's critical to be in the Asian market, with China as the dominant player," said Lange, whose family produces wine under the Lange Twins label.

Lange has visited China four times in the last 18 months, slowly building personal relationships with distributors. Currently, his winery sells 100 cases to a wine bar in Hong Kong, and another 400 cases to a distributor in Yan Tai province.

"It's a small project, but like Japan, personal relationships are important," he said. "We want to build our brand."

Kautz said her family business, which grows grapes in Lodi and Sacramento County and operates Ironstone Winery in Murphys, started exporting in 1993 and now markets 30 percent of its wines to more than 50 countries worldwide. The winery expects to ship 2,000 cases of wine to China this year, less than 10 percent of its total exports.

Kautz said they were burned by unsavory business people and even withdrew from China several years ago to rethink shipping there.

"It's a challenging market," she said. "So many people are trying to make a quick buck, you have to weed out the true distributors and companies that are interested in building a brand. There's good potential, but (with) so many cowboys out there, you have to be careful."

http://www.sacbee.com/2011/08/07/382003 ... china.html