@wesgro western cape wine & china

Julius Okiror, Economist

11 April 2014 An inspiring place to do business

Presentation Overview

• China: A Snapshot

• South Africa Wine Trade with China

• The Western Cape Wine Trade with China

• Questions and Answers

An inspiring place to do business

China: A snapshot


Source: IMF, 2014; BMI, 2014, Deloitte, 2014

2010 2011 2012 2013 2014f 2015f 2016f 2017f 2018f

Value (CNYbn) 14 141 15 456 16 647 17 912 19 211 20 562 22 004 23 538 25 176

Growth 10.4% 9.3% 7.7% 7.6% 7.3% 7.0% 7.0% 7.0% 7.0%

0%

2%

4%

6%

8%

10%

12%

0

5 000

10 000

15 000

20 000

25 000

30 000

Gro

wth

Valu

e (

CN

Ybn)

CHINA GDP & GROWTH, 2010-2018

ECONOMIC INFORMATION

Population 1,355,692,576

GDP (2013 est.) USD13.37trn

GDP growth (2013

est.)7.6%

GDP per capita (2013

est.)USD9,800

Inflation (2013 est.) 2.6%

Interest rate 5.73%

Unemployment rate

(2013 est)6.4%

VAT 17%

Company Income Tax 25%

Doing Business

in...(2014 ranking)96

China: A snapshot


Source: World Bank, 2014

• China is the world's largest producer and consumer ofagricultural products.

• Large state-owned enterprises (SOEs) were thebackbone of China's economy producing over 50% of itsgoods and services

• A trustworthy and a personal relationship are important

• Respect face: Never make the other person wrong. Never say “no” directly. Honour, Respect

• Make sure your facts are 100% accurate in every detail, or you will lose credibility.

CHINA WORLD BANK DOING BUSINESS RANKING, 2014

TOPIC RANKINGSDB 2014

RANK/189DB 2013 RANK

Starting a Business 158 153

Dealing with Construction

Permits 185 185

Getting Electricity 119 116

Registering Property 48 47

Getting Credit 73 82

Protecting Investors 98 95

Paying Taxes 120 122

Trading Across Borders 74 74

Enforcing Contracts 19 19

Resolving Insolvency 78 80

OVERLL RANKING 96 99

PORT-TO-PORT TRANSIT TIMES FROM CAPE TOWN

TERMINAL DISTANCE TRANSIT TIME

Zhanjiang 12642.2 km (6826.3 M) 35 days 8 hours

Shanghai 14083.1 km (7604.3 M) 37 days 15 hours

China’s Alcoholic & Beverage Sales, 2011-2018


Wine growth expected to increase by an average growth of 14% from 2011 to 2018

2011 2012 2013 2014f 2015f 2016f 2017f 2018f

Beer (USDm) 142 001 161 624 187 062 211 222 233 319 258 787 288 936 322 427

Spirits (USDm) 128 484 141 783 159 849 175 516 188 677 204 111 222 374 242 297

Wine (USDm) 59 077 65 615 73 626 82 501 90 422 99 036 108 766 119 256

Fruit/Vegetable juice (USDm) 10 985 12 408 14 452 16 392 18 185 20 284 22 772 25 554

Bottled water (USDm) 6 516 7 632 8 838 9 589 10 578 11 953 13 208 14 573

Tea (USDm) 2 095 2 429 2 718 3 038 3 332 3 662 4 039 4 452

Coffee (USDm) 1 492 1 702 2 003 2 293 2 540 2 860 3 205 3 629

0

50 000

100 000

150 000

200 000

250 000

300 000

350 000V

alu

e (

US

Dm

)

CHINA SALES OF SELECTED ALCOHOLIC & BEVERAGE DRINKS, 2011-2018

Source: BMI, 2014

Highlights: China Wine Market

An inspiring place to do businessSource: New Zealand Trade & Enterprise, 2014; theguardian, 2014; GAIN, 2014

• China’s wine market is dominated by a few large local producers that make bulk and mid-priced wine.

• China is biggest market for red wine consumption, with 1.86bn bottles sold in 2013 & second biggest

consumer of high-priced wine & 5th largest global wine consumer. About 88% of wine consumed in

China is red wine.

• China wine market will increase to 2.7bn litres in 2015, up from 1.1bn litres in 2010. About 20% of wine

consumption is imported, increasing to 30%-45% (USD11bn) by 2015.

• China has 25 million consumers for imported wine, mainly urban upper middle class to highest income

class & 303 million consumers for domestic wine mainly middle income

• Opportunity for SA Wine exporters exist in China’s growing thirst for premium wines/high quality: online

sales or restaurants

• Key wine players by market volume are Yantai Changyu, (21%) percent, COFCO Ltd (17%), Dynasty

Fine Wines (10%), Yantai Weilong Grape Wine Co Ltd (7%)

• Main distribution channels for volume sales are through 'on-premises' consumption particularly at top

end hotels, restaurants, bars & nightclubs (35%), supermarkets and hypermarkets (20%) & specialist

retailers (14%).

• Imported wine is subject to Import Tariff (14%-20%), Consumption tax (10%) and VAT (17%)

China Wine Trade, 2009-2018

An inspiring place to do businessSource: BMI, 2014

• China wine imports expected to

increase by an average growth of 7%

annually to 2018.

• Growth in foreign wines in China

driven by successful marketing of

imported brands, safety concerns of

domestic brands, rising average

incomes in China, rising consumer

affluence, perceptions of wine being

fashionable with status and growing

health awareness.

2009 2010 2011 2012 2013 2014f 2015f 2016f 2017f 2018f

Exports (litres mn) 1.8 2.5 2.8 2.9 3.2 3.5 3.9 4.2 4.7 5.1

Imports (litres mn) 173.0 206.6 225.1 226.3 231.4 244.7 262.1 280.4 300.2 321.9

0

50

100

150

200

250

300

350

Valu

e (

Litre

s m

n)

CHINA WINE TRADE, 2009-2018

South Africa’s Exports of Wine, March 2013-Feb 2014


3.4

3.9

4.1

4.2

4.9

5.0

5.3

7.1

9.0

9.9

11.6

20.3

20.9

22.0

28.1

31.3

33.8

34.6

93.5

109.2

0 20 40 60 80 100 120

UAE

NIGERIA

ANGOLA

KENYA

FINLAND

JAPAN

CHINA

SPAIN

BELGIUM

SWITZERLAND

ITALY

DENMARK

CANADA

NETHERLANDS

U.S.A.

SWEDEN

RUSSIA

FRANCE

GERMANY

UK

SOUTH AFRICA EXPORT MARKETS OF PACKAGED & BULK WINE MARCH 2013-FEB 2014 (LITRES MN)

• China is SA largest

Asian wine export

market. 10th largest by

value & 14th largest in

volume in 2013/14.

• China represents

2.7% in value & 1.2%

in litres of SA global

wine exports.

• SA is China’s 7th

largest import market

for wine in 2013, with

8.2% growth in 2013.

Top 3 markets are

France, Australia &

Chile.

Source: SAWIS, 2014

South Africa’s Exports of Wine to China, March 2013-Feb 2014


RED WHITE SPARKLINGBLANC DE

NOIR +ROSE

FORTIFIED

Packaged 3 256 419 485 621 69 284 32 472 1 673

Bulk 1 376 182 119 749 0 0

0

500 000

1 000 000

1 500 000

2 000 000

2 500 000

3 000 000

3 500 000

Litre

s

SOUTH AFRICA'S EXPORTS OF WINE TO CHINA, MARCH 2013-FEB 2014

Source: SAWIS, 2014

• Packaged wine largest

category accounting

for 72% & Bulk wine

28%

• Bulk Wine fastest

growing category at

140% (Red 161% &

white 25%) in 2013-

2014, while packaged

wine decreased by

31%



Shiraz & Cabernet

Sauvignon account for

28% of packaged red

wine exports & 33% of

bulk wine exports to

China.

0.04%

0.8%

1.8%

1.8%

2%

3%

6%

8%

12%

14%

14%

37%

8%

3%

30%

14%

0 500 000 1 000 000 1 500 000

Fortified Wine

Blanc de Noir + Rosé (Natural)

Sparkling wine

Chenin blanc (white)

Chardonnay (white)

Sauvignon blanc (white)

Other White

Merlot (Red)

Pinotage (Red)

Cabernet Sauvignon (Red)

Shiraz (Red)

Other Red

SOUTH AFRICA’S EXPORTS OF WINE TO CHINA , MARCH 2013-FEB 2014 (litres)

Bulk Packaged

Source: SAWIS, 2014



Cabernet Sauvignon

12%

Shiraz 21%

Pinotage 10%Merlot

6%

Other Red50%

Blanc de Noir + Rosé

(Natural)1%

SOUTH AFRICA'S EXPORTS OF RED WINE TO CHINA, MARCH 2013-FEB 2014

Chardonnay12%

Sauvignon blanc 17%

Chenin blanc 31%

Other White40%

SOUTH AFRICA’S EXPORTS OF WHITE WINE TO CHINA, MARCH 2013-FEB

2014

Source: SAWIS, 2014

Western Cape Trade With China, 2003-2012


Source: Quantec, 2014

2003 2004 2005 2006 2007 2008 2009 2010 2011 2012

Exports (ZARm) 894 507 867 2 517 3 877 985 1 827 1 204 1 347 1 421

Imports (ZARm) 3 232 4 454 6 119 9 266 10 350 12 620 12 312 13 630 17 018 20 107

Trade balance -2 339 -3 948 -5 252 -6 749 -6 473 -11 635 -10 485 -12 426 -15 671 -18 687

-25 000

-20 000

-15 000

-10 000

-5 000

0

5 000

10 000

15 000

20 000

25 000

Val

ue

(ZA

Rm

)

WESTERN CAPE TRADE WITH CHINA, 2003-2012

WC Exports to China grew by 32% on average from 2003-2012

RANK TOP 10 EXPORTS

VALUE

2012

(ZARbn)

%

GROWTH

2011-

2012

1Copper, copper alloy, waste or

scrap383.6 -9.62%

2Grape wines(including fortified),

alcoholic grape must231.2 60.37%

3Flour of meat, fish or offal for

animal feed208.4 57.51%

4 Crustaceans 171.1 -33.43%

5 Citrus fruit, fresh or dried 74.9 9.75%

6Machinery for feedstuffs, poultry,

beekeeping39.8 7.79%

7 Aluminium waste or scrap 37.4 24.80%

8Organic composite solvents, paint,

varnish remover 25.2 -70.50%

9Fruit, nut, edible plant parts

prepared/preserved25.1 61.43%

10 Chromium ores and concentrates 20.9 142.30%

TOTAL EXPORTS 1 420.9 5.50%

Western Cape trade with China, 2012


RANK TOP 10 IMPORTS

VALUE

2012

(ZARbn)

%

GROWTH

2011-

2012

1Footwear with outer sole, upper

rubber or plastic1 171.4 15.57%

2Footwear with uppers of textile

materials989.0 59.65%

3Electric equipment with heating

element, domestic680.1 4.75%

4Trunks, suit-cases, camera

cases, handbags, 517.6 17.11%

5Other toys, scale models,

puzzles502.3 9.18%

6Women’s, girls suits, jacket,

dress, skirt, woven385.2 12.77%

7Men’s or boys suits, jackets,

trousers not knit383.2 7.36%

8Jerseys, pullovers, cardigans,

knit or crochet360.4 21.16%

9 New pneumatic tyres, of rubber 355.2 8.08%

10Babies garments, clothing

accessories, knit or crochet333.1 15.92%

TOTAL IMPORTS 20 107.5 18.16%

Source: Quantec, 2013

Western Cape Trade of Wine with China, 2005-2012


• Western Cape exports of wine to China increased

by 60% in 2012

• WC accounts for 98% of SA wine exports to China

in 2012

• China ranked 8th largest market for WC wine

exports in 2012, from 38th in 2005

2005 2006 2007 2008 2009 2010 2011 2012

Exports (ZARm) 3.9 8.9 18.3 48.5 52.8 76.8 144.2 231.2

Imports (ZARm) 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.2

0

50

100

150

200

250

Valu

e (

ZA

Rm

)

WESTERN CAPE TRADE OF GRAPE WINE WITH CHINA, 2003-2012 WESTERN CAPE EXPORTS OF WINE TO CHINA, 2012

Product

Value

2012

(ZAR)

Share

2012

Growth

2012

H220421: Grape wines nes,

fortified wine or must, pack <

2l

224 572 657 97.13% 62.50%

H220429: Grape wines,

alcoholic grape must nes5 025 433 2.17% 1.42%

H220410: Grape wines,

sparkling1 600 469 0.69% 91.24%

Total Grape Wines 231 198 559 100% 60.37%

China Wine Labeling Requirements


Mandatory Items

• Name/Brand: A brand name or trademark may be placed in a prominent position on the label

• Product type: A product type defining the true nature of the alcohol is to be placed adjacent to the brand

name. Defined by sugar content.

• Ingredients: Wines made up of a single raw material are exempt from this requirement. Fortified wines

must list additives.

• Alcohol content (%): should be labeled as “Alcohol Strength.” Must be listed as a %age of volume.

• Must content (%): Grape wines are exempt from this requirement. It is solely for beer and non-grape wine.

• Packer/distributor/importer (Name and address): Chinese agent, importer or distributor registered in

China. Any company that bears independent statutory responsibilities should have their address listed as

well, but it need not be translated to Chinese.

• Bottling date (yyyy/mm/dd): Must have a bottling/packaging date. Listed in the order of year-month-day-

e.g 2014 04 09

• Quality guarantee or storage period (yyyy/mm/dd): Wines with alcohol content of 10 % or greater are

exempt from this requirement. “Use by date…”

• Net volume (ml): Net volume must be indicated on the same panel as name and product type

• Country of origin: The country of origin is required and must be verified.

Optional Items

• Vintage: No less than 80 % of content should be grapes harvested during the indicated vintage year.

• Varietal: The claimed grape varietal should make up 75 % of the wine content.

• Region of Production: Grapes from the claimed region should comprise no less than 80 % of the total

volume.

All information labeled in English must also be equally represented in Chinese and in the same size font. That size

being the minimum 1.8 mm. All labels must be permanent in the sense that they cannot be separated from the bottle.

Transportation Requirements: Bottled wine must be placed upside-down or horizontally.

Note: this requirements are a guide & you should contact China Authorities to verify all requirements

AD VALOREM TARIFF APPLIED BY CHINA ON SOUTH AFRICAN EXPORTS, 2012

HS CODE PRODUCT DESCRIPTION

TOTAL AD VALOREM

EQUIVALENT TARIFF

(ESTIMATED)

220410 Sparkling wine of fresh grapes 14.00%

220421Wine of fresh grapes, incl. fortified wines, and grape must whose fermentation has

been arrested by the addition of alcohol, in containers of <= 2 l (excl. sparkling wine)14.00%

220429Wine of fresh grapes, incl. fortified wines, and grape must whose fermentation has

been arrested by the addition of alcohol, in containers of > 2 l (excl. sparkling wine)20.00%

220430Grape must, of an actual alcoholic strength of > 0,5% vol (excl. grape must whose

fermentation has been arrested by the addition of alcohol)30.00%

220510 Vermouth & oth grape wines flav w plants o arom subst in ctnr 65.00%

220590 Vermouth & oth grape wines flav with plants or arom subst in ctnr > 2 l 65.00%

90210 Green tea in immediate packings of <= 3 kg 15.00%

90220 Green tea in immediate packings of > 3 kg 15.00%

90230 Black tea (fermented)&partly fermentd tea in packages not exceeding 3 kg 15.00%

90240 Black tea (fermented) & partly fermented tea in packages exceeding 3 kg 15.00%

Tariffs Applied by China on South Africa’s Exports

An inspiring place to do businessSource: Market Access Map, 2014

SOUTH AFRICA’S EXPORT MARKETS OF ROOIBOS, 2011

RANK MARKETSVALUE,

2011 (KGs)

% GROWTH

2011

% SHARE

2011

1 Germany 2 127 852 -15.3% 36.2%

2United

Kingdom996 929 15.9% 17.0%

3 Netherlands 975 101 -10.1% 16.6%

4 Japan 427 701 18.5% 7.3%

5 United States 394 314 8.8% 6.7%

6 Poland 144 000 -39.7% 2.5%

7 Australia 103 660 5.5% 1.8%

8 Russia 97 388 -19.9% 1.7%

9 Sri Lanka 69 972 77.7% 1.2%

10 Spain 67 539 86.6% 1.1%

Total Exports 5 875 601 100%

South Africa’s exports of Rooibos, 2011


SOUTH AFRICA EXPORTS OF ROOIBOS TO

CHINA, 2011

Conventional

RooibosOrganic Rooibos Green Rooibos

4 677 15 037 67

• China is ranked 17th valued 19 781kg, accounting for 0.43%

Source: Perishable Products Export Control Board, 2012

Thank you | Dankie | Enkosi

@wesgro western cape wine & china

Business

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