Cui Fuyi, a retired liquor salesman, said his favorite time of a day is after dinner when his family chats together over a glass of wine.

"I'm 65 years old and healthy, thanks to a glass of wine every day for the past decade," said Cui. He believes wine is the healthiest of all liquor products.

"Wine provides the body with energy, with substances that aid digestion and with small amounts of minerals and vitamins," said Cui. "Moderate consumption of red wine on a regular basis can also stimulate the appetite and boost the immune system, protect against heart disease and block cancer formation since red grapes contain some anti-oxidant compounds."

Wine culture has enjoyed a long history in China. Yet, since wine was not what ordinary people could afford in old times, wine culture declined over the centuries. Wine has gained popularity in recent years, as more people begin to value health when choosing liquor products. China has become a new strategic center of the global wine market. According to a survey by the Shanghai Brewing Association, of more than 200 wine brands in the Shanghai market last year, 160-odd were foreign brands coming from more than 10 countries including Chile, Argentina, Spain and France.

However, major domestic brands such as Great Wall, Zhangyu and Dynasty have controlled more than 60 percent of the domestic market for decades. While global brands plan their expansion in China, Chinese domestic brands are seeking larger stakes in the overseas market.

Rejuvenated wine culture

Compared with wine culture, the tea culture has had a much more profound influence on the Chinese people and their daily life. Many wine industry insiders think China's wine culture is not as illustrious as it is in France, Italy, Greece and Portugal. To them, this is the biggest obstacle blocking the promotion of imported wine products.

"Wine used to be expensive in China and only the aristocrats and the rich could afford to drink it," said Christopher Coughlan, chief wine taster at Zhangyu. "In contrast, alcohol is cheap, and as a result of habitual practice for centuries, a majority of Chinese people today drink alcohol."

Western wine culture has been developed over the past centuries. It is quite different from China's emerging one, said Coughlan. He believes few Chinese understand the essence of wine culture. "If people don't have a taste for wine and never consume wine voluntarily, it won't help wine producers make better wine or launch larger promotion campaigns," said Coughlan.

Chateau Changyu-Castel was a hot resort for many tourists during the first Yantai International Wine Festival from September 22 to October 7 this year. Chateau Changyu-Castel is located in Yantai, Shandong Province, at the latitude approximately equal to that of the Bordeaux region of France. In the chateau, a corridor covered with grapevines leads through the vineyard to a building in the style of European castle. There are five major grape varieties in the vineyard used for winemaking. In the harvest season, grapes are picked, crushed, fermented and pressed into juice here. Wine casks are stored in a huge cellar underneath the chateau with a floor space of 2,700 square meters.

Wine chateaus are traditional tourist resorts in European and North and South American countries. With 100-odd years' history of winemaking, Zhangyu launched China's first tourist route with a wine culture theme, said Zhou Hongjiang, General Manager of Yantai Zhangyu Pioneer Wine Co. Ltd. The Chateau Changyu-Castel displays all aspects of the wine culture, and the history and techniques of the winemaking industry.

The wine chateau trip launched by Zhangyu has helped to promote the marketing of the whole wine industry in China, said Wang Yancai, head of the China Alcoholic Drinks Industry Association (CADIA). The tourism platform has enriched wine marketing methods and will contribute to the growth of market share. Meanwhile, the wine chateau tour is conducive to the popularity of wine culture in China.

Filling the bottle

The total area of vineyards worldwide has increased at an annual rate of 10 to 12 hectares in recent years. Countries like Chile, Argentina and South Africa with less mature domestic wine markets and smaller wine consumption export a majority of their wine products. This has helped to widen the gap between wine production and actual consumption globally. The wine production surplus is estimated at 40-70 million hectoliters every year.

George Dutruc Rosset, Director General of the Office International de la Vigne et du Vin (OIV), said the world's total grape production has increased by great margins either measured by the total vinery area or by grape output due to the rapid development of viniculture technologies. If global wine consumption can't grow at the same pace, the imbalance in wine supply and demand will become more severe.

Large wine makers worldwide are excited with the huge potential for massive wine consumption in China that they discovered at the first Yantai International Wine Festival. "Wine imports have grown remarkably since last year," said Wang. "China imported 1.15 million hectoliters of wine last year, up 115.8 percent year on year, and wine imports this year had already reached 1.02 million hectoliters by the end of July, close to the entire volume imported last year."

Zhang Liang, a marketing expert, said that wine constitutes 1 percent of the total annual liquor consumption in China. It is the last on the list of the four major liquors. Annual per-capita wine consumption in China is only 0.35 liter, some 7.8 percent of the world's average of 4.5 liters, and is lower than the average consumption of the Japanese, who have similar dietetic habits, at 2.2 liters. However, China's wine market promises prosperity due to the rapid growth of national economy and the enhanced purchasing power of Chinese customers.

"This indicates the advent of a new era for consumption and there is still large room for wine market growth," claimed Zhang.

Duty reductions have spurred the sales of imported wine. The Chinese Government reduced the duty on imported bottle wine from 43 percent to 14 percent and on bulk wine from 43 percent to 20 percent as of January 1, 2005. The adjustment has reduced by a large margin the import costs for wine.

Cui told Beijing Review that imported wine was priced at more than 100 yuan a bottle several years ago due to the high duty, and today, Chinese customers can easily find in the market imported bottled wine priced at 28 yuan, 30 yuan or 40 yuan.

New breakthroughs

The problem of production surplus also awaits solutions in China's wine industry. China's wine production reached 2.98 million hectoliters in 2002 and 4.95 million hectoliters in 2006, sustaining an annual increase of 20 percent in the last three years, according to the CADIA. As per-capita annual wine consumption in China is about 0.35 liter, the total sales in the market will be around 4.6 million hectoliters, which include the sales of 1.15 million hectoliters of imported wine.

"An increase in the volume of imported wine will push domestic wine producers into the corner," said Zhang. As an alternative, Chinese wine brands began to tackle overseas markets while keeping an eye on their shares of the domestic market. Sales of China's wine in the global market had been small for quite a long time before 2006.

Statistics from the CADIA show last year China exported 3,700 kiloliters of wine, a year-on-year increase of 50 percent, and exported 4,100 kiloliters by the end of July this year, exceeding the entire export volume last year. At present, China is selling high- and middle-grade wine to customers in a dozen European countries including Germany, Italy, France, Austria and the Netherlands.

Wang pointed out that China's wine producers face competition in both domestic and overseas markets. A majority of domestic brands lack competitiveness and capabilities in seeking overseas expansion, and limit their developments in their own localities, despite the fact that Great Wall, Zhangyu and Dynasty still hold a controlling stake of the domestic market.

The disadvantage on the part of imported wine is their low brand influence-it will take a long period of time for Chinese customers to become familiar with and put trust into these brands and products. Unfamiliar with the liquor sales environment in China, a large number of foreign wine retailers have adopted direct marketing methods and have expanded in the market very slowly, said Zhang.

Both Chinese and foreign wine producers have resorted to joint ventures or cooperation strategies for a smoother entry into overseas markets they aren't accustomed to. Zhangyu, for example, played the vanguard and exported 250,000 bottles of wine to 14 European countries last year through the distribution channels of Germany's TXB Medienagentur. It entered for the first time mainstream distribution channels in Europe, including supermarkets, home mail order networks, five-star hotels and the first class of Lufthansa German Airlines. On the other hand, Zhangyu, with a mature distribution network, acts as an agent for sales of imported wine, learning from overseas wine makers' operation models while seeking to expand its own brand influence.

At the same time, foreign wine producers are adjusting their marketing strategies, looking for Chinese agents that can support them and sell their products. The world's second largest wine manufacturer, Groupe Castel, was among the first international brands to enter the Chinese wine market. The group initially established a wholly owned factory in Langfang, Hebei Province, later cooperated with Zhangyu to set up a joint venture to produce chateau wine, and chose different agents to sell imported original Castel wine.

"The Chinese market is so big that many products of Groupe Castel may find a place here," said President of the International Department of Groupe Castel Adolphe Tourscher, explaining the group's ambitious market expansion in China.