Michele Taccetti – CEO of China 2000 Srl, Tuscany Region Promoter with the China-Italy Chamber of Commerce – CICC
Mr. Michele Taccetti has been involved in doing business with China since 1995, following in the footsteps of his father who had been among the pioneers of international trade exchanges between China and Italy in the 1980s. At the beginning of his career, Michele worked for five years in the Florence-based office of China Resources, one of the most important state-owned trading enterprises in China. After that, he founded China 2000 Srl, a consulting and import-export company promoting Made in Italy products and services in the Chinese market, also with education and training activities. Although the firm’s main focus was originally the textile industry, in recent years, the agri-food sector has become more prominent. Michele has been accredited by the Italian Ministry of Economic Development and SACE as a Temporary Export Manager.
An evolving market for wine, shifting towards deeper synergies among producers
Like the Chinese market for many other F&B products and other sectors, the Chinese market for wine has evolved significantly in the last two to three decades. At the beginning, trading agencies and pure import-export activities had a more prominent role. Foreign businesses’ knowledge of the Chinese market was limited (and vice versa for Chinese businesses looking outwards), traveling between China and Europe was harder, and communication was, therefore, more difficult. Trading agencies helped European and Chinese businesses to overcome many of these issues.
Following the deepening of international trade and communication tools, knowledge, and contacts have intensified—though cultural differences still exist. Trading agencies remain important but have gradually lost their prominence to other forms of business cooperation. We are now witnessing deeper forms of synergies going beyond the traditional import-export model. For instance, we see direct cooperation among producers, distributors, and consumers, as well as with universities, institutions, and educational institutions. Chinese consumers and distributors are eager to enter into direct contact with foreign wine producers, not only for business reasons but also to gain access to first-hand knowledge and information. The opposite is also true: foreign wine producers actively present on the ground in China and engaging directly with Chinese consumers tend to have a deeper knowledge of the market, and, consequently, higher sales volumes. Promoting such synergies is our mission.
Unlike in the past, deeper collaboration among producers (e.g., through a joint venture) seems to be the most important approach and not necessarily viewed only as a risk. If the producer of a wine with a protected designation of origin, say Brunello di Montalcino, cooperates with a Chinese wine producer, it is not jeopardizing the unique connection it has with its territory, it is not trying to produce the same wine in China. Instead, it is exploring an alternative business segment by working with local Chinese producers to produce wine for the domestic market, thus further increasing sales.
French wine producers have pioneered this approach, also thanks to sustained investment to bring into China a solid commercial distribution network. By doing so, French wine producers have contributed to the shaping of a wine culture in China: the word ‘château’ nowadays appears on many Chinese domestically produced wines, and the most important production sites are built with a design effectively resembling French châteaux.
A stronger focus on quality rather than quantity, boosted by the pandemic
Chinese imports and consumption of wine have been decreasing steadily in recent years, even before the outbreak of the pandemic. There are several reasons behind this, such as excessive stocking of wine against decreasing demand. However, Mr. Taccetti thinks that this is a natural development and direction of the market, which has occurred in other sectors (e.g., tourism) and even in other countries. Even wine producers in Italy may abandon certain lower-quality wines to favour higher-quality production. In practice, in China, the decrease in quantity does not correspond to a decrease in quality; the opposite is true. In years past, a large portion of the Chinese wine market focused on low-quality, extremely cheap wines, often purchased in bulk or at extremely discounted prices, and in some cases even produced in China. Now, these types of wines are not as readily available overseas as before and they can be produced domestically in China. Therefore, there is no longer a need to import them from overseas. The focus of imports has been shifting towards higher quality and more expensive wines. In Mr. Taccetti’s opinion, the Chinese wine market is going through a “self-adjustment” phase, which accelerated with the COVID-19 pandemic.
The undisputed leader of the market is still red wine. This is the type of wine that was first introduced from abroad, by the French. Other types of wine, such as sparkling wine (including Prosecco), have seen interesting growth, but in Mr. Taccetti’s opinion, these are mostly consumed by Chinese consumers who have been exposed to international culture or by specific target groups. In terms of specific grape varieties, Cabernet and Merlot are at the forefront (also because these were brought into China early by the French), and in general, consumers appreciate all grape varieties that are soft and easy to drink, even alone without food pairing. In contrast, hard grape varieties face more challenges in China, as they usually require certain food pairings that are not traditionally found in Chinese culture. This is also why among Italian wines exported to China, those that perform better are from the Puglia and Piedmont regions, while those from Tuscany, especially from the inner regions and not those along the coast, are traditionally consumed with heavier foods such as steaks, which are less part of Chinese food habits.
Competition in China is mostly based on industrial structure, marketing, and commercial strategy
The most important competitors for wine producers from European countries are historically their European peers. However, there are wines from other countries that are popular in China, such as Chile, New Zealand, the United States (California), Australia, and South Africa. There are also wines from other countries, such as Georgia, which are not very popular in Europe but can be successful in China and other countries.
Mr. Taccetti thinks that there are two main factors that drive the competition. One is to do with political agreements and industrial structures. Wines from countries such as Chile and New Zealand (and until a few years ago, Australia as well) enjoy zero customs duties when imported into China, thanks to Free Trade Agreements signed at the government level; this inevitably keeps final prices lower. The industrial structure in a certain country of wine producers is also very important. For instance, wine producers in Chile are traditionally of a large scale, thus having more resources and a solid industrial structure dedicated to international marketing and sales. In contrast, wine producers in Italy, and generally in other European countries, are traditionally of small to medium scale, with strong ties to their territory and often still using traditional production techniques.
The second point to emphasise is that the success of an imported wine in China is often based on marketing, branding, and commercial strategy, more than on the product quality itself. Chinese consumers may know that a certain wine from a country is exceptional. However, if they cannot find it easily in China, they will not buy it. This is also Italy’s traditional problem in China: it has a strong policy on product quality, contributing to the outstanding quality of its products, but it focuses less on commercial strategy and product marketing.
The main export approach of Italian wine producers is too short-sighted and fragmented, focusing on the single transaction. Once the order has been placed and the wine is shipped, the transaction is finished; that’s it. For instance, the importer pays for 10 boxes and I ship 10 boxes. In my opinion, it would be more logical to include a small quantity of wine for free, say 2 boxes on top of the 10 boxes paid, to be used by the Chinese importer for tasting or other marketing activities.
Of course, part of the reason is to do with the smaller size and limited resources of Italian wine producers. This is not always the case: I have seen small producers investing heavily in their China activities. A commercial strategy and vision focusing on nurturing longer-term relationships and paying attention to the customer are more suitable for creating new opportunities in the peculiar Chinese market. This is also where wine consortia and institutions could help: increasing coordination and promotion efforts in support of small producers.
Finding truly committed wine producers is the most important challenge, not Chinese regulations for imports
Unlike other categories of F&B products, wine does not seem to be particularly problematic to import into China. Like any other F&B product, wine requires successful registration on the CIFER platform of the General Administration of Customs of China (GACC). However, wine is considered a low-risk category, and therefore the process is relatively straightforward. Of course, you have to be careful and ensure that all the information filled during the registration is correct, and that the GACC code is properly located on the product’s label; otherwise, there might be issues at customs when the product arrives in the Chinese port. In case of doubt, SMEs should get assistance from professionals. But overall, this aspect is not among those that cause the biggest headaches.
In Mr. Taccetti’s opinion, the most important challenge to overcome is finding a wine producer who is truly committed to investing in exporting to the Chinese market. Wine is a very peculiar product: it is often produced by very small companies; however, it has a strong orientation toward export, which usually requires bigger resources and structures. In Italy, it is common to have wine producers that export products, but it is very rare to find wine products that truly internationalise to foreign markets. It is revealing that in most cases, the wine to be exported is stored directly in the winery, rather than at the port through which it will be exported. It is even rarer to have wine producers storing the wine directly in the country where it is sold, for instance, in a warehouse in a bonded zone. Such traditional export models may work in several markets, but probably will not work in China. Therefore, it is fundamental to be extremely committed to internationalising to the Chinese market by investing and dedicating sufficient resources, and of course, by working with qualified professionals.
Advice to small wineries approaching the Chinese market: do not go alone
China is objectively a very difficult market for European wine producers. It is much more difficult than other traditional markets such as other EU Member States, the United Kingdom, or the United States. Therefore, strong commitment, a long-term perspective, and in-depth knowledge of China are fundamental. These require investing significant resources. To minimise risks, Mr. Taccetti’s advice for small wineries approaching the Chinese market is not to go alone. Rather, join hands with one or more other wineries that can offer a different—ideally complementary—variety of products, not necessarily from the same region or even the same European country. Wineries doing so can share costs and bring a more diverse offer to potential customers.
Emerging flagship events such as the Global Geographical Indications Product Expo, held annually in Luzhou, Sichuan province, offer an interesting platform for European producers of wine with protected designation of origin. This fair promotes the concept of geographical indication, quality, and European wine, which, in Mr. Taccetti’s opinion, is the fundamental objective of participating in trade fairs: promoting your culture, traditions, and brand, rather than increasing sales. Importantly, this fair also features a large presence of institutions, which significantly helps in the Chinese market as it increases your credibility. Furthermore, it targets a region in China with huge market potential, and where competition is not as fierce as in first-tier cities such as Shanghai, Beijing, and Shenzhen. This fair might be even more appropriate than other well-known, large-scale F&B fairs. However, trade fairs are just one component of the promotion strategy, and not the final goal.
Finally, it is important to be ready to work with experienced professionals to guide you in navigating the Chinese market. These professionals should be market experts, rather than wine experts; this is essential, at least initially, to penetrate the Chinese market. Technical knowledge of the product is something that should be promoted only at a later stage.
More on China’s Wine Market
Find more information and practical advice to export wine from Europe to China in our recently published report China’s Wine Market(s): Drivers, Technical Requirements, and Opportunities for EU Producers.