High prices and profits will be hard to hold onto in the wine industry in 2013 with dramatic price drops underway. “A large number of wine distributors are expected to go bankrupt in 2013,” predicted Mr. Xu, an imported wine distributor.
A bottle of Carruades de Lafite was sold at 700 yuan in only 2004, but the price increased all the way to a peak of 8,000 yuan in early 2011. However, this price has halved with the end of 2012 to about 4,000 yuan.
“It’s only a price bubble created by speculators with asymmetric information,” said Mr. Xu, “as the demand for high-end wine is limited and is still on the decline in 2012.”
China is the fifth largest wine consuming country in the world, in which imported wine accounted for one fourth of total Chinese consumption in 2011 and is expected to take two fifths in 2012. Meanwhile, the purchasing prices of imported wines are decreasing. For example, the same quality imported wine that cost 200 yuan in 2004, at present is going for only 100 yuan.
The tariff imposed on imported wine is 50 percent, added with transportation and storage costs, the final added cost on retail terminals reaches 70 to 80 percent, said Chen Bailong, vice president of China Economic Trading Promotion Agency and of the China Chamber of Commerce of Foodstuffs and Native Produce.
For example, for Shanghai Grand Echo International Trade Co., Ltd, a leading wine importer in China operated by Chen, the net profit margin is only 20 percent with a high gross margin of 50 percent.