[Exclusive interview] Gonzalo Badilla from Terranoble

Chile continues to be one of the top three importers of red wine to China, only recently losing out to Australia in second place, with France remaining in the top spot.

Talk to any Chilean producer and they’ll tell you the same thing: China is the number one target market for all Chilean wine producers. As Gonzalo Badilla, Asia & America Export Manager for long-established and respected Chilean wine brand, Terranoble, explains – this is down to a number of reasons:

“20% of our red wine production goes to China. In volume, we ship more to the USA, but in value the proportion is more like 20% to the US, 35% to China. And this is for premium-entry wines: for us China is the market for premium wines, not entry level. Entry level will be higher in volume, but premium-level wines are growing faster by value.Gonzalo-Badilla_Terranoble

“It’s interesting what attracts the Chinese taste and palate to Chilean wine. They like the strength of course, 15% ABV is totally acceptable to them, but with our wines the acidity does not increase with the strength, making it an easy-drinking wine to the Chinese palate. Any hint of acidity is a big no-no for the Chinese – they’re very sensitive to it and they’ll tell you straightaway “it’s sour” – meaning sharp on the tongue.

“What they’re looking for is good volume, round and soft tones like a Merlot or Carmenere – and a little spicey, they like a spicey wine. In fact the hotter (meaning spicier) the food, the spicier they like their red wine to be! They like to counter spicey with spicier, not as you’d expect with a nice, cooling white wine, like a fruity Riesling perhaps.

Q: What is the single biggest issue facing wine producers exporting to China?

“But – and this is a big issue for the wine trade: they like that they don’t pay any import tax on our [Chilean] wines but what’s called OEM wine (also called ‘one euro’ wines*) is becoming a big issue in the market. The Chinese like to have their own labels, so they won’t necessarily regard the brand labelling of our bottles as sacrosanct – as we would. They’d prefer to have their own labels on the bottles, and this is an issue that’s beginning to affect the market – by which I mean having a detrimental effect through making would-be investors and Chilean exporters maybe think twice about getting involved in the Chinese market… despite its attractions in terms of potential – both in value and volume because of the growing popularity of red wine drinking.”

China is a market that many think of as a beacon of opportunity. Mr Badilla wouldn’t disagree, but he would advise to tread carefully.

*From July to September 2017, China imported about 56.29 million litres of bulk wine worth about US$47.17 million, representing a 92.92% increase in volume and a 100.74% increase in value compared with the same period the previous year, according to figures released by China Customs, obtained by Chinese media WBO.

The impressive growth reflects a gradual market shift in consumer preference and purchasing channels, wrote WBO, citing China’s e-tailers and rising bottled wine prices as main causes.

The article states that as prices for bottled wines continued to rise, companies turned to bulk wines, where they can bottle the wines for higher profits, a category of wine commonly known as OEM wine. The wines, also sometimes called ‘one euro’ wines, are legally imported in bulk then bottled in China with companies’ own labels. But once a Bordeaux label or a French label is slapped on the bottles, it can often fetch higher prices on supermarkets shelves than other competing brands and (non-bulk) wines from different countries of origin.