California winemakers tap into growing Chinese market

The global downturn hit Doug Hill's family-run Napa Valley winery hard. But the third-generation California farmer's hopes for recovery are strong -- fueled by heady growth in China. It's a long way from his sun-dappled vineyards north of San Francisco to pollution-shrouded Beijing and Shanghai, but that's where his Hill Family Estate bottles have been heading since last year. "We're cautiously optimistic about it," said Hill, who visited China last September and was struck first by the smog -- "My first impression was, where's the sky?" -- but then by the phenomenal signs of growth and wealth. "There's an upwardly mobile class of people we believe could afford to drink our wines. It wouldn't take a very large percent of the 1.3-1.6 billion people there to create a good market," he added, showing AFP round his hillside vines. China was the fifth largest export destination for US wine last year, raking in some $62 million -- a fraction compared for example to the $400 million (322 million euros) worth of French Bordeaux sold annually to the Asian giant. But that US export figure was nearly 30 percent up on 2010, and that trend is expected to continue, according to the Wine Institute, which advocates on behalf of over 1,000 wineries in the western US state. China was granted Permanent Normal Trade Relations with the US a decade ago, and "the wine was just a trickle back then," said Wine Institute communications manager Gladys Horiuchi. "Now it's the fifth largest market and... obviously, it will continue to grow just because of the huge potential there, the growing middle class," she added. That potential was highlighted last year when retired National Basketball Association (NBA) star Yao Ming launched his own Napa Valley winery, Yao Family Wines. The company named after Shanghai-born Yao, who at 7 feet 6 inches (2.28 meters) was the tallest player in the NBA, launched its inaugural Yao Ming 2009 Napa Valley Cabernet Sauvignon in mainland China, before selling in the US this year. While there is clearly a Californian wine push into China, some say Napa Valley will never rival the French or even Australian success in the Chinese market, unless they get serious about marketing. "The opportunity is tremendous, but Napa Valley is not working seriously enough to capture consumers in China," said Mario Sculatti, a wine consultant and trader based in Saint Helena, in the heart of the Napa Valley. He added: "The Bordelais and the Burgundians and basically all the regions in France, especially Bordeaux, are pouring government dollars into marketing wines in Asia. "Napa Valley is asleep at the wheel. Countries like Australia and France are dominating the trade over there." Back in the vineyards, Doug Hill -- whose son Ryan is taking on the fourth generation of Hill Family Estate business -- recounted how he first stumbled on the idea that China might help them recover from the 2008 financial crash. "It was challenging to sell wine, especially during the initial stages of the recession. Mostly restaurants were having a really challenging time in America," he said. "Certain distributors, their market just came to a standstill unless the price points were really low. And that was lower than what was... commercially viable for us in a lot of areas." Then last year, Hill heard about a Chinese-born businessman based in Oregon, just up the US West Coast, offering to buy wines from California, Oregon and Washington state, and sell directly in China. Best of all, the middle-man could deal with Chinese customs bureaucracy in a way that small Californian winemakers would find impossible. A key issue in counterfeit-plagued China was proving the wine is authentic. "If you look at the cultural values in China, there are some real challenges doing business there," he said. The middle-man has been determined to build "a very credible business, that says, 'Look these are real farm families or small winemaking families, that are doing this, and this is the real thing, its not counterfeit'," said Hill. His September visit convinced him, even if the sun-tanned Californian admitted to being shocked by the pollution in Beijing, and elsewhere. "We took a high-speed train 1,500 kilometers down to Shanghai, and I never saw blue sky once. Five hours, at 300 kilometers per hour. And it was 'Oh my God, this entire country has a level of pollution I've almost never seen before," he said. But the evidence of economic growth was eye-popping. "The other thing that I saw, during the five hours I spent on the train, I saw more construction cranes than the previous 59 years of my life," he said. Hill's son Ryan, who visited China himself in March, said exports to the country were already 10 percent of the company's business. "We're looking for tremendous growth... I think we can only go up, because we're just now exposing a product in a market that is totally unsaturated. It's like being an actor, going to LA and only having five people there." But consultant Sculatti still thinks Napa is missing a huge opportunity, and needs to make a coordinated marketing and branding push to compete with the history of French winemakers who have been in China for generations. "All the efforts that are being made are by a very few wineries who are spending their own capital to develop the market in Asia. There's no cohesive effort that I see as working," he said. "The quality is definitely there, but what Napa Valley hasn't done yet is really show the prestige, the quality and the story to the Asians. That's the biggest mis-step that's happening." He stressed: "Napa Valley has an opportunity because of its rarity, as far as acres (of vineyards). If it just figured out how to brand itself... (it) could really catch the attention of the Chinese better."