Saturday, July 2, 2011

Lodi wines gain ground in Chinese market - Lodi News-Sentinel:

Lodi wines gain ground in Chinese market - Lodi News-Sentinel:

Lodi wines gain ground in Chinese market
By Jordan Guinn

News-Sentinel Staff Writer | Posted: Friday, June 10, 2011 12:00 am

Thanks to a blossoming middle class with expendable income and a preference for California wines, Lodi appellation vintners are starting to cash in on China. The interest is so strong that the owner of one Linden winery is even considering selling his vineyard to Chinese investors.

"I'm looking to retire, and I'd say that the offers I'm getting — 5-to-1 — are from Chinese investors," said Dave Pechan, owner of Miramont Estate Vineyards. "The Chinese government is providing financing to help investors buy these places. They want Chinese investments in food processing and food-providing companies around the world."

Part of the reason the investors are interested in the property, Pechan said, is because of the business Miramont is doing overseas. Pechan met with Consulate General of the People's Republic of China Gao Zhansheng in 2008, but didn't start seeing sales materialize until 2010. Last year was a stellar year for sales, Pechan said, with roughly one-third of his exports going to China.

"The last two years have been unbelievable," Pechan said. "The people I'm shipping to in China say things are changing so fast over there that they can't even keep up."
Even though tariffs for shipping into China's mainland can be nearly 50 percent, exporting there can still offer more profit potential than sending wine across the United States, Pechan said. Many states still have taxes and regulations for the shipment of alcohol dating back to the days of Prohibition, and it makes the process cost-prohibitive, he said.
"I can ship to 50 separate countries easier than I can ship to 50 states," he said.

Although the tariffs in China are high, the costs can be absorbed by the importer, and the Chinese vendors he's worked with prefer to receive full containers to keep shipping costs down, Pechan said.
"We may be selling the wine at a lower price point, but we're making the same amount of money," he said.

Paperwork is a part of any business, and the exporting of alcohol is no different, said Craig Watts, owner of Watts Winery in Lockeford.

"The main thing is going through the hoops to get the proper permits to the Chinese government," he said. "Then you have to get contracts agreed on."
Watts has been shipping wine to China for about three years, and will attend Saturday's event to explore options for the future, he said.
One of the most significant challenges, Watts said, besides trying to coordinate the efforts of his five different buyers, is getting the pulse of a market you can't personally visit on a daily basis.
"There are different demands for the different markets in China," Watts said. "Some people want Cabernet; others want less expensive wines. I'm fortunate to have the capacity to do both."
Watts has sent tens of thousands of bottles to China in recent years and shipped a 1,000-case container to China in November. Another 1,000-case container packed with bottles of Zinfandel, Cabernet and Chardonnay should be ready for export in two months, he said. A standard wine case contains 12 bottles.

Gayaldo prefers that Lodi wineries look to ship a finished product overseas instead of raw materials like grape juice, he said, because it helps ensure a better payout for the grower.
"When coffee beans are shipped, the grower receives very little of the profit," he said. "The company that turns the beans into a branded product earn the lion's share of the profit."
Small wineries would be better suited trying to export a finished product overseas to maximize earning potential, Watts said, but larger wineries should consider all the options.
"If you are doing more volume and you are trying to get out as much as you can with a consistent cash flow, sometimes you can do better exporting juice," he said.
Contact reporter Jordan Guinn at