Capitalising on China’s thirst for wine

China’s burgeoning wine market has been well documented of late, particularly after two successful vintages in 2009 and 2010 saw the prices of First Growth vintages in Bordeaux rocket to all-time highs. Wine companies have increasingly been looking to move into the country to capitalise on their newfound love of European viniculture, but early attempts have highlighted the complexities of such markets and the difficulties that can be faced when expanding in these regions.

Anya Robson, Business Manager of Murphy Wine Company, said: "A couple of years ago everyone started to get very excited about the opportunities of exporting wine to China. Those opportunities may not have been as big in reality, but what it did do is push more companies to look at developing the export side of their business and to look more at international markets."

The lessons of the wine industry are consistent across the board when it comes to expanding in countries such as China, and many companies have had to face the harsh reality of a  country that is extremely complex and difficult to navigate.

China’s thirst for wine

China’s thirst for wine has been insatiable of late, with wealthy consumers choosing to invest in some of the most prestigious vintages around. Indeed, demand from the country’s wine has been so great that some of the most prestigious winemakers in Bordeaux have decided to shift part of their operations into the country, with Chateau Lafite building a new vineyard in the port town of Penglai in China.

Sales of Bordeaux picked up across 2012 after experiencing a period of weak demand over the course of the previous year. Demand for French reds started when wealthy Chinese investors developed an appetite for luxury goods in Europe, buying foreign cars and fashionable clothes, along with luxury travel and high-end wines.

Chinese investors have even been investing in the chateaux themselves, with 30 French vineyards being snapped up by investors from the East and a further 20 in the pipeline. As this passion grows, more companies are looking to move overseas and capitalise on the country’s new thirst for wine.

Difficulties when expanding in China

A recent Bloomberg article noted that small business owners looking to move into China should be warned that successfully setting up shop in the country might be one of the biggest challenges your company will ever face. Despite the allure of the consumer appetite and growing wealth, companies must do their homework before making the move.

• Business environment: many firms struggle to get to grips with the business environment in China, with cultural norms far removed from other places in the world creating more unpredictability. This can be particularly problematic when it comes to wine, and businesses should be attuned to the local environment in which they wish to invest.
• Compliance: China is regarded as a bureaucratic nightmare for overseas companies, and many large corporations have tried and failed to navigate the difficult jurisdictions. Registering a company is typically a 25 to 30 step process, and can be immensely time consuming and labour intensive.

Expanding in China

We have eight offices across China and work with many businesses looking to rapidly open up new outlets and improve their brand awareness. Our focus is on managing the local accounting, corporate secretarial, HR, payroll, licensing and admin obligations, including:

• formation of local entities and various business license applications
• registration with administrative and tax authorities
• supplier agreements
• assessment, recruitment and training of local employees
• payroll, bonus expenses, unions, insurance, social benefits
• stock control and counts
• preparation of local accounts and conversion to GAAP or IFRS
• submission of local financial statements and tax compliance