Another Round of Price Increase Has Come in Mainland China!
Recently, ASC Fine Wines has announced that price adjustment is going to be implemented from January 1st 2017 due to the cost increase.
photo credit：ASC Fine Wines official announcement
The crucial reason for ASC’s price-up has disclosed in the announcement above, cost increase from wineries, China market operation expense increase and exchange rate fluctuation all attributed to this result.
WBO was fully convinced by the very reason, because we found it’s hard to push fine wine with comparatively higher price under the dead-alive circumstance, risking cutting distributor’s profit down.
Devaluation of RMB to the US dollar from October certainly made it cost more when importing from France, Spain, Italy, the US and Chile.
photo credit： Finance Sina
Apart from exchange rate problem, rise of logistical cost in the end of 2016 is another tough factor affecting price rise. Chinese officials implemented new rules in transportation in September 21st, which result in around 35% increase in the final logistical cost.
Zhao Guoren, general manager of Jilin SOHO wine company, pointed out that 30% of his increased logistical cost was added to each bottle, it still sound acceptable. But the exchange rate of RMB to the USD has decreased from 6.2 to 6.9 and may go down continuously in the following days.
“A fine wine merchant complaint to me that exchange rate problem has brought loss to him. Considering China market situation, he didn’t put the increased cost to distributors and has to work under big pressure himself.” Dong Huaicheng, general manager of Hebei Huanhu wine company, told WBO. The same pressure was also faced by Napa fine wine merchants.
In fact, WBO didn’t detect any price rise among other interviewed importers apart from ASC. Some insider has pointed out that price-down goes much easier than price-up, especially in the specific de-stocking period. Without any market basis for price rise, importers tried their best to control price, even if it is so difficult in the process.
However, ASC has announced the adjustment in price all of a sudden in November, which means it’s impossible for a comparatively profitable fine wine importer to sustain a sound development in China market.
photo credit: internet
Then what‘s the price trend for low-priced table wines?
“It’s definitely the same for the cost rise in importing, but somehow has little effect on lower-priced table wines.” A Shanghai vintner Lin Jian said, “the profit of cheap table wine is just about 1 or 2 RMB per bottle, whereas it’s not noticeable that when the 1 or 2 RMB was added to retail price. Do you think there’s big difference between 20 and 22 RMB? But in terms of fine wine or premier cru, it matters a lot when cost has increased. ”
But Lin also holds his belief that under China economic condition of price rise in real estates, price rise in wines is unavoidable due to logistical cost increase and the devaluation of RMB.
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