The report’s author Stanislav Sergeev (Stanley Sergio)
stanley@cadabruzzo.it
http://www.cadabruzzo.it/
RU +79015500009 Stanley Sergio
Table of Contents
1. Report of experience of our representative in China - NIL.
a. About wine Market
b. About relations
c. Features of the 2019 market
2. Some wisdom from foreign and russian Importers in China
3. Pitfalls in China. How to live on another Planet?
4. Best practice
● Report of experience of our representatives in China - NIL.
About wine Market:
1. China has overheated wine market. Too many offers from Chinese producers and
also from Europe, Australia, New Zealand and others.
2. “Personal negotiation experience of NIL and his father (they have a company in
China and may represent our interests). They brought high-quality Moldovan wine
with European certificates. The Chinese importers took the samples, played for a
long time - and after a few months later they said that the wine was crap and stopped
the dialogue. Wine is objectively very good. Chinese partners did not give a
feedback.
3. Differences of wine consumption in regions of China:
a. Most of all wine is consumed in the Center of China, in industrial zones and in
Shandong.
b. Sweet wine is preferred in the north of China, in prisons, in the army and
everywhere where it is cold, where people have hard work and restriction of
freedom.
c. Dry wine and all no-sweet beverages are preferred in the South, in resort
towns and everywhere where the climate is fine and people have no stress in
their life.
4. The difficulties in promoting wine are due to the fact that beer is much fashionable in
China, and is consumed in large quantities.
5. High prices also belongs to the traditional distillates like Maotai. Some bottles of this
spirit could reach price of 3000 Euros per bottle. They use it for bribery and you may
find the whole rooms in functionary’s apartments which are full of these bottles
About relations:
The general direction of Chinese people in relation to foreigners .
1. Who are the foreigners? Foreigners are everyone who does not belong to Asians. Фl
foreigners are for them as like as two peas with slight differences. Only darkskins are
distinguished from others.
2. About what kind of people does Chinese think of them as one of their own? These
are Asians - those who have a narrow cut of eyes and eat by chopsticks - the rest
others are strangers and almost enemies.
The report’s author Stanislav Sergeev (Stanley Sergio)
stanley@cadabruzzo.it
http://www.cadabruzzo.it/
RU +79015500009 Stanley Sergio
3. Chinese who are very different. The cultural differences even among the Chinese are
enormous.
a. Tibet
b. Local cultures like Guangzhou
c. Inside China there are some people who are not considered as Chinese. The
Chinese do not consider the Uyghurs and the Inner Mongols as the Chinese.
i.
Uighurs and Kazakhs are imprisoned in re-education camps in
Xinjiang because of their Islamic religion.
ii.
Inner Mongols consider an intermarriage with the Chinese people as a
disgrace.
4. The mood of local society is based on the mythology that supposedly all other nation
in the world are trying to belittle the Chinese people and have no respect to them. In
modern times China has rallied to counter this discrimination.
a. Therefore, at the household level, when some European or American
foreigner finds himself in an unpleasant situation, or troubles, especially with
crime or violation of law, then this causes general joy.
b. And if he also declares that he is a citizen of America or another country, then
this can anger everyone around.
c. You should not pump your rights through international institutions and
embassies, because the Chinese services perceive this as an attempt to
intimidate and push their great country into the corner. Therefore, servants of
the law will side with even the criminal Chinese to the detriment of foreigners.
d. Despite strict censorship and moral filters on the Internet, offensive
statements against foreigners are not removed. Examples:
i.
On the forums, the Chinese write among themselves about Russians
in a chat: “Are these hairy freaks not disgusting? I will tell you a story
in how we beat them. In Germany, where we studied with Russian
girls and helped them, and the Russians ignored us.
ii.
There are lot of stories of how 200 chinese people in Europe beat two
European students or foreigners. They declared: “This suggests that
we are now respectable and weighty abroad".
Features of the 2019 market.
1. Features of local agro raw materials. Cotton is scarce in China - that is why
jeans are bought even from Japan. Cotton products can be produced and
sold from Europe, Russia or other countries. But Chinese don’t take in bulk,
only piece by piece via the Internet or in small batches.
2. Labor Market. In China, labor has risen in price and sewing industries from
China are being transferred to Vietnam.
3. Retail Market. All retail goes online. Almost everything is sold over the
Internet with delivery service. Shops began to work as outposts and
warehouses. Taobao, Aliexpress wins the market. But for Wine online sales
are too small even for brands from 5-15 %. There are sales methods similar
to Periscope. Thus Amber is sold through live streaming.
Some wisdom from foreign and russian Importers in China
The report’s author Stanislav Sergeev (Stanley Sergio)
stanley@cadabruzzo.it
http://www.cadabruzzo.it/
RU +79015500009 Stanley Sergio
○
○
@Export Russia Food VALERIY MRYKHIN: Seems to me Chinese people
does not need cheap bad quality goods. China already have junk-food and
wine. It’s time to up the quality
PG� 彼得 �: Stanislav! Take my word for it, no one of the foreign expats in
China will give you a real picture. People come here spend years of life
answering these questions! But you want to get the answers while sitting in
Europe or Russia and selling Italian products! It's ridiculous! I sincerely wish
you, at least not to lose LOT of money when working with China. But You’ll
lose money anyway!
Pitfalls in China. How to live on another Planet?
Some generalisations based on my researches from 2018-09 till 2019-08.
5. Time in China has turned upside down. Chinese circumstances and conditions are
now in every way interfering with work of foreign companies.
6. The Chinese are learning fast. In the new business from scratch, they become strong
competitors during a year. In wine Industry, those of them who just went into
business a year ago have already flown around all the distilleries and wineries
around the world and know all the prices from the warehouse in Europe, the USA
and other countries.
7. Usual problem for foreign producers in China: There is a manufacturer in Europe who
has signed an exclusive contract with a Chinese importer or chain. For example, per
100 containers per year. The Chinese made a 100% prepayment per the container,
but do not bought the whole volume. For example, they have an exclusive contract
but bough only 10 containers during a year, therefore manufacturer closed the
market at a loss to itself. Since every importer and any chain requires exclusivity you
should not give it for a whole country and forever but for the season(1 year)
and region or city is possible.
8. Bad practice: French manufacturer of wine had an exclusive contract. Since Chinese
partners have not bought the whole volume of contract, the manufacturer decided
himself enters the market. At the same time, their Chinese partner still has some
stucked goods at their stores in China. The manufacturer went to the exhibition (
Price is at least - 10 000 euros for participation in the exhibition). Rumors have
reached the importer and he dumps the goods to everyone in a row at the price 23
yuan instead of 100 and reduces the price in the market. Common relations:
Contracts does not mean anything. Court may stay on the side of Chinese company.
The only thing they need is "fapiao" - - some kind of invoice or a receipt - the most
important paper.
9. Bad practice: Some Italian family farm last year 2018 tried to sell fine wine, from 14
euros. They spent money to exhibitions in China but got zero sales.
10. Bad practice: Chinese partners came to winery in Europe. Documents are drawn up
for the first batch, then under these documents a pluck wine is poured from cheap
Italian(or Ukrainian or Moldovan) wine base but posing as a quality one.
The report’s author Stanislav Sergeev (Stanley Sergio)
stanley@cadabruzzo.it
http://www.cadabruzzo.it/
RU +79015500009 Stanley Sergio
11. Bad practice: Trademark violence. Chinese partners received documents and OEM
confirmation, registered the same trade mark inside China then started to produce
wine from local wine base directly in China under this name. Legal proceedings were
useless. "Prior in tempore potior in jure". Copying is the main source of income for
the Chinese economy. Please make sure that your trademark is registered in
China properly!
a. Example: French wines of premium quality were purchased in the
volume of 1 container, then Chinese partners stopped. Then French
partners found on sale “their own” expensive wine in premium bottles
with superb quality labels at a price of 8.5 yuan with natural corks in
length of 5 cm, which even they couldn’t imagine. In fact, all the cost in
price consists with expensive glass, printing and cork. Inside bottles
was a “shit wine”, poured in China under the brand name and according
to the documents of the French manufacturer. It was irreparable harm to
french trade mark.
12. Bad practice: Exhibitions. Participation in exhibitions and events may worth up to
15,000 euros per one. It's very hard to understand what is the right choice. The task
of Chinese SWINDLERS is to attract participants to meetings and exhibitions and
raise money for participation in the event. Do you still hope to meet their your
customers? Most of exhibition visitors are hired actors to create a crowd. All features
are made naturally: there are old registered sites with traffic, business cards, people
come up to your exhibition stand and talk with you. In fact, swindlers pay 400 yuan
per day for acting, plus a shuttle service, hotel and meals. Most of visitors, their
business cards and even sites are fake. For example, they hired my friend in China
to portray a tycoon buyer of aluminum from Western Europe. This scheme much
cheaper than buying an advertising, promotion and attracting real visitors.
13. Bad practice: Dumping and lower price segment:
a. China market is full of cheapest wine below the 0.8 -1.25 Euro in CIF or even
CIP (Not ExWorks!) because only cheap wine can compete by low price with
what the Chinese themselves produce inside their country. But this strategy
means that producer “lays down” under the conditions of the Chinese market.
b. Conclusion is that you have no possibility to compete in the cheap wine
market. There are "bloody ocean" and local sharks are stronger than any
foreigner and may dictate their conditions.
14. Competitors and unfair advantages. In China, currently the best wines are from Chile
and Australia, which were the first to enter the market. They have cost of customs
clearance of 3-4% of direct import invoice. This is due to their international relations.
The same situation will be with Georgia. The decision was published last year that
Georgia is duty-free - but so far, duties have been levied in the same amount. Now
Georgia has customs clearance by invoice multiplied by 1.65, for cases when you
know best broker and best way to clear customs. If you work through intermediaries
then coefficient will be twice. Conclusion:
a. 1) It's impossible to compete with those who have a small fee or do not have
it at all for fine wine. We should compete at a different level.
The report’s author Stanislav Sergeev (Stanley Sergio)
stanley@cadabruzzo.it
http://www.cadabruzzo.it/
RU +79015500009 Stanley Sergio
b. 2) You can try to transport through duty-free countries by re-labeling and
using such “cunning” approaches as the Chinese themselves. But then you
lose your trademark and origine!
15. Bad practice: Stereotypes. Be careful. Forget about all your ideas and check
everything yourself personally. A social group is not a sign of honesty. For example,
on average, Chinese Christians are more honest, but it was the Christian pastor and
singer from the church choir who tricked my friend out of money. Four years ago he
sued but still not have a result.
Best practice
Downstream the text you may find the examples of SUCCESSFUL ways how other
wine producers works in China
1. Try to win the Luxury and Premium wine segment. Main territories - Hong Kong and
Macau. But this is the “bloody ocean” and a very expensive market for promotion.
Large budgets for advertising and events, attraction of professionals and sommeliers.
a. How to reduce costs of promotion? The mainly methods used by our rivals
are thematic meetings for tasting events with the rental of expensive hotels
and restaurants at the expense of the manufacturer.
b. A good option is to be a winemaker and invite rich China tourists to
excursions and tastings directly to Italy. This way could be good option, as it
also gives profit from the trip itself. Partnership with travel agencies is
possible, which may then become a new sales channel.
2. How to look for customers of premium wine?
a. You need to physically move to China and live there for a years.
b. To have a successful business, you need to make successful Chinese
friends. The more successful your friends, the more successful your business.
c. Personal presence is necessary: our rivals found large customers at a
badminton court and at a car wash.
d. Conclusion:
i.
You may hired people you can trust with good Chinese language
(I have such people in China)
ii.
You should provide them with enough amount of wine sets,
warehouse and resources. Then you should manage the
process of client research, customer discovery and check
market hypotheses. Then we will make sales.
3. Alcomarket is one of the largest Russian beverage-trading companies in China. They
started since 2013 in the staff of 3 people who provided China market with Russian
alcohol, and now they carry everything - they have a large staff and participate in all
exhibitions. One of their founders Michael Yelnikov specialises in retail chains and
has worked with all major chains of China.
4. Imperial Vin Imperial Vin is a Moldovan holding in Beijing and Shanghai. Such wines
as "Soul of a monk" are one of the best-selling everywhere in China. According to
The report’s author Stanislav Sergeev (Stanley Sergio)
stanley@cadabruzzo.it
http://www.cadabruzzo.it/
RU +79015500009 Stanley Sergio
figures "through the grapevine" they provide in Guangdong terminal more than 80
containers per year in 2018 and now have the contract of 120 containers for 2019.
5. The Creation of Azerbaijan Wine House in China
a. "Azerbaijan Wine House" in the Chinese city of Urumqi
b. Created with the support of the Ministry of Economy and the Azerbaijan
Export and Investment Promotion Fund (AZPROMO), the Azerbaijan Wine
House will help support exporters of Azerbaijani products, expand the export
volume and geography, promote the Made in Azerbaijan brand, and ensure
recognition of Azerbaijani wines and other products on the Chinese market.
alcoholic drinks. At the event, a memorandum of understanding was signed
between AZPROMO and the Chinese company YEMA. It should be noted
that to promote the Made in Azerbaijan brand and recognition of Azerbaijani
products, work will continue on opening wine houses in other countries. The
Azerbaijan Export and Investment Promotion Fund (AZPROMO) is a joint
public-private initiative created by the Azerbaijani Ministry of Economy in
2003 to promote economic development by attracting foreign investment and
stimulating exports in the non-oil sector.
6. euhub.ru - Russian hub in Hainan island - free customs zone.
a. Video from Russian Hub at Hainan island
b. These hub participants have no custom taxes inside this island
c. This place is a tourist center
To be continued...