"We all thought the anticorruption would be a
six- or eight-month program. None of us imagined he'd double-down and
deepen the reforms and policies," recalled the head of China's largest
wine importer by value.
"We thought the
second half of 2013 would recover. We brought in inventory" but sales
of top wines—those at 5,000 yuan per bottle (US$804) or more—never did
come back and have remained low, added the former aerospace executive,
who joined the company just last year.
Mr.
Watkins says ASC, a private company started in 1996, has returned to
growth, though he didn't disclose figures. China's still drinking, he
insists, and the growth lies in lesser-priced wines and expanding
e-commerce.
Mr. Watkins spoke with The Wall Street Journal's Jason Chow and
Wei Gu.
Edited excerpts:
WSJ: How has the government crackdown on excessive spending and gifting affected ASC?
Mr. Watkins:
A normal wine market is a pyramid, with premium Bordeaux wines at top, a
medium tier of other quality wines, and your lower-priced wines at the
bottom. But China was an upside-down pyramid. As much as 50% of all
premium wines, some people say, were paid for by government-related
money. A lot of that volume went away when the new policies came.
We've
assumed this year that anything related to government spending isn't
coming back. Our plans this year are much closer to reality in the
market place.
The year 2012 was a
record year in sales, but it's when we started to see the drop-off in
the premium end of the market. In 2013, we were flat, year over year.
And this year, we're up 10%.
WSJ: If not the luxury wines, what are the Chinese buying instead?
Mr. Watkins:
People are not drinking the 5,000 yuan wines anymore. But those who are
drinking can spend 1,000-1,500 yuan and still get a great bottle of
wine. We're seeing a lot more activity at that end of the market.
We're selling more at the entry level. Burgundy is hot. We're seeing strong interest in Italy and a growing interest in Spain.
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