There are some 100,000 different wine labels on sale in the US – a huge range. China has ten times as many. Yes, you read that correctly. According to a Chinese official speaking in Shanghai in May, Chinese consumers have a million wines to choose from.
I instinctively distrust big numbers, especially when they’re provided by men in suits, so I asked a Chinese distributor whether this wasn’t a figure plucked from the air. “No,” he replied, “that sounds right to me. My company isn’t big, and we have over 1,000 exclusive labels, every one of which is registered with the customs authorities.”
For anyone imagining that China has been transformed into a haven for the world’s smaller winemakers, I have depressing news. The explanation lies in three initials you often hear in China: OEM. ‘Original Equipment Manufacturer’, or OEM, was a term many people first encountered in the 1980s and 1990s with the software bundles that came loaded on their computers. Motor manufacturers commonly use the term to describe the parts of their cars made for them by other companies. Type ‘OEM clothing’ into Google and you are offered over 1.2m links, mostly to companies eager to provide garments for you to sell under your brand.
For wine, the figure is 735,000, which is still larger than I might have supposed, given the blank looks I’ve received when mentioning OEM to most wine professionals outside China. When I say ‘private label’, however, they know what I am talking about. Retailers’ exclusive brands represent the fastest-growing segment of the wine industry, thanks in part to the success of labels like Costco’s Kirkland in the US, Tesco Finest, and the entire ranges of the leading discounters Aldi and Lidl.
Often, the link with the retailer is less apparent. Few buyers of Ogio Pinot Grigio and Etienne Dumont Champagne, two historically bestselling brands in the UK, knew that they were respectively exclusive to the Tesco and Sainsbury’s supermarket chains. In Australia, the picture has been complicated by the decision of big retailers Woolworths and Cole’s to acquire genuine popular brands as well as wineries in which they also produce wide ranges of wines under their own private labels. In the UK, Sainsbury’s recently raised both eyebrows and hackles by introducing a Chilean red called Camino del Angel whose label bears a striking resemblance to Casillero del Diablo, and a New Zealand white called Villetta that is targeted at Villa Maria.
There is nothing new in this. When I lived in Burgundy in the late 1970s, almost every négociant had a book full of alternative brands under which they could sell you their Beaune or Nuits-Saint-Georges. In Champagne, labels of buyers’ own brands have to carry the initials ‘MA’. But, as that million-label figure reveals, the Chinese have taken the notion into another dimension. There are separate brands for shops, online sales, and restaurants, all of which are aware of their customers’ propensity to scan barcodes to check whether they are being charged the ‘correct’ price.
New retail chains often eschew ‘real’ brands altogether. As one Chinese distributor said to me, “Here there are only two brands: Lafite and Penfolds. Nothing else matters.” He was exaggerating, but not by much. There is another way in which the Chinese market differs from the west. In Europe, the minimum order for a private label is commonly a mixed container, containing two different styles. In China, where the labels are often applied locally using machines designed for short runs, the quantity might be as small as half a pallet.
There is, of course, a karmic irony in China’s explosion of private label wines, given the number of Chinese-produced, Western-labelled products to be found in homes outside that country. But the trend should concern any wine producer that isn’t dedicated to selling in bulk. The example to consider is Camembert, one of the most famous and popular cheeses in the world, picked up in supermarkets as unthinkingly, I would say, as many wine styles. (Do you know the brand you last bought?) Today, despite the howls of anguish from supporters of small, independent dairies, whatever the name on the packet, between 80% to 90% of all Camembert is produced by one of two companies: Isigny or Lactalis. Many wine regions could follow the same path without undue complaint from consumers.
Unless they get a lot better at building and sustaining their brands, and creating genuine relationships with their customers, a great many wine producers could soon discover the negative side of the phrase ‘one in a million’.
This column first appeared in Issue 3, 2017 of Meininger's Wine Business International.