Chinese brandy producer eyes pole position

With around 10 kilograms of Ugni Blanc grape being fermented into wine and then distilled twice to age in oak barrels for at least six years, a bottle of 700 ml Koya brandy is created, giving Chinese consumers more choices for high-end brandy.

To expand the Koya products in the domestic market, Yantai Changyu Pioneer Wine Co Ltd, China's leading wine producer, officially opened Chateau Koya, the country's first professional brandy chateau, in Yantai, Shandong province, on June 28.

"Koya brandy is positioned toward middle-and high-end customers," said Sun Jian, general manager of Changyu, adding Koya products enrich the company's brandy portfolio.

The Koya brandies being put into the market have three series: Koya VSOP which mature in oak barrels for six years, the 10-year Koya XO, and the 15-year Koya XO.

As early as in 1915, a brandy product of Changyu won a gold medal at the Panama-Pacific International Expo in San Francisco.

Last year, the company produced over 40,000 metric tons of brandy, generating 1 billion yuan ($145 million) worth of sales for Changyu, the company said.

"Along with our domestic wine and imported wine, brandy products will be a major driver of our company's sales in the near future," said Zhou Hongjiang, chairman of Changyu.

Designed and built in the medieval Romanesque style of Europe, the main buildings of Chateau Koya cover an area of two hectares. The chateau has over 60 hectares planted with Ugni Blanc grape. It is expected to produce 300 tons of Koya products annually.

"There is a huge domestic market potential for brandy products. The domestic demands for brandy will remain high," said Wang Yancai, director of the China Alcoholic Drinks Association. "China's growing middle-income group offers better opportunities for growth."

The demand for brandy in China has grown steadily over the past few years. Data provided by CADA showed the amount of brandy consumed in 2018 reached 172,500 tons, from 152,200 tons in 2017 and 75,500 tons in 2010.

China's brandy production though is in its early days. Dozens of domestic wine companies produce brandy and only a few of them are in scale. Around 139,300 tons of brandy were produced in China last year, CADA said.

"China's current brandy market is mainly dominated by foreign products," said Wang Qi, executive vice-chairman of CADA. Last year, China bought 24.4 million bottles of cognac, becoming the third-largest consumer of cognac in the world.

Retail prices of Koya products on China's leading retail portal Taobao stand at a similar level with high-end foreign brandy products. On Taobao, a 700-ml bottle of Hennessy VSOP is priced from 488 yuan to 599 yuan while the same volume of a six-year Koya VSOP is 468 yuan.

"Chinese brandy producers can embrace precious opportunities to develop the domestic market if they can carry on Chinese wine-making culture, (and) use world class winemaking skills to ensure the brandy quality," said Wang Qi.

"Chinese brandy producers like Changyu have been making achievements on innovating efficient ways to create quality products. To promote the overall brandy industry in the domestic market, Chinese producers need to communicate and learn from their foreign counterparts," said Xu Yan, deputy head of Jiangnan University.