Although China's bustling metropolises and staid Bordeaux may seem worlds apart, the two are becoming intertwined.

Indeed, China recently overtook the traditional strongholds of Germany and the United Kingdom to become Bordeaux's largest export destination.

This transformation is particularly remarkable given the country's short history of mass wine consumption. Historically, beverages such as sorghum-based baijiu and beer have dominated Chinese alcohol consumption, with wine only recently gaining wide acceptance.

Bubbling to the top

In the past few years, China, the world's second largest economy, has risen to become one of the world's most important wine markets.

By volume, the country is the seventh-largest consumer of wine, with expected sales of 1.6 billion bottles in 2011.

In contrast, the US and France, the first and second largest consumers of wine, are expected to consume 4 billion and 3.9 billion bottles, respectively. Since 2006, the Chinese market has experienced more than 20 percent annualized growth, and experts predict it will double by 2014 to become the world's sixth largest.

Collectively, three major domestic producers account for nearly half the total wine sales in China. The largest brand, Changyu Pioneer Wine, is a unit of the major state-owned conglomerate China National Cereals, Oils, and Foodstuffs Corp (COFCO). Changyu and the other two primary producers, Great Wall Wine and Dynasty Wine, focus on domestic consumption, with 98 percent of their production remaining in China.

Foreign wine imports are also growing rapidly. In 2010, imports grew to more than 20 percent of total wine consumption, a four-fold increase since 2005.

Currently, an estimated 20 million adults drink imported wines on at least an occasional basis.

Given that this figure is a fraction of the overall estimated 200 million plus people who have the purchasing power to buy imported wine, the future for foreign wine appears bright.

In China, domestic wines are sold primarily at the lower end of the pricing spectrum, while imported wines are sold at the mid-to-higher end.

The average retail price at the lower end is 20-30 yuan (US$3-5) per bottle.

Mid-range wines sell for 30-80 yuan (US$5-13) per bottle and are aimed at consumers with higher disposable incomes and more exposure to wine.

Premium wines sell for 80 yuan (US$13) and up per bottle. Imported wines typically range from 80-400 yuan (US$13-66) per bottle and are in direct competition with high-end domestic wines.

Many factors have driven the growth of the wine market in China. In particular, the government's promotion of wine as a healthy alternative to baijiu and other spirits, declining tariffs on wine imports, and consumers' increasing purchasing power have given rise to an increased interest in wine.

Despite rapid growth, the Chinese market remains fairly immature.

Customer preferences are driven heavily by advertising, with top producers running mass-marketing campaigns to build brand awareness. This brand-driven environment, with a lack of emphasis on taste preferences, has also affected the market for foreign wine.

Regardless of brand or vintage, Bordeaux and Burgundy wines enjoy strong recognition among Chinese consumers. High-end consumer demand for first-growth French wines, such as Lafitte and Latour, has caused a tremendous jump in prices. Although consumer appreciation and knowledge of wine have improved in recent years, purchases continue to be driven primarily by brand-conveyed prestige and status.

Regardless of the product category, Chinese customers often have enduring "country-of-origin" biases, and wine follows this pattern. The association between wine and France is particularly strong, with domestic brands mimicking French imagery on packaging and vintage naming conventions.

While domestic wine brands have traditionally focused on lower price tiers, producers are increasingly looking to move further up-market, investing in world-class equipment and seeking out international best practices.