Market Structure And Market Performance Of China Wine Industry

Chinese wine industry is of massive potentialities. Although in China, the wine consumption per person doesn't reach one twentieth of the world average consumption, wine market is now increasing at a high speed. Meantime, the market performance of wine industry is remarkable among all the alcohol drink processing industries, exceeding traditional white spirit industry and beer industry. Bright prospect and good performance attract more and more firms to enter this industry. Under the circumstances that China has become a member of World Trade Organization, Chinese wine industry will encounter an international competition.This paper is based on the industrial organization theory, and framed by the theory of "Prompting the competition in one industry"(Michael E. Porter). Among those five factors that are posed by Porter to influence the competition in one industry, three factors are used in this paper to analyze the whole wine industry and one winery. They are: bargaining ability of buyers (market); bargaining ability of sellers (materials); competitive ability of present firms.At the level of whole industry, CR3 of Chinese wine industry in 1998 is 60%. In 2000 CR3 is 50.99%. Market structure of wine industry is oligopoly. Because the market concentration degree is relatively high, market performance is better when compared with other alcohol drink processing industries since 1996. Moreover, the high benefit of wine industry has close relationship with the extensive potential market and abundant grape supplies.At the level of one firm, the analysis results of Dynasty winery show that if consumers spend one Yuan on Dynasty wine, the incomes of retailer, wholesaler, winery and grape planter are respectively 0.053 Yuan, 0.05 Yuan, 0.813 Yuan and 0.084 Yuan. There are two reasons why the winery can gain more income than other sections. One is that the brand of this company has strong market power resulting in the little profit space for wholesaler and retailer. The other is that this company has its own material base and the bargaining ability of grape planter is too weak to gain more income.