Vertical coordination in the Chinese grape market

Abstract

PurposeRegarding the global development of the wine industry, China has gained a notable share in terms of wine consumption, and its domestic wine production has increased steadily since 2000. The wine production process requires close coordination between growers and processors to avoid disruption and instability in the supply chain of the wine grapes. However, vertical coordination in the Chinese wine regions has received little attention. Based on the existing theoretical background on vertical coordination, this study aims to detect the evolution processes of vertical coordination in the Chinese grape market.Design/methodology/approachExploratory qualitative research fits with the aim of this study. From December 2018 to January 2019, interviews with grape growers and wine processors of various Chinese wine-producing areas took place. After transcribing all recorded files into text, a qualitative data analysis following the approach of Mayring (2015) was used to analyse and interpret the data.FindingsThe models of vertical coordination in the grape supply in China vary between the producer's requirements on grape quality/quantity and the arrangements of grape supply chains, which are diverse depending on regional strategies of the local government.Research limitations/implicationsHowever, in this research, the authors did not get into details on the organization of the contractual coordination, and due to the limited access to grape growers, the relationship between farmers and processors cannot be analysed in detail. With a better understanding of the coordination relationship and enhanced contract enforcement, the vineyard management and grape supply chain management can be better performed, inducing a steady industrial development.Originality/valueRegarding the global development of the wine industry, China has gained a notable share in terms of wine consumption, and its domestic wine production has increased steadily since 2000. However, vertical coordination in the Chinese wine regions has received little attention. The study provides a first insight into the grape market structures, as very little is known.

Dragon head enterprises in China's wine production – case study results

“…To fill this gap, we investigate in the case study based on the example of China's largest wine producer Changyu, how the structure of DHEs in the Chinese wine business looks like and which mechanisms the leading enterprise applies to coordinate the internal structure and steps of production, processing and marketing. Bitsch et al (2021) have also found that differences between wine-growing regions might exist due to natural conditions. In Ningxia, for example, there is a water shortage, and vines have to be buried in winter (also see: Hao et al, 2015).…”

“…So far, scholars have mainly focussed their research on DHEs in Chinese agriculture, horticulture and animal production. Regarding DHEs in the field of the wine business, not much research has been done to this point (Li et al , 2021; Bitsch et al , 2021; Rozelle et al , 2006). To fill this gap, we investigate in the case study based on the example of China's largest wine producer Changyu, how the structure of DHEs in the Chinese wine business looks like and which mechanisms the leading enterprise applies to coordinate the internal structure and steps of production, processing and marketing.…”

“…In total, 16 individuals were interviewed (one of them is a government officer, two are professionals and 13 interview partners are wine producers who are spread in various Chinese wine-producing areas). In their study, Bitsch et al (2021) examined the scope of production, vineyard investment, grape supply chain management, transaction processes, as well as contract design, labour management and challenges within the grape supply. Bitsch et al (2021) clearly outlined in their study that DHEs exist in the wine business in China.…”

“…4. Empirical studyIn order to identify important players and DHEs in the Chinese wine business,Bitsch et al (2021) conducted a first explorative study. The results of this study have been published in this journal.…”

The development of the Chinese wine industry and trade

“…Thus, there is a need to consider the potential of China’s domestic wine consumption and production to satisfy domestic demand, as well as to increase its competitiveness in the international markets. One of its consequences is a shift from quantity to quality in production, which increases the value of Chinese wines (Bitsch et al , 2021). Wine consumption is expected to grow in line with the increasing income of Chinese consumers (Liu and Song, 2021).…”