Wine Australia is upbeat about China

Upbeat Wine Australia

Wine Australia (WA) released a positive media release on Australia’s wine performance at Vinexpo Hong Kong, held last week. “Highly chuffed” covers the general feeling. No need for TKR to go overboard by repeating the hearty backslapping that WA gave itself. But worth noting are the quotes that WA got from various sources:

Joanna Zheng, product senior director at Amazon China: “Among all of the pavilions, it seemed to me that Wine Australia’s pavilion was the most popular, always crowded with visitors. The representatives from Australian wineries are very passionate about their wine, and they interacted a lot with visitors. I can see that Wine Australia and the wineries and exhibitors they partner with are holding their hands together to bring the fine image of Australian wine to another high level.”

Emma Shaw, global sales manager at Langmeil from the Barossa: “This is my first time in Hong Kong for Vinexpo. We partner with Wine Australia at ProWein in Düsseldorf and this year was full-on and I was thinking there’s no way Vinexpo will be anywhere close to that but it is. The stand is so busy and we’re making some really good contacts and having a good time as well.

Sam Holmes, general manager international sales at Negociants: “Vinexpo has been a great opportunity for us to meet our partners from all over Asia. For us it’s not about finding new customers or new markets, we’re pretty extensively distributed in this region. What it does allow us to do is meet with influencers from so many different countries in one spot. It’s a lot easier to come to Hong Kong than it is to also fly to Vietnam, Cambodia, Laos, Myanmar, Japan and China for example.”

Hiro Tejima, Wine Australia’s head of market Asia Pacific: “The Wine Australia stand was arguably the busiest throughout the entire show. Our exhibitors were constantly surrounded by a crowd of keen wine buyers and media from not only Hong Kong and mainland China but also Singapore, South Korea, Japan, Taiwan, Malaysia, Thailand and India among many others. There was a very special vibe about our stand that no other stand had, which is indicative of the strength of the Australian wine category in this region. Many of our 27 exhibitors commented that the visitors were remarkably more serious about exploring new business opportunities and partnerships, than they had been in previous years.”

This last comment is good to hear as it was the openness and unfussy approach of Australian winemakers and export managers in the 1980s and ’90s that got the UK and other European countries excited. A personal opinion is that it was the appearance of an army of Australians waving their wine marketing diplomas that heralded the decline of interesting Australian wines in the UK, and the rise of bland brand.

The trick will be to make sure the interest from China and other Asian countries is maintained, and the mistakes made in the UK and the rest of Europe are not repeated. The WA release ended with the information that Australian wine exports to Asia are worth $756 million. The profitable aspect is that wines over $10 per litre FOB account for 49.5 per cent of this total.

HSBC Global Research has put out a report by Julia Wang and James Pomeroy titled China and the World: New Frontiers, Fresh Connections. It has these sub-headings:

  • China’s relationship with the world is changing…
  • …as its role in the global economy grows ever more complex…
  • …bringing unprecedented opportunities and challenges for countries everywhere

The report contains a great deal of information on various countries’ trade with China, and a small amount on the trade in wine. China is Australia’s largest trading partner and it’s important the diversity of product exported is as wide as possible. For example, China’s share of global imports is 4 per cent of alcohol but 7 per cent of dairy. With the price milk is fetching on the domestic market one can see how there could be a better market for the white stuff in China, just like wine.

Between 2008 and 2015 Australia’s economy grew 20 per cent, compared to the US economy’s 9 per cent, while the euro area economy was static. China played the major role in Australia’s performance. In the same period China’s economy grew more than 80 per cent.

Chinese tourism to Australia is also huge. The authors give the following example:

“It’s a sunny midweek day in Sydney and Taronga Zoo, scenically positioned on the city’s spectacular harbour, would be quiet but for the large numbers of visitors from mainland China. This highlights the rapid increase in Chinese tourists (and students) in Australia and the growth in the number of flights between the two countries. This, in turn, is helping Australia rebalance its own economy away from commodity sales to, yes, China.”

Some Chinese tourists also visit wine regions and drink wine in restaurants. Hopefully these experiences contribute to their wine drinking preferences when they return home. It’s not yet apparent in the Australian wine sector, but complacency will play a huge part in trade with China in the coming decade. As the table below shows, Australia sits at the top of the trade table, but all those under us want a slice of what we have.

Per cent exports to china

 

Chinese tourist destnationChina’s growth is slowing and moving away from commodity-intensive activities. This is a loss to the Australian mining sector but other doors are opening, such as tourism, education and agricultural exports. For wine, that means it’s important how Chinese tourists are catered for, should they visit regions and cellar doors.

 

 

 

 

 

 

 

No matter the influence China has now, it should be remembered that in GDP terms it is still a poor country, as this graphic shows:

China economy

Wine wise, the report covers Chile’s success in China. About 25 per cent of Chile’s total exports go to China, up from 5 per cent in 2000. Chile has moved away from the dominance of copper to a wider selection of goods, including wine, exports of which increased 30 per cent in 2013.

South African wine exports to China also increased about 30 per cent in 2015, according to statistics from South African Wine Industry Information and Systems.

What Australia has wine wise with China is very good. We need to keep it good, and not rush.

Thinking outside the box

The volume leader of the boxed wine category in the US is the Wine Group, with its Franzia brand, comprising a simple line-up of Crisp White, Refreshing White, Sunset Blush, Fruity Red Sangria and Chillable Red, then up to single varieties. They come in five-litre boxes and sell from US$15 to US$20 ($21-$28).

However, this sector is in decline, and recent articles suggest the boxed wine category is moving to premium wine, with the price still around US$20 but for three litres. Precept Wine, based in Washington State, has a range of three-litre, single-variety boxed wines simply packaged and simply called ‘House Wine’. These hover around US$20.

The question is: can higher quality boxed wine be sold at higher prices? Maybe, which raises the second question: is there room for an Australian premium boxed wine?  Worth keeping an eye on, we think.

Million-case whiskeys

The table below shows Scotch whiskeys that globally sell more than 1 million cases. In an article by Hamish Smith in Drinks International it’s said there has been a move away from premium priced to lower priced whiskey. Of the 22 brands listed, eight are in the Diageo portfolio and six belong to Pernod Ricard. Are there any lessons for wine? TKR thinks there are. Not all can afford the top premium brands, and not all want the cheapest brands. The middle road may hold more answers than we think.

Scotch Whisky

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