GROWING DEMAND FOR AUSTRALIAN WINE CONFERENCE

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GROWING DEMAND FOR AUSTRALIAN WINE CONFERENCE GROWING DEMAND FOR AUSTRALIAN WINE AT THE VINEXPO ACADEMY 2018 Industry Experts Examine Increased Interest and Influence of Asian Consumers Down under

1 GROWING DEMAND FOR AUSTRALIAN WINE CONFERENCE GROWING DEMAND FOR AUSTRALIAN WINE AT THE VINEXPO ACADEMY 2018 Industry Experts Examine Increased Interest and Influence of Asian Consumers Down under charm reigned supreme at the 20th anniversary of Vinexpo Hong Kong, with Australia taking centre stage as the Country of Honour. Alongside masterclasses, tastings and talks focusing on the country s terroir, varietals or winemaking traditions, Wine Australia presented the conference Growing Demand for Australian Wine as part of the Vinexpo Academy. Held on the afternoon of 30 May, an expert panel consisting of distributors and analysts examined the growing influence of Asian consumers led by China s Millennials and rising middle class and how they are affecting Australian wine. Consumer trends and ways for owners to adapt to China s rapidly evolving market were hot topics of discussion, as panelists drew upon their market experience to reveal insights and offer advice to a packed-out auditorium of professionals. Vinexpo CEO, Guillaume Deglise opened the conference with his take on the special relationship that Australian wines enjoy with Chinese consumers. As the world s fifth largest wine exporter and the second largest exporter to Greater China, he emphasised that Australia s diversity of terroir and legendary experimentation with grape varietals has led to the country s products being praised by critics, sommeliers and consumers alike. As the demand for Australian wine grows, it naturally creates opportunities and challenges for traditional exporters. Ian Ford, the conference s moderator, then took over the reins to provide an overview of the current changes Australian wine is experiencing within Asia. Originally from New York, Ford relocated to China in 1995 and worked for Seagrams before founding imported drinks distributor Summergate in After he sold the business in 2014 to Australia s Woolworths, he co-founded Nimbility to help drink producers develop Asian markets.

2 With his more than two decades in the industry, Ian Ford believes that the growth of Australian wine in Asia is a topical subject and asked What is driving the market in China? What are the changes on the consumer level? Younger consumers are more interested in the story and origin behind the wine. As we see the emergence of e-commerce, the market is also maturing. Consumers are buying in different markets for different reasons than they were 10 years ago, leading to a degree of uncertainty. AUSTRALIAN WINES APPEAL TO MATURE & SAVVY MARKET As London based Wine Intelligence s Research Director, Guangxi province native Chuan Zhou is responsible for keeping ahead of the curve when it comes to wine trends. While still wine is enjoying stable global sales, traditional European markets have decreased and are offset by growth in the United States and China. Though wine is a traditional industry where seismic shifts are rare, he pointed out that there has been changes starting in 2005 leading to the US and China consuming 21% of global wine production today. This is a significant change, Chuan Zhou comments. Asia now accounts for 10% of global wine consumption. Through our surveys in more than 30 markets, we find that customers around the world are fundamentally the same. It s the distribution channels that are different. Consumer relationships with the category don t change, wine is about relaxation and reward at the end of the day. Chuan Zhou s research in China, Hong Kong, Japan and South Korea has recorded six major shifts between the years 2011 and People are drinking more frequently, with Japan and South Korea recording increases in consumption of 49 to 62% and 34 to 48% respectively. As wine becomes more affordable in these mature markets, it is a relatively smaller portion of consumers disposable income. The second change is that consumers are becoming more involved, engaged and adventurous in their purchases; they are less price-driven and more open minded to trying different styles of wine. The third shift is the changing face of the consumer: in China, female consumers have increased from 34 to 47% while in Japan s ageing population, half of wine drinkers are now 55 years old or above. The fourth noteworthy difference is a broadening of purchase channels, with the decline of traditional hypermarket and supermarkets from 85 to 40% as online and convenience purchases increase 36 to 48% and 7 to 10% respectively he commented. We are also seeing the shift resulting from more mature consumers who want products unavailable through supermarkets or who don t have the storage to stock up, thus relying on internet or convenience store purchases. The fifth change is white wine muscling in on red wine dominated markets, with more visibility online. Sauvignon Blanc, for example, has enjoyed 20 to 27% growth in China between 2011 and Lastly, food matching has been growing in importance when it comes to selection, particularly when it comes to wine with Chinese or Asian cuisine. Chuan Zhou acknowledges three dominant trends will impact the sale of wine; as technology develops in China, consumers demand transactions to be faster and better. Yet at the same time, they want to have all the information on hand to make the process less intimidating and more enjoyable.

3 The second trend is the shift from brick and mortar shopping to online purchases, with less human interaction and more interactive wine experiences. A third trend is reduction of wastage in packaging, making the industry more sustainable on the whole. Understand what consumers want now and 15 years from now, he advises. Understand what your unique selling points are, as well as your strengths and weaknesses. And understand the market and what your competitors are doing. THE WINES ARE SEEN AS BOLD, EXCITING AND AUTHENTIC Andreas Clark, CEO of Wine Australia, followed up with some insights into his organisation s role at Vinexpo and how he sees Australian wine changing within China. With 151 exhibitors from 51 wine regions this year at Vinexpo Hong Kong, he admits it is Wine Australia s biggest single overseas event to date. He underscored the long-standing relationship Australia enjoys with China, citing 45 years of bilateral relations. The elimination of wine import duties to Hong Kong in 2008 changed trade in the region, Clark states. The ease of export has been reflected in the value of wine changing. Australian wine is now second to France in terms of exports to Hong Kong. China is now our most lucrative market, overtaking the United States. The top five exporters including Penfolds, Wolf Blass and Jacob s Creek account for 40% of Australian wine s value or 24% of its volume. Clark believes that Australian wine is enjoying a rich and deep export community on the backs of many hard years of work by the previous generation of exporters to China. Although he notes that red wine exports continue to dominate, white wine is coming up steadily, buoyed by younger consumers with travel experience willing to experiment. Andreas Clark references a seven-country global study asking customers why they choose Australian wine; the perception is that the products are bold, exciting and authentic, expressing sense of place with a strong bond between growers and winemakers. We are pleased to be the country of honour this year, Clark states. It is an exciting point in our history. We have exceptional families with many generations crafting grapes into wine, resulting in products with finesse and refinement. BUILDING A BRAND IN CHINA Summergate Fine Wine and Spirits Rose Scott provided insights into the China market from a distributor s perspective. With her solid track record at some of Australia s top wine and spirits brands prior to taking on her current role in 2016, Scott believes in a consumer-focused approach to sustainable business growth. She has observed three kinds of structural forces shaping changes. First, as the middle urban class emerges, they are changing consumption growth. Second, a new generation of more liberal spenders has more sophisticated tastes and different drinking habits than their parents. Third, e-commerce is enjoying a powerful role in how consumers shop. She touched upon the rate of Chinese affluence being out of sync with physical shops. As Chinese consumers spending power increased, the physical retail stores in China were less developed, Rose Scott explains. In the West, there were plenty of brick and mortar places to buy things. In China, there was no where to spend money. It has led to the most advanced digital marketplace

4 globally. And the market remains very fragmented. Brand owners should be mindful of how to get broad coverage across Chinese cities. Scott states that in 2006, there were two million nine litre cases of imports to China; that jumped to 17 million cases by 2017 with France and Australia making up the lion s share at 5.7 million and 5.5 million of those cases respectively. Yet she notes that when examining the import data over a three-year period, Australia and Chile have enjoyed consistent growth during that time frame as the two countries were more focused on building brands in the market. Brands are very important in China, Scott argues, citing that Chinese consumers previously drank more Chinese wine in 2006 due to their stronger brand differentiation and local appeal. Though imports selling directly to the market enjoyed early growth, with traditional wholesale for gifting and business dinners maximising margins, now the growth is in personal consumption. Scott notes that as more international retailers join with direct sales, different business models must be adapted to manage the value chain in China s fragmented market. She believes that higher disposable income, a competitive market leading to declining prices, and loyal brand consumers are the key elements influencing growth of Australian wine in China. New world wines are starting to build strong brands in China, she states. China is a big country. Consider the right products to take to market. Does it have the appropriate format and style? Consider where you want to be and what channels you wish to use. There needs to be the right people on the ground to manage the chain, and the resources to support that. Ensure that you have the sales capacity, scale, pull, pricing, reach and good partnership. China requires a longer term view and lots of patience. IMPORTING, MARKETING & EDUCATION Edouard Duval is a sixth-generation descendant from Champagne house Duval-Leroy and he founded Shanghai based East Meets West Fine Wines in With more than 200 professionals importing over 600 labels from more than 70 wineries hailing from 14 countries, East Meets West services 2,500 customers in 150 cities across Greater China through its seven branch offices. Through his extensive experience working with family owned Australian wineries, Duval advises for newcomers to the Chinese market to focus on three main areas: importing, marketing and education. More than 90% of the market will remember your brand by its Chinese name, so spend time with your Chinese partner to make sure it is a good one, he stresses. Chinese names are typically closely related to the phonetic sound of the original or with a similar meaning in Chinese; Duval states that once a name is confirmed, it should be trademarked for legitimate ownership. Further, Chinese language back labels are a good platform for a brand s design and story, and are legally required for wine exports in China. He feels that having the right Chinese partner with a good distribution network and sales force is paramount. As international hotel chains and big restaurants in first and second tiered cities drive volume, your partner needs to speak the same language and share the same vision, he states, adding that social media platforms such as WeChat and Weibo are different animals than their Australian counterparts. Tmall is a good platform for selling wine and brand building.

The Weimall platform reaches people in a digital manner that forms a strong link with consumers through events such as wine tastings, dinners, and road shows its QR code allows easy access.

5 The Weimall platform reaches people in a digital manner that forms a strong link with consumers through events such as wine tastings, dinners, and road shows its QR code allows easy access. It s about building strong bonds with consumers to promote your wine and build a loyalty programme. Reinforcing the notion that China is a very competitive market, Duval advises for putting in the resources to help brand, market and education Chinese consumers about new products. Be active; come to China, he urges. Invest time and money, and make sure you can support your Chinese partner with events, promotions and classes such as masterclasses for sommeliers and wine enthusiasts. He believes that as long as the right partner who is in place shares a common strategy and vision, new Australian players entering the Chinese market will have a good foundation for success. More information on VINEXPO HONG KONG Vinexpo Press Contacts Anne Cusson Communication Director Camille Malavoy Senior PR Officer T/WhatsApp: +33 (0) presse@vinexpo.com

KOREA MARKET REPORT: FRUIT AND VEGETABLES

KOREA MARKET REPORT: FRUIT AND VEGETABLES 주한뉴질랜드대사관 NEW ZEALAND EMBASSY SEOUL DECEMBER 2016 Page 2 of 6 Note for readers This report has been produced by MFAT and NZTE staff of the New Zealand Embassy