Asia a major focus of growth for TWE

Treasury Wine Estates is embracing the “evolving” market of Asia as last week’s results revealed profits for the region were up 52%.

TWE’s MD for the Asia and EMEA regions, Robert Foye

Last week, TWE posted its full year results for 2015 which showed a net profit of AU$77.6 million after tax. One of the biggest areas of growth was China with volumes rising 36% and profits across the region up 52%. CEO Michael Clarke also said he expected Asia to be biggest earnings contributor within 18 months.

TWE’s managing director for the Asia and EMEA regions Robert Foye joined the company in July 2014 and spoke to db about the changes in TWE’s strategy for Asia market during his time at the helm.

“The major change we’ve instigated is becoming much closer to our customers in China and gaining more control over our route to market. We sell direct now to the key accounts – the supermarkets, our e-commerce platforms and we manage those relationships direct and keep them buoyant with in-store marketing and promotions.”

Under the leadership of Peter Dickson, the general manager of Greater China for TWE, the company bolstered its team in China by adding new account managers and brand ambassadors to up the dissemination of education, as well as devoting more time to the “classical marketing” of TV advertising and billboards.

Actively pursuing opportunities with convenience stores, online retailers, supermarkets and hypermarkets has also been a core focus with Chinese supermarket chain, Fuhzou-based Yonghui now counted as the company’s largest single customer on the mainland – all in the space of six months.

“Globally, we’re focusing on 15 brands,” said Foye. “And in China we’ve narrowed it down to seven. It has the same portfolio as Australia: Penfolds, Lindemans, Wolf Blass, Wynns and the US: Beringer, Stag’s Leap and Chateau St Jean.

“Each country as its own marketing channels and how much advertising and promotion we put against the brands. The bigger brands – Penfolds, Wolf Blass obviously get more, but we’re also investing in the smaller labels like Stag’s Leap and Chateau St Jean so we can also drive those brands.”

TWE had initially concentrated on the middle level or “masstige” segment in China that it defines at AUS$10-20 or 100-200RMB per bottle; Wolf Blass Yellow Label and Penfolds Kalimna Bin 28 are described as “hitting that sweet spot”.

“But everyone knows that China is the number one red wine market now so the answer is there is growth in every sector. Wolf Blass Red Label and Eagle Hawk are under 100RMB which is the most interesting development we’ve seen. The truth is we want to grow in all three sectors and introduce the brands to the Chinese customers.”

A major component of brand familiarisation for TWE is the strengthening of education through the mass market in-store events – something that Foye explains “is happening every day across China.” 

Stealing hearts: The Penfolds range is perennially popular across Asia

Despite the likes of Bordeaux and Burgundy continuing to capture consumers’ hearts, Foye believes that TWE’s premium Australian portfolio is on “on track” to steal the limelight.

“Without being too controversial, I think the idea behind Australian and American wine is easier for the Chinese consumer to understand and be less intimidated about. We make it easy for them to access affordable high end wine.

“It also appears that premium Australian wines is more enticing to the Chinese palate. The wines express the fruit more boldly so they’re perceived as fruiter and sweeter which fits in with the consumers’ tastes.

“Our premium end – Penfold’s Bin 389, Bin 407 and Grange, as well as Stag’s Leap and Beringer also portray the history and heritage behind the wines, which we explain in our tasting events. It’s a long journey we’ve taken in China but we’ve got there and we feel that we are able to present the Australian and American wines very well.”

Turning to Hong Kong which Foye coins as the “model market for Asia”, sales have not been as strong as in China but TWE sees it as the archetype for its Asia strategy in the way that it uses its distribution channels through selling to supermarkets, retail outlets, restaurants and hotels.

“Hong Kong is extremely important. It sets our route-to-market strategy and how we grow our key accounts for the rest of Asia and it’s an extremely buoyant market where our brands are so strong. Penfolds and Wolf Blass are leading the pack but Beringer, Chateau St Jean and recently Gabbiano and Stag’s Leap are gaining ground through our increased presence in the off-trade and targeted in-store marketing promotions.”

With Hong Kong leading the model of growth for the other Asia markets, TWE has strengthened its partnerships with distributors in Singapore, Malaysia, Taiwan and Japan and reinforced its “direct relationships with customers” through investing in sales staff on the ground who can pursue new, fruitful relationships. Unsurprisingly, it has also been able to benefit from Australia’s recent Free Trade Agreements with Korea and Japan.

“We’ve introduced new brands to the distributors. In Japan, our distributor Sapporo has taken on Penfolds, Beringer and Chateau St Jean for example, but we’ve gotten to understand the market and targeted our approach to what the consumers actually want.

“For example, in Taiwan and Japan, our US category is much bigger than the Australia portfolio. So we’ve targeted our marketing accordingly and pushed all segments of our US brands. We’ve also become Singapore’s brand leader in imported wine with Wolf Blass, and Penfolds is in the top five.”

Recent in-country policy changes such as Indonesia’s 90% import duty of the market price on wine and Thailand’s ban on selling alcohol within 300 metres of educational institutions has not dissuaded TWE from pursuing opportunities there either.

“The local politics can derail us for a bit but we are committed to growing our brands. We have people on the front line driving the business and this does not change our strategy.

“Across Asia we are seeing incredible growth, not just in sales and volume but in our relationships with customers, key accounts and our partners. Acceptance and interest in wine is growing year on year and younger customers are becoming part of our target.

“Even five years ago, the average customer age demographic for our tasting and events was 45-50 and now it’s 25-30-plus. The market is evolving and we’re at the forefront of seeing this developing trend.”