Wine Australia: China is the ‘wild west’ for wine

Comparing China to the ‘wild west’, David Lucas, the newly appointed regional general manager of Greater China for Wine Australia, highlighted the opportunities as well as the dilemmas and nuances of the vast market for producers at a panel discussion hosted by Vinexpo on Tuesday.

From left to right: Wendy Chan from Telford, David Lucas from Wine Australia and Lu Yang MS from Shangri-la Group at a panel discussion hosted by Vinexpo on Tuesday at the Eaton Club

Although Australian wine exports to China have surged in recent years, like many other wine producing countries looking to tap into the market, Lucas confessed that challenges ranging from intellectual property rights protection to a “disconnect” between Chinese and western social media strategy and brand awareness, in addition to materialising China’s e-commerce for tangible wine sales present loomed large for wineries.

“China is the wild west for wine. There’s no question about it. Everybody wants a piece of it,” said Lucas, who had 11 years of working in China with ASC and Bacardi before joining Wine Australia.

“I was in Chengdu last week. People are hungry for credibility, for endorsement. They can’t really explain Shiraz and why the family winery is so great,” he said at a panel joined by Vinexpo CEO Guillaume Deglise; Wendy Chan, general manager of Telford International’s wine and spirits division; and Lu Yang MS, corporate wine director of Shangri-la Hotels and Resorts on Tuesday.

“But if they get masters like Lu, that’s when you see some traction,” he added, gesturing to Lu Yang sitting to his left, while speaking to a room of Hong Kong’s trade professionals and media.

Citing Australian wine as an example, he estimated that 99.9% of consumers in China don’t have any idea where Margret River or McLaren Vale is. By extension, consumers wouldn’t notice the difference between an authentic Penfolds logo or a copycat label that has has one letter slightly out of place or where the colour has been tweaked.

“That’s what happens and it is a big challenge. We invest and try to support the industry as a whole but intellectual property is a big problem for everyone. There’s very little consumer awareness for any brands in China to be honest with you. Penfolds, Jacob’s Creek and Yellow Tail they have done the best job, and they have big corporates behind them with [the likes of] Telford for Yellow Tail. This challenge of consumer awareness is years away and it probably won’t happen in my lifetime,” Lucas commented.

Australia has been named as ‘Country of Honour’ at this year’s Hong Kong edition of Vinexpo and will be present with the biggest ever pavilion organised at an exhibition in Asia, with 160 wineries in attendance. The strong presence of Australian wines reflects the increasing interest of Asian wine consumers. China, which has already become Australia’s number one export market, will consume 16.9 million 9-litre cases of Australian wines between 2016 and 2021, double the current amount, according to a report by Vinexpo and IWSR.

The success of Australian wines in China, according to Lucas, is a result of Australian wineries’ push for brand awareness – led early on by Penfolds – and improved Australian wine quality seen by the high export value per bottle.

Continuing, Lucas added social media is one of the key areas high on his agenda to push Wine Australia’s success in the Chinese market. Stressing the differences between popular western social media platforms and Chinese WeChat, he pointed out there’s a “big disconnect”.

Lu Yang

“If we try and copy what happens in the West in China, we will fail. You’ve got to understand WeChat consumers, and you can only do that in China. We have a digital team in Sydney, they are trying to get their head around it. This is one of the three big issues for me: how do we connect with Chinese consumers? Twitter? Facebook? Forget about it. We have to take WeChat strategy,” Lucas ascertained, further adding that trade organisations and wineries need to understand how Chinese consumers want to be talked to and approached.

Speaking of Chinese social media, Lu echoed Lucas’ point, and added that Weibo, a Chinese social media platform that was popular a few years ago is also making a comeback and producers shouldn’t view it as an afterthought.

Expanding on social media, Lu underlined the intricate relationship between Chinese social media strategy and China’s growing e-commerce sector as another area that producers should heed.

“Social media is always linked to e-commerce. But in the end, it needs a balance because wine is not something you can just learn and taste online, it needs an offline platform. It needs more events, more tasting, and interaction,” he stressed.

China is the biggest e-commerce market in the world but for the wine sector the success of China’s massive e-commerce industry is yet to be translated into tangible sales results for wineries. Even with Alibaba spearheading its ‘9 September Global Wine and Spirits Festival’, sales results have become lacklustre to the point that Tmall.com doesn’t reveal its sales value each year, a sharp contrast to its more successful Singles Day campaign, where the company was never reticent to reveal that it brought in US$25.3 billion in one day last year.

This was not passed without noticing by keen trade organisations and China-minded wineries.

“Everyone in China is struggling to find out how to apply e-commerce to the wine business, even Alibaba. They would say their ‘Nine Nine’ (referring to the 9 September sale) activities are strong, but benefit wasn’t tangible. With Nike, cosmetics, it’s more tangible, but wine is still struggling,” Lucas admitted.

Realising that consumers are often bewildered and overwhelmed by massive sales online, Wine Australia is working with companies such as Alibaba and 1919.com, an online specialist of wine and spirits, to help consumers make better online wine purchasing choices before assuring that e-commerce with its marked growth, is however not the “holy grail” of wine sales given that wines sold online can’t be physically tasted offline simultaneously.

Moving on to organic wine’s potential in China, a subject that Vinexpo has introduced to this year’s Hong Kong edition with first-ever appearance of WOW! (World of Organic Wines!).

China with its growth potential is naturally under the watchful eye of organic producers. Projecting confidence in organic wine’s potential in China, Lu explained, “Now with food safety, people are focusing more on the terroir, and the traditional and holistic way of agriculture, to protect the future and generations to come.”

“In China, you need to understand the people who have disposable income, financial capability to consume premium wines, they are the ones who focus on food safety as well,” he continued. They are simply “more aware, more educated” and as a result “pay more attention to organic wines,” Lu concluded.

This year, it’s estimated that more than 1,300 exhibitors from 30 countries will participate in the upcoming Vinexpo Hong Kong from 29 to 31 of May at the Hong Kong Convention & Exhibition Centre.