The appointment of David Lucas, an experienced China wine and spirit industry expert, gives significant credibility and focus to Wine Australia’s ramped up activities in Australia’s most important wine market. Lucas, whose eleven years in China have seen him take on a number of roles within ASC Fine Wines, one of the country’s major importers and distributors as well as a more recent role in the online space with Daily Liquor in Hangzhou, has also worked in Korea for a decade and Singapore for two years prior to that
As Regional General Manager Greater China, Lucas is now responsible for the markets of Hong Kong, Macau, Taiwan as well as mainland China itself. His placement dramatically ramps up the link between WA’s Australia-based board and management and the China wine trade and will provide significant focus to the allocation of the Federal Government’s $50 million investment package in this region
Lucas expects that the ongoing growth of key Australian brands within China will have a significant effect on the nature of the market itself. He attributes much of this growth to Treasury Wine Estates and describes the taking control of its own distribution in China as a ‘major factor’. ‘Nobody could deny that they have made a huge difference to the way the Australian category has moved. They have really shaken it up’, he says. ‘They’re aggressive in every channel with powerful brand strength.
Right now, the entry level Australian wines for many Chinese wine consumers are the self-branded or OEM wines, which represent around $350 million of the $865 million Australia-China wine trade. As the big brands are continue to ‘clean up’ and become even more competitive, Lucas expects the entry-level offerings to move more towards branded wines, which will dramatically increase the market share and profitability of the large brand owners. ‘Branded entry-level wines will really do damage to the OEM producers’, he says
Experienced watchers of the China market have long been advising Australian producers to focus more on the on-trade in Tier 2, 3 and 4 cities, a market still currently controlled by the OEM brands. Lucas expects that with the right choices of wholesale partners in these very significant markets, and with pricing of branded wines competitive to OEM products, Australian brands have another large layer of opportunity. TWE, he says, have lined up a significant investment into these channels. ‘You can have significant influence and control in these cities’, he says, ‘without the expensive fight for market share you see in the Tier 1 cities. But you still need to help the stockists sell the wine your distributors sell them.
Lucas is also conscious of a fundamental change in the traditional national brand distribution model for China. ‘It’s over-priced and they’re not providing the service for the added margins and exclusivities they require’, he argues. ‘This side of the industry is neither growing nor really delivering. They’re doing very little in the online space. Online shoppers don’t identify with the names of the distributors so there’s no hook to attract traffic.
Of great interest to Australian exporters will be Lucas’ observation that most distributors, from the largest to the smallest, are actually looking for new Australian brands. The issue, he says, is that they don’t know how to go about it and are afraid of being flooded with brands if they let the market know. ‘They’re underweight with Australian brands but need a service to connect them. There’s no magic formula, but Wine Australia can play a role here’, he says
David Lucas is justifiably optimistic about the long-term future of wine in China. ‘People drink here not just to have a good time, but it’s really a part of life. Wine is the only category that has changed the market here. Beer is going nowhere and is just a fight for price. For the last 15 years western spirits have sold around 4 million cases. Wine has captured the imagination of the growing affluent middle class
‘There’s been a huge change in the wine-drinking demographic over the last five years in top restaurants from being mainly western to being overwhelmingly Chinese. Chinese are prepared to spend a large chunk of their incomes on hospitality and wine. Young middle-class women will frequently drop 300 RMB on afternoon tea in Shanghai’s fashionable Xintiendi district’, he says, recalling that when he arrived in China there was no way a 25-30 year-old would own two apartments in Shanghai; yet this is commonplace now. ‘They’re not necessarily paid mega money, but they’re part of a group of 50 million-plus people that is growing quickly’, he says
And thanks to affairs of a political kind, unlike the US, Australia is today seen as a wine-producing country to aspire towards. ‘We can start to catch the French’, says Lucas, ‘and then it’s game on!’
