With sales of Australian wine to China increasing at a rate that is now beyond prodigious, there is no bigger issue facing this industry than not to burst the bubble. Now that we are around $800 million in value on an annual moving total basis – up from $600 million at the end of June 2017 – we’re entering dangerous times. It’s not my intent to sound negative on the China market, but since it’s hardly a year ago that it was worth around $400 million, it’s become a phenomenon that requires some serious thought and protection.
Why has Australian wine grown so dramatically in China? I suggest that the massive focus and spend by Treasury Wine Estates, particularly with Penfolds, which is perhaps today the most widely recognised and respected of all wine brands in China, is reason number one. This is supported by smaller, but nonetheless effective work in the market by huge brands like Jacob’s Creek, Yellowtail and Wolf Blass.
Next, by some margin, is something I touched on last issue – the vast amount of wine sales to China (which I now estimate around $300 million or more per year) by the 2000-plus informal wine exporters from Australia to China (most of which are Chinese and seeking or permanent residency in Australia). Chinese people remain as keen as ever to establish a path by which they can remove themselves and their financial assets from China into Australia, and wine is the preferred vehicle of choice for a large number of affluent and well-connected individuals.
While much of the wine imported to China by this group is OEM-branded and of dubious quality, there do remain vast numbers of potential customers whose wine knowledge has yet to advance beyond the very basic and for whom the tag ‘Wine Product of Australia’ is all the reassurance they need. It’s but no means clear what happens to much of this wine once it arrives in China, since much is sold to personal connections or indeed left unsold, so let’s focus on the development in China of real long-term brands.
Led by its signature labels plus the now-ubiquitous presence of many (relatively or entirely unknown) Australian wine brands at the multitude of wine trade shows that now compete for attention across the country, Australian wine has plenty of visibility and recognition in China.
The first thing for the brand owner is to covert that recognition into trust. Wine brands need to check out well online and have a legitimate story. Their prices, especially if entering China for the first time, need to be realistic and in line with what the wines sell for in Australia. Chinese consumers, using their phones, will check all of this out before purchase.
No wine market in history is learning about wine quality as fast as China today. Chinese palates easily adapt to wine and they’re spoilt for choice. Chinese consumers react strongly and negatively against steady increases in price without a commensurate improvement in quality, just as Australians do.
Similarly, Chinese buyers are wary of wines dressed up in what many Australians still believe are their preferred regalia of red, black, gold and dragon-like images, for they profoundly dislike the notion that a wine is being customised for them and them alone. Nothing is more likely to lead to mistrust in the marketplace than the notion that the Chinese consumer is being taken advantage of or conned.
Furthermore, Australian wines dressed in more contemporary Chinese-looking packages are also asking for trouble. For this reason, Penfolds has raised eyebrows with the labelling, bottle weight, shape and wax sealing (and the price) of its G3. This wine carries minimal visual connection to the rest of the Penfolds range but would actually be hard to pick amongst a display of expensive contemporary Chinese-made red wine.
Connectivity is next. Once quality, price and package are set, it becomes a matter of exploring sales channels from the multiplicity of those available and then to communicate the narrative behind the wines – the stories of the owners, the makers, the sites and the region. Today, this requires an approach across a number of social media platforms plus a possible brand-owned online outlet within one of the extraordinary number of online shopping malls such as Tmall and JD.com.
Brand owners that just adopt part of this suite of online resources are less likely to succeed than those who construct a detailed online strategy, linked to happenings at the vineyard and winery, which are communicated a minimum of weekly via the suite of platforms. Then, once the online process is established, it’s supported by offline events and shows.
Finally, those brands whose adoption of smart packaging enables some kind of anti-counterfeit authentication and ability to connect consumer directly with the brand owner will be best placed to build and manage their own direct audience in China. This is the jackpot.
However, all of this can come tumbling down if the bond of trust between the brand and the customer is broken. The extent of social media usage in China means that negative feelings can proliferate with extraordinary speed and impact. And once lost, trust is nigh impossible to rebuild.
