In a process that commenced with the purchase in December 2014 of struggling China-based wine importer Summergate Wines for US $25 million, the Endeavour Drinks Group (EDG) – until recently known as the Woolworth’s Liquor Group – continues its expansion into East Asia with the opening of langtons.com.hk.
Bundled with Summergate came the associated retail business of Pudao Wines which, under the guidance of China-savvy Marcus Ford, had already developed two popular outlets in Shanghai and Beijing. Along the way, Woolworths also acquired the Hong Kong-based online outlet and sales platform of Adelaide Cellar Door, which has since been rebranded as Pudao Wines. Today under the EDG roof there now exists Summergate as the wholesale B2B arm, Pudao Wines as the B2C retail business (although still only virtual in HK) and langtons.com.hk, which will effectively duplicate its online fine wine merchant and brokerage services as seen in Australia.
The combination of these three businesses, together with the strength and track record of its ownership and management group, has the potential to change the wine importing and distribution landscape in Hong Kong and mainland China.
Jeremy Stockman, a respected former senior buyer for Vintage Cellars in Australia (owned by Coles and its owner, Wesfarmers), is today General Manager of Watson’s Wine, a Hong Kong-based retailer and e-tailer with 30 stores in the SAR. He voices the concern that given the access that EDG has in Australia via its Dan Murphy channel to very large volume of wines from a wide range of brands, there is nothing to prevent EDG from operating as a parallel importer into a duty free market like Hong Kong, i.e. as an importer of brands but without the mantra from the brand to do so. Might EDG also have the commercial clout to enable this to happen despite the intent of the brand owner?
‘Of course these concerns are yet to be validated, but given the strength of EDG, these are valid questions’, Stockman maintains. ‘Having competition is no problem – in Hong Kong there are quite a few guys bringing small quantities of wines in parallel, but there is a danger that this company can use its leverage to get wines at the lowest possible prices into this market. While this is initially great for consumers, it has the potential to undermine brands and to drive quality wines out of restaurants which won’t want to stock them if their (online or retail) prices have reduced significantly.’
Martin Smith, EDG’s Managing Director, is unapologetic about EDG’s intentions to take into HK and China a broader range of wine than merely the wines listed within the wholesale division of Summergate. ‘It is absolutely Langton’s intention to showcase the wines of any supplier partner or individual vendor with whom we have strong relations and trust. One of the benefits of our presence is the ability to provide end-to-end servicing for Australian wineries in both mainland China and Hong Kong through the infrastructure investment we have made’, he says. ‘This venture will open up the opportunity for many of our existing brokerage partners to participate with us in this rapidly growing market.’
‘The secondary market is the core business that Langton’s was founded upon and we are excited about the opportunity to further extend its fine wine credentials and reputation into the East Asia region. We will be active player in Bordeaux, Burgundy, and other fine wine regions around the world including Australia.’
More specifically on the notion of parallel importing? ‘Our venture represents a huge opportunity for Australian wineries and we’re not selecting them to participate without their consent. Over time we will obviously outline the benefits to our supplier partners of our expansion into the East-Asia market, but ultimately it will be their decision on whether to take up that opportunity or pursue their own strategies. In actual fact, at the moment we have more brand owners wanting to work with us than we can possibly accommodate and we are unfortunately declining many of these opportunities.’
Responding to the issue of pricing, Smith adds that ‘Wine will be priced according to the market environment that exists in mainland China and Hong Kong. It will not be a ‘lowest price guaranteed’ model, but one that is consistent with the premium positioning of the Langton’s brand.’
It’s significantly more of a footnote to this development that there have been a major repositioning in the wholesale distribution landscape in HK and mainland China over recent weeks. The major beneficiary is Summergate, which is now the sole importer and distributor of Penfolds and Wolf Blass into Hong Kong and China. The Yalumba Wine Company and Hill-Smith Family Vineyards, previously with Summergate, are now with the previous Penfolds and Wolf Blass importer, ASC Fine Wines.
Observers of Australian wine who have watched the last two decades of commercial interaction between Treasury Wine Estates (in its various corporate guises) and the Dan Murphy’s/Woolworths can only conclude that there has been a very significant realignment of this relationship at the most senior level, which is ultimately a very good thing for this industry. Roger Sharp, a TWE spokesperson, says that ‘Over the last few years we have successfully put in in place mechanisms and ways to sell which ensure that our brands are sold and marketed in the best possible way – one that is brand enhancing.’
Concerning the new partnership in China, Sharp says: ‘We will be working closely with Summergate to ensure pricing is correctly positioned for our consumers in China.’
