News Special Coverage Industry Overview Supply & Demand Price Reference Forum
 

Australian wine exports: China now the biggest market

www.weeklytimesnow.com.au by ALEX SAMPSON15/08/2017  

33.jpg
CEO of Australian Vintage, Neil McGuigan

GIVE the people what they want.

A simple ethos, yes, but one that, in the wine world, is not particularly well embraced.

And when it comes to exporting to China, complex wines forced on to simple palates could spell disaster.

Australian Vintage Limited has taken the message to heart, and has landed a first-of-its-kind deal with China’s largest online wine retailer, YesMyWine.

YesMyWine is to buy 15 per cent of Australian Vintage Limited through a partner fund, Vintage China Fund.

This not just a big deal for AVL, but a big deal for any Australian agribusiness hoping to get into China, which is now Australia’s biggest wine market, importing $520 million of wine annually.

The move will raise $16.5 million for AVL, one of just two ASX-listed Australian wine companies. The other is Treasury Wine Estates.

AVL had already been trading its McGuigan brand into China via the country’s largest food processing, manufacturer and trader, COFCO, but now its other brands — such as Tempus Two and Nepenthe — will get a foot in the door.

AVL chief executive Neil McGuigan believes his company sealed the deal by ensuring its wine looked and tasted appealing to the Chinese consumer.

“Our Australian cellar doors get a lot of Chinese visitors and we have been focusing on ensuring those visitors get the best wine and food experience we can give them,” McGuigan says.

“We have two people that speak Mandarin working in our Hunter Valley cellar door and we’ve been working very hard to showcase wines from all the districts where we grow grapes.”

What is vital — and what McGuigan believes many wine brands don’t consider — is that the Chinese wine palate is only just starting to develop.

“Many Chinese consumers are still mixing wine with juice and soft drink, so you need to start gently,” McGuigan says.

“They’ve heard wine is good for them and they’re trying to incorporate it into their diets, but they don’t have a taste for it yet.”

McGuigan’s view is backed by strategy agency Wine Intelligence’s research that shows the Chinese are moving away from drinking for prestige or perceived health benefits and instead drinking for pleasure.

Research director Chuan Zhou says, in the process, they are also moving away from heavy, tannin laden old-world European wines and towards lighter Australian wines.

“When I drink Australian wine I feel it’s so different from the old world, so I can see why it’s appealing to Chinese people — it’s easier to understand, easier drinking and also the branding is more straightforward and the labels are modern,” Zhou says.

McGuigan says there’s an inherent advantage in being an Australian wine producer.

“The Chinese market is growing at about 40 per cent a year with Australian wine and I believe that the Chinese consumer enjoys Australian wine more than any other red wine from around the world,” McGuigan says.

McGuigan says wine must have the Chinese consumer in mind, not the preferences of winemakers.

“We can make a wine that is technically brilliant and wins a lot of awards, but the consumer will pick it up and say they don’t like it.

“So, as a winemaker, I have to say, OK, I hear what you’re saying and now I’ve got to use my professionalism in making fantastic wine quality but I have to make it into a style which is appropriate for the consumer.”

The tactic must be working, with AVL the only wine company to win International Winemaker of the Year four times.

McGuigan says the deal between AVL and YesMyWine is “really going to start the fire” of Australian wine trade with China.

“We’ve entered the market at a time when the Chinese consumer is drinking one litre a head per year, compared with mature markets where consumers drink 20 litres a head per year,” McGuigan said.

“If China gets to those volumes there won’t be enough wine in the world to keep up with demand. But let’s just say they get to seven (litres a head). For the long term this is exciting for our business.” But first, wine growers need to ensure they are not offering a complex answer to a simple problem.