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Wine company CEO talks about bond between Australia, China through wine

Xinhua by Marcus Reubenstein, Yang Jingzhong23/06/2020  

The story of Australia's 1.1 billion Australian dollars (around 765.7 million U.S. dollars) wine exports to China, according to the data from Wine Australia in 2019, is far from an overnight success. Its bedrock is the deep cultural understanding and relationships cultivated over the years.

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Wine, as one of Australia's main export, has a unique story from every other exporting industries.

Unlike the bulk resource and agricultural commodities which make up just over 50 percent of the nation's 438.1 billion Australian dollars (data for 2018 from Australia's Department of Foreign Affairs and Trade, about 304.96 billion U.S. dollars) in exports, Australian wine is produced in a vast multitude of varieties and exported to 120 countries by about 2,000 producers.

Australia's major bulk exporters can mostly count their global competitors on one hand, but not so for wine. "Australia is a small player," Andreas Clark, CEO of the industry's peak body Wine Australia told Xinhua on Monday.

"We have around 4 percent of global production. The big three in Europe are massive players in terms of their volume," said Clark, noting that the United States and Argentina are also their competitors.

More than half of the world's wine production comes from Italy, France and Spain, taking nearly 60 percent of the total global wine exports, while Australia is the world's fifth-largest wine exporter ranking the seventh in terms of global production.

"Wine is all about branding and positioning. It is not a bulk commodity and it works at different levels, so we work hand in glove with producers in taking our story to the world and helping people understand what is special about Australia," said Clark. "We export over 60 percent of production so export markets are critical."

IMPORTANCE OF CHINA MARKET

Only a small fraction of the Chinese population drinks wine but in a market of 1.4 billion consumers, small fractions still represent big numbers.

Presently numbering 50 million people, China's wine market is double the size it was just seven years ago. Nearly one-third of Australia's wine exports are headed for China.

"There's always this perception that it's been overnight success in China and that really understates what's involved. We all know that's not true," said Clark. "You can't just turn up and produce a bag of gold out of nothing in any market, especially not China. It comes off the back of a lot of hard work."

While the maturity of their markets and profile of consumers varies greatly from China, Britain and North America account for a similar export share to that of China. Clark said the industry understands there's inherent risk in overreliance on single markets.

"The industry is very much conscious of broadening its exports markets. We work in hand with all our wine exporters and you need to have a spread of exports markets, so we have offices in Shanghai, London and San Francisco.

With the traditional wine markets being the United States and Britain 10 years ago, Clark said China wasn't on the radar back then. "Since then China has emerged and it really has been a fabulous market for the sector."

CULTIVATING GOOD RELATIONSHIP WITH CHINA

Trade consultancy ITS Global assessed the industry profile of Australia's exports to China in May, noting that Chinese wine consumers' preferences are generally based on price, country of origin and social influencers.

Country of origin has been an important pillar in building an Australian wine brand story, Clark said. "As an export industry collectively, Australia has done well in China."

"Treasury Wine Estates has done an outstanding job leading with Penfolds. The position of Penfolds as a brand is first class and that's obviously delivered returns for Penfolds but it's also delivered returns for Australian wines as a category. Undoubtedly others have benefited from that positioning."

Export numbers may be high, but Australian wines have a large global footprint outside of China. In size, three of the world's top ten wine companies are Australian (Treasury Wine Estates, Accolade Wines and Casella Wines).

Earlier this year, the international Wine Intelligence report named Australia's Yellow Tail as the most powerful global wine brand, the third year in a row it has topped that list. While the same report ranked Jacob's Creek wines fourth among other global brands.

Undoubtedly there are many ingredients to the success of Australian wine in China. There is not short-cut from the grape to the bottle as with a fine wine. The relationship Australian producers have with Chinese customers has been cultivated over many years.

"Producers who are successful in China have being going there for 15 and 20 years," said Clark. "It's been consistent hard work, multiple trips cultivating relationship and that's been profoundly important."

He added that personal connections and relationships between Australia and China, at multiple levels, cannot be understated.

"The Chinese tourists who've come to Australia enjoying the pristine environment here, the blue skies and seeing our beautiful regions. We've captured their hearts and they understand where the wine is coming from. There's a real connection there and the benefits flow from that," he said.

The deepest understanding of any market comes when you spend time understanding the culture and knowing what both wine distributors and consumers desire.

"When I'm on the road with some of our Australian producers in China, you see what they do in terms of always picking up on their relationships at various trade events," Clark said.

"There's side dinners organized, there's side events organized. These people have become very close friends due to the longevity of the relationship, especially with a product like wine because when you open that bottle of wine that shares the camaraderie."