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Cloud Over Australian Wine Imports Benefits Chile In China Market

www.forbes.com by Russell Flannery23/11/2020  

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Australian wines such as Penfolds are facing uncertainty in China. (Photo by Bill O'Leary)

A cloud over the future of imports of Australian wine by China is likely to benefit Chile, a long-time importer and consultant in mainland’s wine market said in an interview.

“For the Australian wine industry, it’s an unprecedented challenge,” said Ian Ford, president of Shanghai-headquartered Nimbility, an American entrepreneur who has lived in China for more than two decades and been a part of the spirits industry’s growth here during that time.

The Australian Broadcasting Corp., or ABC, reported earlier this month that “China's Government has dramatically raised the stakes in its economic campaign against Australia, with multiple Chinese importers receiving verbal directives to stop shipments of Australian wine.”

“From what we can tell, effectively all Australian importers have stopped shipping wines to China,” Ford said. “There has been no ban that’s been published. There’s been no official notification but it’s been made clear to every importer that I know that it is no longer encouraged to ship wine from Australia.”

Ford first worked with Seagram, helping to market its Martell cognac, Chivas Regal scotch and Absolut Vodka beverages. He then started what would become one of the country’s largest spirits importers, Summergate; it grew to nearly 400 staff before Ford and a partner sold the business for an undisclosed amount to Woolworths of Australia in 2014. Nimbility supports wine and spirits imports as well as premium drinks including water. Ford, 49, invests in beverage brands through Lightkeeper Studio.

I spoke to Ford about the impact of China’s reported action in Shanghai on Saturday. Excerpts follow.      

Q. How big is the impact of China’s reported moves?

A. From what we can tell, effectively all Australian importers have stopped shipping wines to China. There has been no ban that’s been published. There’s been no official notification but it’s been made clear to every importer that I know that it is no longer encouraged to ship wine from Australia.  The importers know what that means, and they’ve effectively decided that they’re going to hold off on shipping Australian wine. For the Australian wine industry, it’s an unprecedented challenge. It’s the biggest market, it’s a huge driver of the Australian wine industry, and we don’t know how long it’s going to last.

Q. How big was Australia’s market share?

A. They had just taken over the No. 1 position in the China market last year (in value terms).  It  had been that France was the No. 1 country of origin for wine imported into China. So, Australia had been growing, and that’s probably going to change now.

Q. Why had they been able to take over the No. 1 spot?

A. It’s a great wine-producing country. They have great regionality. The wines are very well marketed.  They were also led – which is very important — by a flagship brand, which is Penfolds. Penfolds came to that point where they became a must-have – consumers were pulling them through the distribution network and demanding it. That’s an essential ingredient that, for instance, Spain has been missing and California has been missing. 

Q. California – really? 

A. Mondavi, for instance, has just appointed a major, national distributor – ASC — to represent, import and market Mondavi in China. Until till now, they’ve been messing around with direct-to-retailers. They can finally put Mondavi in the position it should be, which is out in the forefront.

Q. Who benefits from Australia’s problems?

A. Without a doubt, it’s Chile. France used to be No. 1, then Australia, then Chile. Australia and France swapped (last year).  There’s already been a significant awareness of Chilean wine in China – that’s No. 1. No. 2, the guys that are doing Australian wine are going to want to switch to another New World country that’s an

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Ian Ford speaks at a wine-tasting event in Shanghai on Nov. 14; 

obvious replacement to take something from another new world country. No. 3, you have South Africa and Argentina, but why do I say Chile? Because Chile has a free trade agreement and zero import duties, just like Australia. 

Q. What happened to France?

A. Several things. They were not very good at managing their brands. They did a lot of opportunistic trading. They were pushing a lot of low-quality wines into the market that ended up getting sold at high prices. And I think the trade and consumers got a little fatigue. There was also, though, a major thing that happened. I think it was the 2010 or 2011 vintage when China’s appetite for the fine wines of Bordeaux was almost insatiable, and they were driving the prices up for the rest of the world. There was a turning point, and I think when the China market realized they were constantly jacking the price up for China, they got fed up with it.  That happened simultaneously with an austerity campaign in 2012 when President Xi Jinping came to power and said stop having unnecessary banquets.  That happened right around the same time. That was the turning point, in my mind, in the sort of downturn in demand for French wines.