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Interview with ASC CEO: ‘we address challenges head-on’ by NATALIE WANG29/02/2024  

Makoto Nagae, CEO of ASC Fine Wines (pic: ASC Fine Wines)

In the intricate and fast-paced arena of China’s wine market, ASC Fine Wines, the country’s leading fine wine importer, like many had its share of challenges. The year 2023 has been a testament to ASC’s resilience and foresight, navigating through a landscape punctuated by consumer volatility and shifting dynamics following Wajiu’s shocking merging of two of China’s biggest wine importers – Torres China and Summergate Fine Wines.

At the helm is CEO Makoto Nagae, who took the challenges “head-on” as he says. Nagae’s emphasis on prioritizing long-term market value over immediate profit gains resonates deeply in an industry grappling with rapid changes.

In the interview, the CEO shares the cornerstone that has propelled the company’s resilience. Nagae also discussed the rise of instant retail and why it is “a new highlight in the wine distribution evolution in China.” Looking to the future of wine, the industry veteran sheds light on how ASC strategically pivoted to engage the next generation of wine consumers and why ASC is bullish on boutique Chinese wine’s growth.

Q: Given the consumer trend in 2023 that started with high enthusiasm but saw a decline over time, what strategies has ASC employed this year to address this situation?

Makoto Nagae: Confronted with the industry’s challenging trend in 2023, ASC is addressing these challenges head-on rather than retreating. We are actively organizing promotional tasting events across major cities nationwide, introducing new brands, and engaging more enthusiastically in public welfare activities to realize our ESG goals. For 2024, we aim to achieve significant performance breakthroughs.

The Chinese wine market still harbors immense potential, especially among the middle class and young consumers. We are confident that the current challenges are temporary and that the future of the Chinese wine market holds numerous opportunities. The focus of consumers is shifting beyond just big brands and price points to include broader concerns like social responsibility and sustainable development. With an optimistic outlook, we will continue to cultivate the Chinese market and seize future opportunities. We also hope ASC’s confidence in the future and our steadfast commitment to the Chinese market will inspire our industry peers.

Q: Speaking of ESG, last year ASC was awarded ‘2023 Best ESG Company in the China’s Wine Industry’. What significance does this award hold for ASC?

Makoto Nagae: Since its inception, ASC Fine Wines has been deeply committed to Corporate Social Responsibility (CSR), with a focus on supporting education and charitable causes. Particularly since the establishment of the ASC Fine Wine Auction Company in 2009, we’ve consistently donated a portion of our auction proceeds to the Shanghai Charity Foundation, thus creating the “ASC Charity Fund.” After becoming a part of the Suntory Group in 2010, ASC has broadened its engagement in the ESG area, striving to integrate environmental sustainability into our business practices. A significant portion of the ASC product portfolio reflects the values of sustainable development, aligning with the wider environmental initiatives of the Suntory Group. ASC Fine Wines is honored to receive this prestigious award, further solidifying our responsible and socially aware leadership position within China’s wine industry.

Q: Over the past year, there have been several instances of foreign-invested wine companies in China being merged and acquired. What impact has this had on the competitive landscape, and what is ASC’s stance?

Makoto Nagae: Amidst the backdrop of mergers and acquisitions of foreign-invested wine companies, we’ve witnessed a transformation in the market’s competitive dynamics. Mergers and restructurings play a crucial role in enhancing company efficiency and fostering industry synergy. The acquisition of ASC by Suntory in 2010 is a fitting example of a successful merger that spurred growth for both ASC and Suntory. However, we emphasize that mergers should pursue long-term market value rather than short-term profits.

ASC and Suntory have always prioritized consumer interests, which we believe is the cornerstone of sustainable industry development. Amidst fierce market competition, we remain committed to enhancing the quality of our products and services, ensuring ASC’s competitive edge.

Q: In recent years, the development of instant O2O retail channels, such as Meituan/Pupumall/Jiuxiaoer, has been rapid. What is your assessment of these channels’ performance?

Makoto Nagae: We view the rise of instant O2O retail channels as a new opportunity in the evolution of the route to market in China’s wine industry. These channels uniquely cater to immediate consumer needs, especially for wines at lower price points, offering a more convenient purchasing experience. Nonetheless, there’s room for improvement in these platforms’ supply chain management and professionalism regarding upstream suppliers. We anticipate these platforms will continue refining their operations to better cater to consumer demands for premium wines.

ASC is rapidly growing in various O2O channels, including Waimai Delivery, Meituan Grocery (Xiaoxiang Supermarket), and Hema, outpacing the overall market growth rate. The inherent compatibility of O2O instant channels with wine, a product with strong FMCG (Fast Moving Consumer Goods) characteristics, presents a promising avenue for wine consumption.

Q: Chilean wine has been a hot topic in recent years. How are the Chilean wine brands represented by ASC performing?

Makoto Nagae: ASC’s portfolio of Chilean wines, focusing on boutique brands, has achieved commendable success in the market with exclusive distribution rights in mainland China for brands such as Caliterra, Lapostolle, Casa Silvia, and so forth. We are committed to a long-term process of brand building, based on each brand’s unique characteristics. Currently, our efforts towards brand cultivation are steadily advancing.

In addition to our exclusive Chilean brands, we’ve seen substantial growth in the open-market Chilean wines. While we have no immediate plans to expand our Chilean portfolio, we are focused on optimizing our existing brands and deepening market penetration to maintain a competitive edge. Through continuous adjustment and improvement, we aim to ensure the robust performance of our Chilean wine brands in the Chinese market.

Q: ASC also represents several Chinese wine brands. What are the latest developments in this area?

Makoto Nagae: We have great confidence in the direction of domestic boutique wines. Over the past few years, we’ve successfully marketed a series of domestic wines and last year we added two new brands to our portfolio including Domaine Muxin from Shangri-la Yunnan and Kanaan Winery in Ningxia, demonstrating our firm belief in the potential of Chinese boutique wines.

The Chinese wine brands taken on by us highlight the unique terroir and diversity of Chinese wine regions. For example, Domaine Muxin, despite its limited production and niche appeal, has garnered high demand in the market due to its quality, terroir, and winemaker’s charisma. We are committed to furthering the development of domestically produced Chinese wines, aiming to elevate the Chinese wine industry on the international stage.

Q: In recent years, ASC has also ventured into targeting younger consumers with products like the sweet wine brand “Coucou Bee.” How is it progressing?

Makoto Nagae: Our efforts to cater to younger consumers, including leveraging the potential of products like Coucou Bee, have been fruitful. Collaborating with KOLs, we’ve conducted targeted promotions on social media, sparking interest in wine among young people. Additionally, we’ve developed related POS materials and launched fashion-forward accessories like scarves and transparent jelly bags, appealing to fashion-conscious female consumers. Coucou Bee’s breakthroughs in both on and off premise accounts, such as introducing these products to popular vendors like Hema and Commune, have been well received by young consumers, earning recognition in the market.

This strategy of targeting younger consumers is not merely an experiment; it reflects our understanding of future wine market trends. We are committed to continually engaging future consumers, particularly the young and those new to wine.