China develops taste for Australian wine

Australia's wine exports to China grew in volume by almost five times - up 482% to 11.75 million liters - over the past year, according to statistics from the Australian Wine and Brandy Corporation (AWBC). By value, wine exports to China for the year ended May 2006 were worth 20.6 million Australian dollars (US$15.27 million), up 110% on the prior year, although the price per liter was down 63.9% to $1.75.

The Chinese market is small by comparison to Australia's largest export market, the United Kingdom, which bought almost 271 million liters of Australian wine worth about $968.5 million, or about 37% of total exports.

But China is a market which the AWBC says is continuing an "exceptional performance". "China ranked ninth in volume and 13th in value [in terms of wine] shipped from Australia," AWBC analyst Peter Bailey said. "While 90% of the volume growth was in bulk [wine] shipments, bottled shipments also recorded strong growth at 68% for the year, albeit off a small base."

AWBC corporate affairs manager Eric Wisgard said Australian wine producers were being spurred into the Chinese market by a recent tariff reduction on wine and by rising Chinese economic affluence.

"A major tariff reduction has occurred in the past 12 to 18 months from 65% to 14%, so that's obviously made it a lot more attractive to export Australian wine to China," Mr Wisgard said. "The other factor, too, is the increasing affluence, particularly in the major cities. There's a growing middle class, and there is quite a move to adopt Western symbols of success and sophistication. They're looking for international brand names and other signs of Western-style affluence, and wine fits into that quite comfortably."

Although China has not had a wine-drinking culture like France or Australia, consumption per head in China had doubled in the last five years. Nonetheless, annual consumption per head was still extremely low at 0.3 liters per person compared to 25 to 26 liters per person in Australia. "But the sheer size of the population over there still means it's an opportunity," Mr Wisgard said.

The AWBC said most of the wine going to China was bulk red, of which Australia has a big surplus after several years of bumper grape harvests. Mr Wisgard said the Australian wine sector was looking to lift exports to China of more-profitable bottled wine. The Chinese market is still under evaluation and there is no general promotion of Australian wine in China at the moment other than marketing carried out by individual companies.

One company currently selling Australian wine to China is Pernod Ricard Pacific (formerly the Orlando Wyndham Group), which says it is having success with its popular Jacob's Creek label. Pernod Ricard Pacific international sales director Nick Blair said China was an interesting market but was hard to break into. "There's quite a few challenges that you're confronted with in terms of distribution and maintaining integrity of your products and so forth, in terms of warehousing and everything else to make sure your product doesn't suffer heat exposure and stuff like that," he said. "We've had some reasonable success, mainly through the fact that we've got a substantial distribution network through our sister company there, Pernod Ricard China."

Mr Blair said Pernod Ricard had been focusing on selling branded bottled wine to big Chinese restaurants frequented by locals in the major cities and to international hotels. "With the Olympics coming up [in 2008] we've also put a fair bit of effort into trying to increase our exposure in Beijing," Mr Blair said. "Part of the challenge with the Olympics is there's a lot of education required for the Chinese to understand how to handle wine and how that will be viewed by the outside world."

Blair said China had a substantial wine market of its own and had as many grapes under vine as Australia. "But the quality of the wine that they're producing is vastly different to that which we produce, and the occasions that they drink wine are very different to when Western people would normally drink wine," he said. Blair said one had to be "quite well-to-do" to be able to afford wine in China, so Pernod Ricard was targeting consumers more interested in trying things that were "Western".

Chinese consumers were also traditional people who liked authenticity. "So the fact that Jacob's Creek is the number-one selling brand in Australia resonates with them, and we're finding that that gets us entry into quite a few restaurants," Blair said.

He added that selling bulk wine to China may not be sending the right message. "I think we should be focusing on getting our bottled product and strong brands into the market place and really pushing what we're really very, very good at, which is producing high-quality, branded bottled wine at affordable prices," he said. (Asia Pulse)