“We like to say that when you have been in China for a week, you can write a book. When you have been here a month, you can write an article. After six months, you can write a very good letter. After 12 months, you can introduce an expert on China. The more you learn, the more you realise you have to learn.”
And to learn, you need to be visiting the market on a regular basis.
“You don’t have to be an expert in the language, but you do have to understand the business customs. And you can’t do that from New Zealand. You have to be here on a regular basis, transacting with the people and the market.”
Given the evolution and the fact New Zealand doesn’t have a high profile in the Chinese market, English believes there is a need to also think outside the traditional forms of marketing your product.
“Hotels and restaurants may not be the best way to sell, as it is a well trodden path. If they have 30, 40 or 50 wines on their list, how do you stand out? Retail is difficult as it is often low end. In major supermarkets margins are low, their terms and conditions aren’t great and its hard to make money there. Some people I know who have been very successful here are selling through events, rather than the traditional outlets.”
By events he means, major sporting, corporate or government functions.
“One company just did a deal to supply $250,000 worth of wine to one company. Another (New Zealand) wine company was the only wine supplier at a Top 500 Hotels conference. Through their distributor and connections, they have had a very good result, from just one event.”
Given the tariffs for New Zealand wine came off at the beginning of the year, New Zealand now has a competitive advantage no other nation (with the exception of Chile) has. Companies will still have to pay VAT and Luxury Tax, but other countries exporting to China will pay on top of that the Most Favoured Nation (MFN) tax of 27%.
“So we do have some competitive advantage on price alone But we have to be able to understand the system they work with. I can’t emphasis enough the Five Ps. Proper preparation prevents poor performance. China is a hard place to do business, but there is potential for returns if the business case stacks up. Do your homework. If it sounds to good to be true, it probably is, and remember China is not a market for low hanging opportunities.”
One wine company that has been exporting to China for 12 years is Villa Maria, which was the very first wine in the Summergate Wines portfolio back in 2000. (Summergate Wines is now one of China’s largest independent wine importers.) Charlotte Read is the Asian/Middle East Market Manager and spends up to three months a year in China alone. She agrees with English, that being on the ground is paramount to growing your business. But she says wine companies also need to realise that growth won’t happen overnight.
“If you talked to the partners in Summergate Wines, they would say the China wine story is a 10 – 20 year vision. New Zealand makes up only 1.5% of the Chinese market, and if you stripped out the foreign hotels, ex pats and foreign visitors, there are probably not a whole lot of people drinking New Zealand wine. We have really got to get to that next level of awareness.”
Read also believes promoting New Zealand wine as the “cool” or “hip” wine to drink, is going to be important going into the future.
“We need to make the New Zealand wine brand really aspiration because now in China, they want to look good. They drink with their eyes. The label has to look good and it’s got to support the feeling that they are sophisticated by drinking wine. And we have to create an awareness of white wine.”
Both Read and English say there is a real opportunity to promote New Zealand’s white wines in the hotter regions, particularly to women.
“In Decanter recently there was an article that showed white wine drinking (in China) is on the rise. It grew by 19% last year and will grow by 70% by 2015,” Read says. “That is really positive for New Zealand and the story we want to tell. It pains me that in the middle of a Shanghai summer, where it could well be 35 degrees and high humidity, you will see people drinking a glass of red wine because that is what they think wine is. I think it would be very good to do a campaign on the fresh coolness of a Sauvignon Blanc on a summer’s evening.”
(Interestingly 75% of Villa Maria’s sales to China are white wines.) With 12 years experience in the market, Read says the company has learnt some important lessons. Number one being active in the market place on a regular basis is essential. Number two, you have to be able to sell your wine through your label.
“Busy labels with too much going on are least preferred. It’s the more simplistic, more classic, more old world looking labels that are going to succeed.”
Also while having a Chinese back label is mandatory, Read says don’t forgo your English version.
“Because there is a fear in China of adulteration, they will pay a premium for imported product they know is authentic. If you go to too much trouble to translate into Chinese, there is the possibility of people thinking you have some link to China. It’s a funny one, as in the west we need to have a bit of communication on the back label, as that is part of the buying process. But at this embryonic stage of the wine market development in China, authenticity and an assurance the wine is from a foreign company is what they are looking for.”
Read’s other piece of advise is to ensure you take responsibility for your product going through the distribution chain. She says every company exporting into China needs to be asking the right questions.
“Once that wine gets to China, where is it going? Is it going into a restaurant, or is it going onto a shelf in a wine shop? We are all brand guardians of the New Zealand wine image, so we all have to take a responsible stance. The last thing we want is for a 2011 Sauvignon Blanc to not be shifted until 2014, because it won’t be selling the best of what we are about. I hear a lot of people taking the short term opportunities. I really hope for the health of the New Zealand premium brand, long term, that people will make more responsible choices.”
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