14/05/2018 - 15:05

Chinese taste for WA wines leads Asian sales push

14/05/2018 - 15:05

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SPECIAL REPORT: Local wineries are embracing China’s growing taste for WA wine with plans to develop more export opportunities across Asia.

Chinese taste for WA wines leads Asian sales push
Vanya Cullen plans to exhibit her Wilyabrup-based organic wines at Asia’s premier wine and spirits trade fair at the end of this month. Photo: Tim Campbell

Local wineries are embracing China’s growing taste for WA wine with plans to develop more export opportunities across Asia. 

The Chinese have taken a liking to a good Aussie drop.

Australia’s wine exports to China (including Hong Kong and Macau) set a record this year with bottled wine exports increasing by 51 per cent in the 12 months to March 2018 reaching just over $1 billion – a first for Australian wine exports to a single country. 

The data released by peak industry body Wine Australia last month also showed Australia’s overall wine exports reached their highest value in a decade, increasing by 16 per cent to $2.65 billion.

For Western Australia, bottled exports to China by value increased by 35 per cent in the year to December 2017, from about $13 million to $17 million.

Mainland China is the biggest export market for the state by both value and volume, followed by the UK, and the US. Singapore and Hong Kong come next, with bottled exports by value growing by 5 and 4 per cent respectively in the 12 months to December 2017.

The reduction in wine tariffs set out in the China-Australia Free Trade Agreement is one driver for the substantial growth in exports to China, with the tariff set to be removed completely in January 2019; this is expected to provide a competitive advantage over other key producers such as France, Italy and Spain. 

(click here to see a full pdf version of the three article special report)

Chief executive on industry peak body Wines of Western Australia, Larry Jorgensen, said there was more optimism among the state’s wineries than 12 months ago, given the improved export performance, specifically to China.

“There’s no question that China is a growth market,” Mr Jorgensen told Business News.

“The impact of China on the domestic market is also something to consider; the more wine that goes offshore, the less there is available for the domestic market.

“That’s where the benefit for smaller producers comes – trading in a market that has more tension around supply and demand.”

Mr Jorgensen said the federal government’s $50 million Export and Regional Wine Support Package had also increased confidence in the sector.

Across Australia, 21 international wine tourism projects were granted funds earlier this month, including proposals from the Swan Valley and Margaret River wine regions, receiving $250,000 each.

The Margaret River Wine Association is planning to use the grant to fund a week-long program of events in Singapore, as well as the development of marketing assets and a digital campaign to help grow visitation from Singapore and South-East Asia.

Mr Jorgensen said the Swan Valley region was also focusing on Singapore as part of its competitive grant strategy, with the other seven WA wine regions to benefit from a broader state grant, which is currently being negotiated by Wines of WA. 

“The biggest opportunity is collaboration,” he said.

“What do you think has more value, generic New Zealand sauvignon blanc or Marlborough sauvignon blanc?

“Promoting the fine wine regions in WA, that’s where the branding juice is.

“That’s another attraction for visitors when considering coming here; we have nine different distinct regions.”

Opportunity

Fogarty Wine Group, ranked in the BNiQ Search Engine as the state’s largest winery by volume of wine produced, is one of many local producers hoping to accelerate wine sales in China.

Chairman Peter Fogarty said the group had been gradually building its presence in Asia and planned to increase its efforts in China over the next 12 months.

He said China had already absorbed a significant amount of Australian wines, evident in the increasing grape prices on the east coast and the growth in sales of premium wines.

The group’s acquisition of the Evans & Tate brand last year was one way to bolster this appetite, with Mr Fogarty pointing to the brand’s track record of award-winning premium wines.

The premium drawcard has been top of mind for Denmark-based winery Rockcliffe, which has created a new label, Peaceful Bay, specifically tailored to China’s tastes.

Owner Steve Hall said the winery had already shipped its first container to China in 2018, with total sales to China on track to hit $540,000 this financial year.

Dr Hall has sought out Asian markets since he purchased the winery in 2002, pointing to advantages such as: its burgeoning middle class with a desire for affluence; a population far larger than the competitive domestic market; its location in the same time zone as WA; and the ability to fly directly from Perth.

“We got into China via agents,” Dr Hall said.

“Patience has been key; time invested in forging workable relationships is now beginning to bear fruit.

“When I began attending wine shows in China, I was taken aback by the enormity of demand. In particular, if Chinese consumers liked a wine, they were game enough to order it by the pallet, not the case.”

Wine shows have also been key to Wilyabrup-based Cullen Wines, which managing director Vanya Cullen said was planning to exhibit at the 20th anniversary of Vinexpo Hong Kong, Asia’s premier wine and spirits trade fair, at the end of this month.

This year, Australia is the country of honour, featuring 140 wine brands from more than 35 regions across the nation.

“China seems to be on the move for everyone,” Ms Cullen said.

“We’ve spent a lot of time getting the right person there.”

She said instead of showcasing in the Australian section of Vinexpo, the winery had chosen the organics section.

Cullen Wines has embraced organic and biodynamic winemaking principles since the late 1990s, but Ms Cullen said consumer interest had only started to grow in recent years.

According to Wine Australia, the country’s organic wine exports were valued at $14.5 million in the year to March 2018, with Sweden and the UK the largest destination markets.

Sales to China were next, with Australia’s organic wine exports increasing by 170 per cent during the same time frame.

Ms Cullen said the winery was well placed to cater to China’s organic appetite, with its Vanya Cabernet Sauvignon biodynamic label retailing for $500 per bottle.

South West winery  McHenry Hohnen Vintners co-founder Murray McHenry also plans to showcase wines at the Vinexpo in Hong Kong.

“If we don’t visit, we’re not going to build our export trades,” Mr McHenry said.

“We’re also looking at Taiwan and Japan, they’re not big currently, just boutique levels.”

The UK market has traditionally been the largest export market for McHenry Hohnen, however, Mr McHenry said the winery would soon match that in sales to China. 

“For the best part of eight years we’ve taken a hit on the exchange rate, but UK sales have got some margin now,” he said.

“Our other key market today is China, particularly for our red wines.

“The UK will grow at 3-5 per cent a year and China will grow at 10 -15 per cent a year.”

McHenry Hohnen has also recognised the potential in organic and biodynamic wine, having adopted those viticultural practices seven years ago and currently in the process of gaining certification.

Mr McHenry said the cellar door and mail order were its largest selling channels, followed by exports, as supermarket chains had become ‘cut-throat’ with margins.

“We see a marketing edge coming forward once we can say we’re certified,” he said.

“We’ve got clients in Singapore, like the Hyatt hotel, who have a venue where all the wine and food are organic. I think big cities around the world will start doing that more, and when you’ve got the product, then you’ve got the ‘in’.

“The wine industry has been a massive growth market for the Australian balance of trade and as much as we send iron ore and minerals out of the country, wine is more sustainable, the others will run out at some stage.”

Dunsborough-based Flametree Wines export sales and marketing manager, Liz Mencel, said building added capability would help boost the potential for exports.

Ms Mencel, who is also on the board of the Margaret River Wine Association, said initiatives like the federal government’s $50 million Export and Regional Wine Support Package were vital to boost opportunities for the state’s number of small- to medium-size wineries.

“There’s a part of the grant that focuses on building capability within the industry like workshops and helping to gear up producers on how to work in supply chains effectively,” she said.

“Because of these resources and initiatives, I think there is certainly a huge awareness for a lot more of the smaller companies around opportunities in China.

“We’re seeing really good results in terms of the overall value of wine exports increasing and that’s always a good thing rather than simply looking at volume, because in WA we’re much more about the dollar figure than bulk.”

Flametree exports just less than 20 per cent of its production, and had tapped into the significant ‘gifting market’ in China as a means to grow its presence, with more than 85 per cent of its wines destined for China being red.

While China is the main export destination for Flametree, Ms Mencel said the US could be another market on the horizon for the state’s small to medium wineries.

“We’re still a relatively young winery and we’ve really focused on building our direct consumer sales first, as a small- to medium-size winery always benefits from that approach with greater margins,” Ms Mencel said.

“Despite the opportunities in the US, it’s still really a market for larger players that requires significant investment and a concerted effort over a long period of time.

“We’re happy to go into the US in maybe another year or two in terms of our strategy, but right now in terms of where our money is best spent, it’s China.”

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