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What is NZW’s event strategy for Asia, including China?
New Zealand Winegrowers events are organised according to winery demand, and are based in markets where wineries want to explore and leverage opportunities. As such, we coordinate events in order to deliver maximum results for wineries; this typically includes a mix of standalone New Zealand-focused wine fairs - such as the Pure Discovery events we host in China’s Tier-1 cities each May - supported by a regular presence at the major trade show VinExpo HK. Where possible, we try to link events together to create roadshows or tours, in order to maximise travel times and budgets for winemakers and representatives.
As all our events are funded 100% by winery contributions, they are entirely based on demand. We communicate with wineries regularly to understand what it is they are looking for in an event, what their global market objectives are, and how we can deliver this. Winery demand also affects which events are regular points in the annual schedule and which are more opportunistic.
ProWine China is becoming the largest mainland China event – yet New Zealand wineries do not seem to be keen to take part. Why do you think that is?
In recent years, China has seen a huge proliferation of expos, wine shows and other activities for wineries to reach trade and consumers with their products. Some of these are international shows with highly professional organisers such as ProWine China, newly-launched Vinexpo Shanghai, Decanter Fine Wine Encounter, the long-established Chengdu Tang Jiu Hui and more, while many others are more locally focused and typically have lower participation fees and production values.
As a general rule, wineries that are seeking distribution or looking to expand their network of representation into new regions of China tend to be more willing to look at the larger events; while wineries that are already represented in China tend to follow the advice of their importers, either attending smaller-scale locally-targeted events or spending funds on in-market promotions and activities to drive sales.
Having said this, NZW believes that ProWine China is a valuable event for all wineries to consider. We have supported the event, participating with a national pavilion at the second edition and promoting it in our Global Events Program and events communications for the past three years. However, as all our events are 100% participation funded, we require a minimum number of sign-ups to proceed with a pavilion to cover design and build costs. In the case that we cannot offer a pavilion, we pass any wineries keen to participate on to the event organisers to coordinate their participation directly.
In terms of other major markets (US, UK, OZ, other Asia) how important is China?
China is our largest export market in Asia, and 6th largest globally by value, so it is an important market that both demands and deserves attention from wineries.
New Zealand wine exports to China for the year ending June 2018 increased 11 percent to reach 2.5m litres, while value was just shy of NZ$37.5 million, up 18 percent y/y. The average FOB price per litre stands at $14.83, more than double New Zealand’s global average of $6.68.
Looking in more detail at varieties by volume, white wines make up 42.5 percent of exports at just over 1m litres, dominated by Sauvignon Blanc (835,000 litres). While red wines represent the majority of exports, the share has dwindled over the past 10 years from well over 70 percent to the current 57.5 percent. Red wine exports are relatively evenly split between Pinot Noir (460,000L), Cabernet and blends (450,000L) and Merlot (400,000L). Syrah exports to China make up a further 145,000L, representing approximately one third of New Zealand’s total exports of this increasingly recognised varietal.
(All data is from NZW for the year ending June 2018)
What effect does the Chinese preference for red wines have on New Zealand wineries who are considering exporting into mainland China?
As the data shows, New Zealand red wines are in demand in China and can command high prices. However, don’t let that fool you – increasingly sophisticated consumers purchasing wine to drink with friends are shifting the dial slowly towards whites such as Sauvignon Blanc.
Wineries that are most active in China tend to have a focused offering of both red and white, in particular those offering a choice of Merlot or Pinot Noir to pair with the expected Sauvignon Blanc.
How have New Zealand wineries embraced the China market?
We have seen a great deal of enthusiasm, with well over 150 wineries exporting to the market on a regular basis. Market visits are now a regular part of winery reps’ travel schedule, and a small number of producers have taken the step of committing to establishing local sales teams to help grow their businesses.
Despite this enthusiasm, China remains a demanding market that is constantly changing. Wineries that are active here know how hard it can be to keep track of who’s who, with platforms and key players regularly shifting to meet new trends. China offers great opportunity, but also demands attention and focus to perform well.
Moving forward – what advice would you give to New Zealand wineries who are considering expanding their export markets into China and Asia?
While the landscape is shifting towards meeting the needs of consumers, the majority of distributors in China are still focused on moving volume without the capacity to build brands. Very few companies are able to maintain nationwide distribution, so be prepared to start small with non-exclusive partners and grow using their distribution network. As far as is possible, try to get a clear idea of where your product will be distributed and what marketing investments will be made, including your travel obligations for market visits and sales calls.
Do your due diligence about any company that approaches you, and expect to be firm and bargain on pricing and volume targets. Ensure you work out China-specific prices and your walk-away point before entering negotiations. Finally, protect your IP and make sure your brand names (and Chinese translations) are registered in your name. Fortune favours the well-prepared!