Wine Authorities Explain Chinese Market

Managers and prospective vintners gather for Wine Executive Program

by Andrew Adams
Wine executive program
Jeremy Benson of Benson Marketing Group discussed how to create a marketing plan during the UC Davis Wine Executive Program. Credit: Jacqueline Romo/UC Davis
Sacramento, Calif.—As a Far East nation of 1.3 billion people grows wealthier, many of its residents are gaining an appreciation for fine wine. That thought has sales staff in Bordeaux, Adelaide and St. Helena licking their chops, but there may not be as many wine lovers in China as some suppose.

Tom Selfridge, a wine industry consultant and retired president of Hess Collection, currently is consulting for a vineyard development project in China.  Selfridge said the potential for wine in China is huge, but if sellers look at how many people are actually buying varietal wines at premium prices, the market is still smaller than that of the United States. Wine made from grapes also accounts for just 10% of the wine that Chinese drink.

“When people in China talk about wine, it’s a much broader category than what we talk about,” said Selfridge, who added that the Chinese make wine out of other fruits such as plums and enjoy mixing it with juice and soft drinks.

Selfridge discussed the potential of the Chinese market with a group of wine industry professionals attending the 12th University of California, Davis, Wine Executive Program held March 25-29.

Selfridge recalled a conversation he had with the owner of Chateau Lafite about Chinese drinking habits. “The people buy Lafite over there (and) they always mix it with Coca Cola, and he says to me, ‘Tom, what a waste of a good glass of Coke.’”

Those habits are changing as an ever-growing number of Chinese billionaires and a growing middle class begin to drink and collect wine. He said the French were the first to tap the Chinese market and still have a large lead over California imports, which also lag behind Australia. “We have more work to do,” he said.

Mark Yang, an attendee of the Wine Executive Program, is a U.S. citizen who lives in China. Yang co-founded the La Joie De Vivre wine club and is working to establish a resort and wine club near the Chinese city of Guangzhou. He agreed with Selfridge’s assessment that the Chinese market is around 18.5 million core wine drinkers, but he expects that market to double within five years.

Pay to play
Yang said he has full faith in the Chinese government’s plan to double the average citizen’s disposable salary within five years, and when that happens he expects wine imports to double as well. “That means people here need to do a much better job, honestly, of marketing,” he said.

Chinese know the top French brands—all of the wines in Yang’s club are French—and they have an appreciation for Penfolds, but they don’t have the same taste for California brands. Yang said wealthy Chinese businessmen are looking for investment projects in Australian wineries and vineyards because of the proximity of the two nations and their familiarity with Australian products.

He said Americans also could be surprised that it takes money just to get on a wine list or in a retail shop. “You’ve got to pay a lot of money to get on the list,” Yang said. “If you want to have your wine on a shelf in a retail store, you pay. That’s very expensive.”

It’s also not unusual for deals to have credit terms of three to six months. To many Chinese wine drinkers, price plays a key role in how they buy wine, so Selfridge urged the audience to view China as a destination for only premium products.

When asked how to navigate the many importers who claim to offer access to the Chinese market, Selfridge said it’s worth paying for the advice of an American firm that has been working in China. “Otherwise you risk working blind.”

One problem American wineries don’t have is the risk of counterfeit bottles being sold in China. The lack of interest, however, could be viewed as a negative. “If we get counterfeited, that says we’ve made it. We’ve established ourselves in China,” Selfridge said.

    2013 Program

    The 2013 Wine Executive Program is set to also take place in March on the UC Davis campus. The program is intended for mid-level to senior managers at wineries or other businesses in the industry as well as professionals looking to enter the wine industry. The cost is $4,400 for a the full four-day program featuring a morning “boot camp” session in finance or wine production or $3,900 without the boot camp. Details: wineexecutiveprogram.com
Wine Executive Program
Seventy people attended this year’s Wine Executive Program held at the UC Davis campus. Those attending the conference hailed from Argentina, China and Canada as well as wine regions throughout the U.S.

The attendees represented some of the big names in the wine industry such as Diageo and Constellation as well as smaller independent wineries and industry suppliers.

Nikoo Bakhtiar, owner of Cross Keys Vineyards in Mt. Crawford, Va., said she found the marketing sessions most helpful, adding that she will “definitely get more serious” with the winery’s Facebook and YouTube presence. “I will also implement a better training program for our tasting staff to be more interactive with customers to talk about our brand and mission.”

Cross Keys produces 3,500 cases a year and the average bottle price is $22 according to WinesVinesDATA.

Jeremy Benson, president of the Benson Marketing Group, discussed creating a marketing plan for wineries, and Brian Dunbar, managing partner at the ad firm David&Goliath, discussed how to make a winery brand stand apart.

Several professors from UC Davis gave presentations about viticulture and enology, and Robert Yetman, an associate professor at the UC Davis Graduate School of Management, lectured on accounting and strategic cost management.

Phillip Anderson, general manager of the 25,000-case CapRock Winery located outside of Lubbock, Texas, said he learned something in each session.

He said Dr. Anita Oberholster’s a presentation about cost-saving techniques in winemaking was quite helpful. “I want to start trials with mannoproteins to replace cold stabilization. It sounds like we could save energy and time without changing the taste of wine,” he said via e-mail. “That’s pretty impressive. I hadn’t even thought about that prior to her talk.”

Anderson said he picked up a few marketing and accounting ideas. “Since everything in the wine business is expensive, every decision you make has an effect on your resources,” he said. “I’m going to drill the net present value concept into anyone at the winery who makes purchasing decisions.”

Posted on 04.03.2012 - 08:05:37 PST
I'm sorry to hear that a successful Bordeaux chateau would continue to circulate wine and coke stories. Too many people love to make fun of Asians, choosing to believe consumers in our part of the world are foolish and frivolous. Simply not true. As a longtime resident (25 years) and wine professional in Asia, I have observed the market move at a lightening pace and am daily impressed by the sophistication of our keen wine lovers. If you are interested to learn more about the Hong Kong market specifically, see the Guide to the Hong Kong Wine Trade, which is a 458 page directory of importers/distributors with market research and insights provided by the importers themselves as well as consumer dynamics and 'all things wine' in our booming market.
Debra Meiburg MW