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Monday 20 October 2014

Australia puts positive spin on Chinese slide

16th April, 2014 by Gabriel Stone

Wine Australia has argued that Chinese government austerity measures stand to benefit the wine industry in the long term, despite attributing its latest significant volume slide in this market to the crackdown.

Photo credit: Wine Australia

Photo credit: Wine Australia

According to Wine Export Approval Report March 2014, released this week, exports of Australian wine to China during the previous 12 months fell by 12% to 37 million litres.

The same report showed that Australia’s overall volume exports fell by 6% to 677m litres, echoing the country’s previous data covering the 12 months of 2013.

Despite this continuation of declines seen by many companies exporting to China since the country’s new government came to power 18 months ago, Wine Australia’s general manager for market development James Gosper stressed the positive aspect of cuts on lavish gift giving.

“I believe that the controls the Chinese government has put in place are going to be the best thing for industries in that market,” he told the drinks business. “A lot of importers were bringing in unknown brands and even creating them to give as gifts.”

As a result, he continued, “there was a huge amount of trade in brands that hadn’t established themselves; they had no heritage or history and their value couldn’t be traced online.”

In addition to this problem for consumers of understanding the wine in their possession, Gosper highlighted the challenge for producers in connecting with their audience

“The brand owners and importers didn’t ultimately understand who the end consumer of that wine was,” he remarked. “One of the very basic understandings for building a brand is to know who’s drinking your wine. If the consumer is faceless, there’s very little opportunity to build your brand.”

Suggesting that many of these brands with weak foundations were now disappearing from the market, Gosper predicted: “Consumers who really want to be wine consumers will start to see a traditional wine market emerging; wine brands with a pedigree and heritage will start to become a lot more important.”

According to Gosper, this shift in the shape of the market “will mean slower growth, but it’ll be more sustainable growth.”

Indeed, he argued that as a result of these measures China “will continue to be an incredibly strong market,” noting: “over 500 million Chinese will enter the middle class in the next 10 years and all of those will be thirsting for what middle class consumers in the West have, whether that’s cars, bags or wine. It means they will want to understand what wine is about.”

His comments fall into line with an estimate made last year in a Chinese newspaper that the country’s growing middle class could see Australian imports boom by as much as 50% during the next three years.

In line with this expanding potential customer base, Gosper pointed to the “huge focus” on education within Wine Australia’s Chinese strategy. In short, he concluded that, despite these short term declines, “there’s a great opportunity for Australian winemakers in China.”

Detailed analysis of Australia’s recent export performance will appear in May’s issue of the drinks business.

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