A pair of wineries from Western Australia’s Great Southern are finding that uncorking the potential of China’s lucrative market is just as much about cultural experience as it is about business.
Even a quick look at Australian export data reveals how attractive China has become for Australian winemakers.
The latest figures from industry representative group Wine Australia show exports to China were worth more than $1.12 billion in the year to June 30, with more than 180 million litres being shipped from Australian vineyards to the People’s Republic.
And with China’s ever-growing middle class increasingly seeking out new culinary experiences, the market is only expected to grow further, with Wine Australia forecasting the $2 billion mark is not a matter of if, it’s a matter of when.
It’s quite a turnaround for the wine industry, which until the ratification of the China-Australia Free Trade Agreement in 2015, was grappling with the conundrum of what to do with millions of litres of excess wine with no apparent market.
“Three or four years ago there was this great wine lake in Australia,” Rockcliffe owner Steve Hall told Australia China Business Review.
“I think that great wine lake has shifted in bottles to China, and the next big problem is going to be finding enough grapes to make wine.
“The market is so enormous, there is room for a lot of people.”
Mr Hall’s Rockcliffe vineyard, located near Denmark in the pristine Great Southern region of Western Australia, has been exporting wine to China since around the same time the ChAFTA was introduced.
Rockcliffe exports around a third of its total production to China, with sales in the 2018-19 financial year forecast to reach $1 million.
Mr Hall said the size of the Chinese market, along with the lowered barriers to entry, made it an extremely attractive proposition for the Australian wine sector.
“We can sell more in five days to China than we do in the whole of Australia in a year,” he said.
“That’s a little bit of an exaggeration, but the effort one has to go through to sell wine in Australia is substantial.”
That’s not to downplay the lengths Mr Hall has gone through to establish his China presence, however.
Mr Hall said Rockcliffe had launched its own label, Peaceful Bay, to drive its China sales, after the winery’s initial efforts to capitalise on the growing Chinese demand for quality imported wines were met with some specific challenges.
“My original thought was that we could go in with the branding that worked in Australia,” Mr Hall said.
“But initially they didn’t like some of our labels.
“They were made for China, but they were made for China by someone in Sydney, who wasn’t Chinese.
“With the labels, they are very particular, and they are particularly important for someone who can’t read English.
“You want to be distinctive with your label, but you don’t want to break the rules.
“For example, you can’t put Chinese on the label, because if you do that, it looks Chinese, and they don’t want Chinese, they want Western products.”
Along with the new, China-focused branding, Mr Hall has also employed a Shanghai-based Chinese national, former Levis China executive Jessica Zheng, to handle sales and marketing, after previously having used various sales agents and distributors.
Like many other industries, Mr Hall said success in the China market was not an overnight proposition; rather it was built on long-term commitments.
Mr Hall said he travelled to China at least four times each year, hosting wine education events with potential distributors or attending trade shows.
“Developing the relationship is what takes the time,” he said.
“It’s not instantaneous. People will make a mistake if they think they can go to China, they’ll meet somebody, and they will order a container of wine. They won’t, in my experience.
“You need to understand the culture but it’s not easy to understand the culture.
“The way that things are done in the West is you turn up to a meeting and you do a deal.
“But if you go into China thinking that’s going to happen, it won’t happen, you’ll get upset and they will go buy from someone else.
“It doesn’t seem to matter what the quality of the wine is, what really seems to matter is if they like you.”
For Rockcliffe’s Great Southern neighbour, Singlefile Wines, gaining a foothold in the China market was as much about good fortune as it was about producing good wine.
Singlefile chief executive Patrick Corbett said his winery’s China journey began during WA’s mining development boom of 2007 to 2011, after several Chinese nationals who visited the cellar door expressed interest in taking wine back to China in bulk.
But Mr Corbett said none of those discussions ever went anywhere because neither party could agree on price.
“I think there was a cultural element there of people liking a discount and a special deal, which just didn’t suit us,” Mr Corbett said.
“Because we’re such a small producer, it’s about quality and it’s about small quantities at a premium price rather than large volumes.”
However, Mr Corbett said a chance visitor validated his stubbornness to not budge from the premium price point.
That visitor was Tony Wang, founder of electronics manufacturer HKE Group, who was looking for a premium Australian wine partner that could supply wines to his three art galleries.
“The discussions started reasonably slowly, we spoke a lot for two years, he placed a small order and out of respect to him we went up and visited him and his family in China,” Mr Corbett said.
“The first step for us was to visit him and his family and understand his lifestyle, his history, and so on and so forth.
“That really solidified the relationship and my first lesson was that making that family connection was extremely important.
“The talking continued for a while, and he mentioned to me that there is something in the Chinese culture that they like to know someone for 1,000 days before they start making longer-term investment decisions.
“We must have been talking for about four years at that stage, and about 12 months ago, things got fairly serious quite quickly.
“We’ve now built a showroom in one of his properties, he’s set aside a part of one of his art galleries as a cellar door, and we are employing agents in 12 different cities in China.”
Mr Corbett said of Singlefile’s production of around 12,000 cases of wine per year, 4,000 of them ended up in China.
Like Rockcliffe, Mr Corbett said Singlefile had to develop completely new sales strategies, particularly at the cellar door.
“We’ve done it quite differently to how I would do it in Australia,” he said.
“It’s almost like a jewellery store, where you don’t necessarily go in to try wines like at a wine bar, you go in to learn about the brand, the story and see the bottles, rather than necessarily taste the bottles.
“What we have found is it’s not as sophisticated a market compared to Australia from a taste point of view.
“Our experience, and Tony’s advice, is you need to give some quality cues to assist the Chinese in understanding where you sit on that quality spectrum.
“Particularly because his other business is the art gallery, the showroom is something that’s in keeping with that.”
Mr Corbett said the vast differences in Chinese buying behaviour in comparison with that of Australians was another learning experience.
“People seem to be more brand loyal in China than here,” he said.
“It’s not uncommon to get a pallet order at the gallery.
“Often it is CEOs, who buy on behalf of a company who will then use it as their gifting wine.
“To buy a pallet of wine that’s 50 or 60 dinners over the course of 12 months, so it’s solved a problem.”
While acknowledging it would be tempting to see how far Singlefile could push the China wine boom, which he described as only just beginning, Mr Corbett said the winery would likely cap its China production in the near future.
“We have made the decision that we want to stay focused on the quality end, rather than chasing volume," he said.
“It is about having that discipline to ensure that we are focused on quality.
“There are opportunities that are presented that appear easy to say yes to in the short term, but could have a detrimental impact on the business in the long term.
“The reason Tony was interested in Singlefile was that when the price discussions started, we said ‘no discounts’.
“He said he knew then that our focus was quality, and that was actually a very important quality cue for him.
“He spent a lot of time getting to know us.”