12.11.07
Posted in Dan Siebers at 4:47 pm by admin
- By Dan Siebers
This is part 5 of 5. See also part 1, part 2, part 3 and part 4.In part 4, I talked about brands in China. In this, the last part of the series, I look at distribution and at some of the “land mines” for producers to consider in the China market.
Here is some information about geographic segments in China:
- Shanghai is the most developed wine market in China and the headquarters for most wine importers. The relatively well developed Western restaurant scene is due to a more outward-looking Shanghai subculture.
- Beijing is the second most developed wine market, and is 5-10 years behind Shanghai.
- South China has the highest per capita income in China, with Guangzhou and Shenzhen as centers. It is 10-20 years behind Shanghai.
- There are 20-30 secondary cities spread across the country. They focus on the most inexpensive imported wines, even in five-star international hotels. They are 15-20 years behind Shanghai.
- Tertiary cities are found throughout the rest of China and have virtually no wine market other than the occasional premium Chinese restaurant that can sell serious amounts of Grand Cru.
As you approach these markets, and consider the consumers, wholesalers and distributors in China, here is some friendly advice that will hopefully allow you to avoid costly mistakes.
- You are your own worst enemy. Don’t let your excitement cloud your judgment
- Be suspicious of any order. Be very suspicious of any first order over 500 cases.
- Demand full prepayment.
- Do not use letters of credit from Chinese banks.
- If it sounds too good to be true, it probably is. The importer is often honest, but shares the same weakness as the producers when it comes to China - overexcitement based on impressions rather than facts. This leads to a lack of due diligence and planning.
- Even with prepayment, the odds are that the company will not be able to sell the wine and will dump it on the market. It is thus best not to put your brand anywhere on the label.
- Contact the importer’s other suppliers to ask about payment. Only ask other questions to people who have visited the market themselves.
- Ask the importer about basic statistics on the market, for example the total size of the market in 2004 and 2005. Make sure they understand the wine market themselves.
- Do not simply sell to the first person who contacts you.
- Do not put undue pressure on your export manager to enter the China market. Intelligent, professional export managers sometimes enter situations they know are high risk only because of pressure from owners who want their wines in China, a desire that arises from poor coverage in the media and inadequate facts.
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12.03.07
Posted in Dan Siebers at 4:41 pm by admin
- By Dan Siebers
This is part 3 of 5. See also part 1 and part 2.
In part 2, I discussed some anecdotal evidence about wine consumers in China. Now, here are some “hard facts” about importers:
- Total bottled wine imports in 2005 were 1.15 million cases. In 2004, imports were 750,000 cases.
- The total number of importers in 2005 was 531.
- In 2005, 122 importers brought in more than 2,000 9L cases, 42 importers brought in more than 5,000 9L cases, and 21 importers brought in more than 5,000 9L cases in 2005 and imported wines from more than four nations.
The market is far too immature for regional specialists. Any serious importer should have wines from France, Italy, Australia, Spain, United States, and from at least one of the following: Chile, New Zealand, Argentina and South Africa.
Importers can be divided into several types, each with its advantages and disadvantages.
- For brand owners, the advantage is high marketing budgets, large financial resources, and very low system margins. The disadvantage is that they depend on wholesalers for distribution, which from a customer’s point of view are too inconvenient in scope to use in a serious way. Major players are Gallo, Pernod Ricard (Jacob’s Creek), and LVMH (Moet Chandon and Veuve Cliquot).
- The advantage of independent foreign-owned importers is they have consistently been most successful, while disadvantages sometimes include poor financial management and limited financial resources.
- For independent locally owned importers, their advantage is the best distribution to Chinese venues. The disadvantages are that distribution is relationship-based and thus limited (often to one city) and there is a lack of basic wine knowledge that leads to improper storage and sometimes a lack of basic logistics and operations planning (they sometimes order and pay for wine while lacking the ability to import it). They tend to be commodity traders in nature and their distribution is often “purchased” rather than earned. The result is that this type of importer appears very often - and disappears at almost the same rate.
- One derivative of this group is “cowboys” - companies that import one shipment from one country and then never appear again. For example, in 2004 one cowboy imported 12,000 cases of Spanish wine - more than 20 percent of the 2004 total - in one shipment. The company never appeared again, and we never saw the wine in the market. These companies can account for 20-60 percent of total China imports, depending on how they are defined.
- Independent Hong Kong-owned importers have the advantage of a more convenient home base from which to start a company that imports and distributes into China. They sometimes have the ability to penetrate markets normally supplied by locally owned importers. Their disadvantages may include massive overconfidence leading to a lack of due diligence and proper planning. They chronically “have plans” to enter China without ever realizing them. And they often confuse and distort the market to producers trying to enter the mainland China market.
- Finally, Chinese wine companies have the advantage of the largest and widest distribution networks. Their customers demand “imported wine”, meaning anything red, cheap and not from China, with no other specification or need. These companies often import one wine from one brand from one nation. The disadvantage: this is essentially commodity trading, with little positive brand value and possibly negative brand building. It inevitably shifts to the company bottling bulk wine in China as its own brand.
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12.01.07
Posted in Dan Siebers at 1:21 am by admin
- By Dan Siebers
This is part 2 of 5.
In part 1 of this series, I introduced some general issues producers should consider when entering the China wine market. This time around, I look at consumer trends
All of the comments I make on consumer trends are purely anecdotal and should not be taken as hard facts. These are my personal opinions based on seven years in the China wine market, half of it as a restaurant operator and half as the area sales director (North China) for Summergate Fine Wines.
Some key points:
- Consumers often do not buy for taste. “What is the Chinese palate like?” or “What goes good with Chinese food?” are interesting questions, but largely irrelevant to the issue of penetrating the China market. Chinese most often buy for fashion and prestige, not for flavor. If Chinese drank wine for the taste, then semi-sweet whites like Moscato d’Asti would be the most popular type.
- Brands that have sought to play to Chinese tastes, particularly in the area of packaging, have failed. For example, an imported wine with a red and gold label and a dragon on it will not do well. If the Chinese believe that a product is “custom made” for them, they won’t trust it.
- Most wines are being purchased and consumed in restaurants. Restaurants are essential for entertaining and socializing, as homes are often too small for such purposes.
- There‘s a tendency to buy the cheapest (personal use) or most expensive (when entertaining).
- Australian and Chilean wine are on the rise. Chile is the fastest growing category, largely due to the efforts of one importer. Australia is the second largest category, and the only one threatening France for top spot. This is likely to do with the relatively easy-to-approach style of Australian wines and also possibly to the fact that Australians and Singaporeans make up a large percentage of foreign restaurant managers in China, which is an advantage for Australian wine only.
- Red wines represent 65-80 percent of the market. White wine is often perceived as not being “real” wine. Red is also a lucky color.
On Monday, part 3 in this series: Hard and soft facts about importers
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11.27.07
Posted in Dan Siebers at 4:18 pm by admin
- By Dan Siebers
This is part 1 of 5.
Many people wonder, “How can I sell my wines in China?”
They’ve heard so much about the booming China market and don’t want to be left behind. But the questions they should ask are, “Should I sell my wines in China?” or “When should I sell my wines in China?”
What have they heard about the China market? About the rising income levels? The huge homogeneous population? The amazing GDP growth?
There is truth in all these things, but the key point is that China’s success is built on its ability to manufacture goods cheaper than most other nations for the purpose of export. Of course, raw materials must sometimes be imported for manufacturing, but in general, importing finished goods into China is like driving in the wrong direction on the freeway.
In the wine market, in particular, most of what I’ve seen reported in the media is either incorrect or exaggerated. Of most concern is that more than half of the “hard facts” are wrong, including in in-depth articles in certain wine trade magazines. Why do the media give such a distorted picture?
Here are some issues to consider:
- Very little comprehensive professional consumer research in the area of wine has been done in China.
- The main source of consumer trends is anecdotal comments from individuals in the wine business.
- There is misinformation, which includes exaggeration, in the international media.
- The only source of hard data is import statistics by importers, broken down by country. These must be intensively filtered to draw out the “real” data.
On Friday, Part 2 in this series: Consumer trends
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11.07.07
Posted in Dan Siebers at 5:59 pm by admin
Grape Wall of China will soon begin including contributions from ten people involved in the Greater China wine scene as academics, wine-makers, distributors, educators or consumers. To kick things off, I will post a profile each day. (For more China wine info, join the Grape Wall of China group on Facebook and/or sign up for my free e-newsletter by emailing beijingboyce@yahoo.com with “sign me up” in the subject line.)
Today’s profile: Dan Siebers
Main focus: Distribution
“Dan Siebers is portfolio director and an area sales director for Summergate Fine Wines. Formerly Dan was the sommelier and GM of CourtYard Restaurant in Beijing. He holds certifications from all three of the most prestigious wine education organizations (WSET, CMS, SWE).”
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