Wine Word: Ian Ford of Summergate on the state of the China market

~

By Jim Boyce

Summergate is marking its fifteenth year as a wine importer and distributor in China. I asked founding partner Ian Ford about changes during that time, the current state of the country’s wine scene and what bottles from the portfolio he’d recommend for an absolute beginner to wine.

~

When I moved to Beijing in 2004, the market seemed to largely consist of Summergate, Montrose, ASC and a half-dozen to dozen smaller players. Since then, the floodgates have opened and there are importers / distributors everywhere. What happened and what has it meant for the market?

In 2004 at Summergate we were just celebrating our fifth anniversary and were just coming into our own as an established importer and distributor in China. At that time shipments of bottled wine to China totaled only 786,954 nine-liter cases, compared to roughly 31 million cases today.

In 2006 there were a total of 812 registered importers of bottled wine in China – in 2013 there were well above 4,000! While there have been a few serious new players, the large majority of these new entrants across the country are general trading companies seeking opportunistic profits from a new and emerging market. Wine is by nature very fragmented in terms of brands and labels, and difficult to navigate for new consumers and buyers. This has opened up many opportunities for unscrupulous traders to cheat the market and gouge on prices. Much of this trading is done with private labels and “look-a-like” copy brands.

As the China market grows, and the stakes along with it, it seems like the world’s biggest wine producers will want to handle their own distribution here in China. What’s you take on this?

The major wine producers in the world will want to optimize their route to market in China, and gain as much access to buyers and consumers in China as they can. The smart and patient ones are recognizing that you need a serious and capable partner to build a market across China. There are creative ways to innovate and structure the distribution model with a partner, but in my firm view having a partner is indispensable.

The industry has gone through a period where some sizable producers have opted to “handle” the market themselves, or to go with multiple local wholesalers. Kendall-Jackson, Georges Duboeuf, Antinori, and Catena have all gone down this path, and they are now a shadow of the their former selves in terms of awareness, visibility, and sales in China, and are far away from building a brand and a market.

Also, they face multiple risks to their brand, including price structure manipulation, trademark violations, poor storage and handling, inappropriate or non-compliant brand communications, regulatory violations, erroneous Chinese back labels, and even counterfeits. These and many other risks are difficult if not impossible to manage across the breadth of the Chinese continent without a competent and trustworthy partner.

I keep hearing about fast growth in second-tier and third-tier cities and that cities like Beijing, Shanghai, Guangzhou and Shenzhen are saturated. Fair assessment?

Only half right in my view! There is a lot of strong growth and evolution happening in cities all around the country, the fast growth that you mention is indeed a reality. Summergate has just opened our thirteenth registered and licensed office, with a team and a warehouse, in Wuhan covering Hubei province, in addition to registered and licensed offices in Liaoning, Shandong, Zhejiang, Fujian, Sichuan, and Sanya. We have seen and continue to plan for significant expansion in all of these provinces.

In the primary cities of Beijing, Shanghai, Guangzhou, and Shenzhen, the market is still far away from saturation, although they are generally more advanced down the path of market development. If you imagine a mature city market like London or New York, there is still a long, long way to go before the markets in Beijing and Shanghai are saturated!

People have long bought wine for reasons of status, such as gifts, and for health, but now an increasing number are buying for taste. How far along is this trend and what niches of consumers are leading the way?

Consumers in China are buying wine for all kinds of different reasons these days, all over the country. Health continues to be a factor favoring wine, when consumers are choosing from different options of beverage alcohol. Food scandals have driven many consumers towards imported wine where they have greater confidence in the integrity of the production. Provenance and credibility are also increasingly important as consumers get wise to the rip-off private labels and even counterfeits that have been flogged to them by unscrupulous short-term trading companies.

Taste, as you mention, is also increasingly a driving factor in consumer choice. A retailer like Pudao Wines [note: Summergate has a stake in this company] that offers 20 different wines to taste, changing every two weeks, is at the epicenter of this development. Over the few years now that the Pudao Wines shops have been operating, it is 100 percent clear that if given a chance, consumers in China will buy what they like to taste, over labels, image, or heritage.

Summergate once carried a Chinese wine, Catai, from Shandong. Are there any plans to carry another Chinese label? What is your assessment of Chinese wines?

We don’t have plans at this stage to carry a Chinese wine, but I would be very open to the possibility and very keen to have one. It’s exciting to see smaller Chinese wine producers of various shapes and backgrounds making great strides in terms of quality and integrity.

What brands have been with Summergate from the start or at least from near the start?

Villa Maria Estate was one of if not the first wine producer to appoint Summergate in China, right at the beginning in 1999. We’ve had a great partnership and ongoing success with them, even through tough times like 2013. Villa Maria was one of our great growth brands in the last 12 months, and persists today as the leading and most visible New Zealand brand in the market. We launched Vina Concha y Toro in China on the Great Wall in Beijing less than two years into our existence, an amazing success story over the past 12 years, and growing strong. Today Concha y Toro is undoubtedly one of the leading imported wine brands in China, period. Yalumba, from the heart of the Barossa, has been with us for ten years or so. Bouchard Pere et Fils started with us very early on, as did Delicato Family Vineyards and Ridge from California. Dr. Loosen from Germany joined us within a couple of years of our founding, and again has been a tremendous growth and success story. We’re really thrilled with the quality of partnerships that we have, and the amazing families and winemakers that we work with.

If you had to pick one red and one white from your portfolio for an absolute beginner to wine, which would you choose?

It’s very hard to choose only one or two wines, there are so many great ways to get into the world of wine!

For a white wine I might recommend Dr. Loosen “Dr. L” Riesling, a low-alcohol, off-dry Mosel Riesling with good acidity and great flavor. This wine is a delicious way to start to experience the fruit, the acidity, and the aromas that great wine has to offer, in a very accessible way.

For a red wine, ordinarily for a beginner you would try to avoid high tannin and acidity, and perhaps look for something a bit more lush and ripe and inviting. La Vielle Ferme red, made by the Perrin Family in the Rhone Valley, is seductive, juicy and eminently drinkable and a perfect entrée to red wine for a new wine drinker.

(Get my free Grape Wall e-newsletter. Subscribe here. Sample here. Follow Grape Wall on Twitter here.)

Sign up for the Grape Wall newsletter here. Follow Grape Wall on LinkedIn, Instagram, Facebook and Twitter. And see my sibling sites World Marselan Day, World Baijiu Day and Beijing Boyce. Grape Wall has no advertisers, so if you find the content useful, please help cover the costs via PayPal, WeChat or Alipay. Contact Grape Wall via grapewallofchina (at) gmail.com.