Matthew Deller MW, CEO of Wirra Wirra Vineyards, ponders the renewed opportunity in China – as well as the bigger opportunity in the United States of America.
I guess the big news is the removal of China tariffs. I think there will be a lot of hoopla there initially. The way that I picture it is by imagining that if we couldn’t buy Champagne in Australia for four years, then suddenly it came back, it would dominate trade promotions and consumer share of mind for at least three or four months.
Then things will settle into the ‘new normal’.
From what I gather talking to people on the ground, while the China wine market is roughly half what it was five years ago, and imports are a third of what they were, it’s more of a ‘real’ wine market now.
That is, wine is no longer part of the corporate gifting and entertaining repertoire that traditionally drove a lot of wine sales and there’s been a big shift from wine to baiju, so the wine that is sold is people drinking for pleasure with a preference for buying online.
I was still dealing with the China market through Covid while at Villa Maria and saw first-hand the rise of e-commerce and importance of investing in online flagship stores and in KOL’s to drive traffic.
We are seeing a move in consumer demand to lighter, fresher wines.
The upshot is that China won’t nearly be as big a market as it was in 2019, and the sales channels, successful go-to-market strategies, wine styles and price points will be completely different.
But for the wineries that navigate it carefully and organically, building their brand with consumers and approaching it as a long-term opportunity rather than short term solution, it will be a nice additional market to complement their global distribution.
It’s terrific that the SA Government came straight out of the gate with a $1.85 million support package to jump-start the market.
I only wish that a similar investment could be made in the world’s biggest wine market, the USA.
In fact, best estimates place the USA imported wine market at four times the size of China’s.
A $7.4 million investment in driving consumer demand for South Australian wine in the USA market would actually be game changing.
The Victorian Government is spending $2.2 million on growing their wine market in USA, so in terms of relativity, the $7-8 million investment would be entirely appropriate.
At Wirra Wirra we are off to a good start with Gallo, in terms of distribution.
We have a straight McLaren Vale Cabernet Sauvignon at $20 in Albertson Companies exclusive assortment, and by July expect that to be in 900 stores across 42 states, and Church Block is now in 200 Harris Teeter stores throughout the mid-Atlantic.
Gallo are investing in trade marketing and sampling and demos.
My biggest concern from touring the USA is the complete lack of awareness of Australian wine, and its unique value proposition amongst the shoppers in those stores.
The question remains: will they pull it off the shelf and why?
They are great wines at great prices in varietal categories that are in demand and growing.
However, there is a category issue – why will anyone walk past all the Californian wines and choose South Australian?
The numerous consumers I’ve spoken to in the US are barely aware that premium Australian wine even exists, let alone how compelling our wine style and quality is.
If, as an industry, we could invest in market research to understand who the target consumer is for premium Australian wine and how to connect with and engage them to develop a compelling platform that pulls people into the category and generates desire and demand, then enough wine would start pulling off shelves that we would have a compelling category growth story we could take to the retailers to demand more distribution, and so the virtuous cycle flows.
I really hope that Wirra Wirra’s distribution gains will pave the way for more South Australian wineries to make their way into chain distribution, so that shoppers at least have the option to buy their beautiful wines.
I also hope that years of under-investment in marketing South Australian wines to consumers in the USA doesn’t backfire on us, and our wineries lose distribution opportunities due to poor category performance.
South Australian wine brand health is low, but the offer is compelling – it needs investment and a cohesive consumer marketing strategy to bring it into shopper consideration sets.
Then we will all have a chance to benefit from the world’s largest wine market.
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