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Content provided by :  Hong Kong Trade Development Council
 

A World of New Wines

Robert Pong, CEO of Top Cellars, represented Pacific Northwest wines at the HKTDC International Wine  
Wines from the Pacific Northwest
are making inroads in the China
market through trade shows and
special-event dinners
 
Five years ago, David Harder noticed a lack of Canadian goods on supermarket shelves in the Chinese mainland and Hong Kong, and set out to do something about it. Despite initial market skepticism, he now imports a wide range of goods, including 15 types of ice and table wine, such as those from the Canadian winery Birchwood, through his company, The Canada Emporium, to markets across Asia. Growth is spearheaded by sales on the mainland, where he says company sales are set to quadruple, thanks to growing numbers of new affluent consumers eager to try foreign goods. 

Figures show that North America has already made significant leaps into the Hong Kong wine market. Nudging aside the fact the region has long favoured famous French reds, in 2009, Hong Kong imported US$40 million, or 4.1 million litres, of wine from the United States, a rise of 138 per cent and 13 per cent respectively.       

California wine has led the growth, but with a further 50 per cent rise in imports expected this year, the benefits of shipping to the city are attractive. Combined with US President Barack Obama's goal to double US exports in the next five years, the push could see a flood of wines from around the US. Canada, meanwhile, benefits from its image as a wholesome nation with bountiful fresh food.

The American Dream 

  Erik McLaughlin
 

Erik McLaughlin, National
Sales Director, Willamette
Valley Vineyards

In May, the Hong Kong Government signed a memorandum of understanding (MOU) on cooperation in wine-related business with the US. Soon after, it signed separate deals with the US states of Oregon and Washington to promote wines from the Pacific Northwest. Toby Marion, who runs Golden Gate Wine in Hong Kong, which distributes new and fine wines from the US, has seen double-digit growth in sales from Washington State and Oregon in recent years.       

High-quality Cabernet Sauvignons and Chardonnays from Washington and Pinot Noirs from Oregon are the flagship wines beginning to gain recognition. “American wines are really high quality and good value, but the market perception used to be that they were overpriced,” says Mr Marion. That's changing now. Since Hong Kong abolished taxes on wine in 2008, the market has surged. Yet the choice has led to an increasingly savvy but price-sensitive customer. Statistics predict wines at US$5 dollars or under will be the fastest growing segment in coming years.

“Wine prices in restaurants are quite high, so many people believe there is a large amount of pent-up demand among consumers, who don't want to pay high prices,” says Mr Marion.       

It's here that Hong Kong wine lovers could turn to American wines as a solution. Mr Marion says his pouring wines compete with most other varietals. His mid-priced to premium offerings prove excellent value. But, he cautions, American wineries must be aware of the need for “steady supply and pricing.”       

Those used to dealing with the three-tier producer to distributor to retailer system prevalent in the US, may be daunted by numerous routes open in Asian business, says Erik McLaughlin, National Sales Director with Willamette Valley Vineyards in Oregon. Finding partners can also be taxing. “I still feel I learn much from each interaction I have with my business partners in Asia,” says Mr McLaughlin. “We are still figuring it out.”   

Flying in Wine Importers 

As part of a campaign to create ambassadors for Oregon wines, the Wilamette Valley winery recently h

 

As part of a campaign to create ambassadors for Oregon wines, the Wilamette Valley winery recently hosted a group of Hong Kong importers and affiliate companies from the Chinese mainland

 
Willamette, which ships up to 3,000 cases annually across all markets, expects Hong Kong and the mainland to become its top export destination within five to 10 years. Mr McLaughlin says that reaction in both locations has been good, but that knowledge of US wines is in its infancy and needs to grow before profits can build. 

As part of a campaign to create ambassadors for Oregon wines, the winery in September hosted a party of Hong Kong importers, affiliate companies from the mainland and Macau and their top customers to promote the region. “Not only did we spend time with them at our winery, educating them about our wines and viticulture practices, we helped tour them around some of our fellow wineries' properties to learn about Oregon in general, particularly the culinary and agricultural scene,” Mr McLaughlin says.    

Despite positive figures and the MOU signalling long-term interest, players are looking for guidance. Producers and dealers say support by the many US wine bodies and organisations would provide much-needed consumer education in Hong Kong and the mainland. Others look to big producers to open channels for smaller wineries. Sean Sullivan, author of an independent blog site, Washington Wine Report, suggests that unless smaller producers work together, they may lose out. “The main issues are costs and regulations,” he says. “The vast majority of Washington's almost 700 wineries are small in size, and produce less than 3,000 cases per year.” 

  Alex Sokol
 

Alex Sokol Blosser,
who runs family winery, Sokol Blosser in Oregon, ships 200 cases annually to China

With or without the support, wineries should recognise this need for education and in the value of building personal relationships in the marketplace. Hong Kong and the mainland run many trade shows for use as a platform. 

Alex Sokol Blosser, who runs his family winery, Sokol Blosser, in Oregon, ships 200 cases annually to markets in Hong Kong, the mainland and Macau. While progress is slow, he also views it as sure and is hopeful for growth. “My plan to increase sales is to visit Hong Kong every year and continue to grow my reputation there. In 10 years, we may have a small following.” 

Lasting Finish        

The same strategy can be applied to the mainland, though the markets are vastly different. The mainland imposes a 48 per cent tax on wine imports, rising to 69 per cent if labels display traces of fruit other than grape. Each wine must be accompanied with a specific set of intricate documentation. Labelling laws are strict and require great detail. Yet, recent figures show wine consumption rose 80 per cent from 2004-2008, and by 2013, the country is expected to become the world's seventh largest wine consuming country – representing tantalising potential.         

Top Cellars of Washington exports a number of the state's hand-crafted wines. The company's focus lies in China. With limited marketing budget, Top Cellars presents its wines through high-profile events, including dinners held by the Hong Kong Chef's Association, and providing wines at the Shanghai Expo's Washington Day in order to reach the upscale restaurants and hotels.       

Robert Pong  

Robert Pong, CEO of Top Cellars, represented Pacific Northwest wines at the HKTDC International Wine & Spirits Fair

 
Since February 2009, the company has put 75 samples into the market, many through trade shows and similar events, and is beginning to reap the benefits. Top Cellars is now fielding requests from Shenzhen, as well as Beijing and Shanghai, though company CEO Robert Pong finds competition fierce. “Trying to stay competitive while maintaining a reasonable margin is always a challenge,” he says.       

David Harder at The Canada Emporium spent nine months and Rmb500,000 establishing an office in Beijing and obtaining an import license. He says employing people to work on the ground is vital for success. Those who don't invest in people, secure companies that do. Failure to put money into people, says Mr Harder, “is almost a definite recipe for failure.”       

Niche products do have an opening, he says. Mr Harder’s company is expecting its sales in Hong Kong to flat-line year-on-year going forward, but forecasts a 400 per cent annual rise for the mainland over the next four years. “The mainland market does focus on famous names, but the rise of the upper middle class, which is growing every day, will try something new,” he says. “In fact they are very keen to try.”        

Related Links
Golden Gate Wine
Sokol Blosser
The Canada Emporium
Top Cellars of Washington
Willamette Valley Vineyards

 

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