The World’s Biggest Potential Wine Market
USA, Europe and Australia Chart a Course through Asia
By Peter Tromans
Contributing Editor
With a population numbering billions, Southeast Asia—despite its trials and troubles—remains potentially the world’s largest market for wine. Traditionally, the region’s drinks market has centered largely on high-quality cognac for the rich and on beer for the many poor. Following years of major economic recession, however, countries such as the Philippines, Thailand, Vietnam, Cambodia, Taiwan, Japan and of course China, are raising their eyes to the West again, but this time they are looking for wine.
Long regarded as a drink of the affluent, cognac became so expensive that wealthy Asian business people instead turned to fine wine to replace cognac as a show of wealth and position. Now, imported, yet less expensive wine is developing into a social drink.
One of the first California companies to realize this shift was Wente Vineyards, of Livermore, Calif., which now distributes to Vietnam, Laos, Cambodia, Bangladesh and Nepal.
Wente CEO Eric Wente views SE Asia as a prime market. “We see it has great potential and we want to extend it possibly into China,” he says. “We maintain our own office in Bangkok, Thailand to oversee SE Asia distribution and development.” The office also oversees Wente’s joint-venture winery in India, which produces high-quality wines for that domestic market. (See WBM, April 1999.)
Wente boasts being number one in duty-free in Asia, with their wines available at most Asian airports and as the only American wine sold at some airports such as Hong Kong and Indonesia. In addition, Wente wines are served aboard Cathay Pacific, JAL, ANA, Korean, Thai, Malaysian and Philippine Airlines.
In a joint venture, California’s Wente Vineyards teamed up with an Indian partner to launch the Wente Indage wine brand.
Though Wente has the biggest presence in Asia, it is not alone in joint ventures and marketing efforts around the region. In Myanmar (formerly Burma), Robert Mondavi wines, Australian-produced Rosemount and Penfolds, Los Vascos from Chile, Etchart from Argentina and Cloudy Bay from New Zealand are all major players in this important arena. Surprisingly, Gallo has yet to decide their strategy in the region. Gina Gallo has hinted that the company is watching closely, having set up a joint venture with Italy’s Ecco Domani, which has French vineyards—a result of Gallo’s collaboration with Trentino-based Ca’vit, which is already exporting to the region.
Regional Vines and Wines
New World wines appear to be the choice of many in the region as tastes become more advanced, but actual local wine production has some catching up to do. However China and Thailand currently have projects to produce wine grown on home soil.
Beijing-based Montrose Food and Wine, one of the region’s larger importers, signed a joint-venture deal with Great Wall wines, the biggest producer of Chinese sweet and still table wines produced from Cabernet Sauvignon, Chardonnay, Chenin Blanc and Cabernet Franc grapes.
In Loei, a northern province of Thailand, Dr. Chaijudh Karnasuta, chairman of Italthai, a joint venture between an Italian wine consortium and the Thai government, has been advancing the production of French style wines grown in the region. Since 1995, Italthai has produced a Chenin Blanc and a red Syrah. Vine yields in Thailand may only be 25 to 30 percent of what would be expected from European vines, but a 305-percent import duty makes growing grapes an affordable option.
Southeast Asia, et al.
In the Philippines, the largest retail chain is Philippine Wine Merchants, founded in 1975 by Ralph Lim Joseph. The company has 15 retail stores and a duty-free shop and is looking to produce wines and spirits itself in the near future.
Lim Joseph says he has seen 50-percent import growth in the past two to three years; the majority of which has been French red wines. “I personally see the Philippine wine market developing and growing by some 20 percent a year,” he predicts.
Most of Philippine Wine Merchants’ stock is sourced from Europe. “We import 20,000 cases from France and 15,000 cases from Italy, as well as 10,000 cases each from Bulgaria and Spain,” he says. From the USA he estimates 2,000 cases, which matches the import figures from Chile, Argentina and Australia.
Where are the major sales being made? “Eighty percent are made through retail outlets now and just 20 percent through hotels, which is a big turnaround,” he states.
Wine in Japan has been up and down. In 1998, imports boomed thanks to wide media exposure publicizing wine and its health benefits. However wine importers and producers could not meet demand. From January to March 1998, for instance, importers ordered twice the volume they had purchased in the previous year and were still unable to satisfy the thirst for predominantly red wine.
In the second half of the year, supplies of less expensive red wines improved but gave importers a second headache—too much wine on the market arriving two months after the order was placed. Japan was flooded with cheap red wines, mainly from Chile, France and Italy. Due to very high storage costs, importers were forced to dump these products to reduce their outlays. Retail stores were even able to buy a case of Chilean wine with a free sample case.
Since then however, sales have stabilized and sales of wine outstrip sales of spirits by about 20 percent.
Other markets in the region include Vietnam and Cambodia. The U.K.’s Allied Domecq made a big statement by building the Phan Rang winery just 400 km from Ho Chi Minh city, a 70/30 joint venture with the People’s Committee of Ninh Thuan Province. This vast, modern facility has a one-million-bottle capacity. The vineyards were first planted by Australia’s Charles Sturt University in Wagga Wagga with first batches of juice sent there for vinification and returned to Vietnam for tasting trials during 1995/96. Surprisingly the wines have taken off in Vietnam’s major cities with sales increasing by 30 percent over the last five years. They are made with the half-red/half-white Cardinal grape.
Classic European wines also make it to Vietnamese hotel tables. Occasionally, bottles of Dom Pérignon are found in local markets with the staff from reputable hotels and restaurants hand-carrying Grand Crus and vintage ports for affluent Japanese clients.
Cambodia is a similar market to Vietnam, although it was perhaps more helped by U.S. government aid following the Vietnam War. Again, Wente is in the forefront because their wines are the only American product sold in the market for the past four years, available at the airport duty-free shops, tourist hotels and up-market stores in Angkor Wat and Phnom Penh.
“The market is relatively small at present, but growing,” says Wente’s vice president of international operations, John Schwartz. “We sell around 1,500 cases a year at the moment, through two distributors for the domestic market—Les Celliers d’Asie and Prime Wines and Foods. Also we sell through the duty-free outlet at Khmer.”
Ahh, China
China is arguably the biggest market in the world for whatever you want to sell. But it lacks consumer (estimated at four billion) wine education and, for the importer, it lacks how to handle distribution and taxes.
The biggest problem facing importers is that the Chinese government imposes duties of up to 120 percent on imported raw goods, which apparently covers both bottled and bulk wine shipments.
Wine bars and restaurants line the length of Singapore’s historic and fashionable Boat Quay district.
Then there are the add-ons. Label and hygiene laws vary from self-regulated region to region; lack of distribution channels; ignorant wine waiters and stores that have never stocked a corkscrew add to the problem of getting the wine into stock. For instance, containers full of cases of wine have stood on the quayside in Shanghai or Hong Kong in 90-degree temperatures for two or three days awaiting clearance.
Simon Berry, of Britain’s Berry Bros. & Rudd, last year established a wine club in Hong Kong to test the market. More than 450 members signed up in the first three months and the company is now looking to open up in Shanghai and Beijing.
Berry Bros. & Rudd is not alone. In Hong Kong, at least 20 dedicated wine retail outlets—one selling nothing but Bordeaux—are open in up-market shopping, retail and financial districts. There are also some 30 wine schools or clubs in Hong Kong that are rapidly expanding into mainland China. In Shanghai the picture is very much the same.
There are 50 million Chinese households with an annual income in excess of US$18,000, which equates to around $60,000, leaving some disposable income to be realized by Western influence.
Kerry Vix, partner and general manager of Arciero Winery in Paso Robles, Calif., says, “The Chinese market is no harder a market to cope with than the United States and they don’t have an attitude about what your wine is supposed to be,” she says. The company promoted its wine at the Wine & Spirits Asia exhibition in Hong Kong last year.
Southcorp Wines of Australia also sees the potential of this vast market. Director Freddie Choong, responsible for Asia, has embarked on a program to boost sales of Lindemans Wines throughout the region, especially in Hong Kong, Malaysia and Taiwan. Last year he took the famous Asian martial arts actor and wine buff Jackie Chan on regional tour to promote the wines and in September unveiled the Jackie Chan Reserve Release Wines in Hong Kong.
A growing acceptance of wine is reflected in the increasing number of trade exhibitions throughout Southeast Asia. This year there are five major shows: SIAL in Beijing, China (April); Wine & Spirits Asia 2000, Singapore (April); V&S VINEXPO, Tokyo (June); Wine & Spirits China, Beijing (June); and the International Food, Wine & Hospitality Show 2000, Bangkok, Thailand (October). The marketing message appears to be “go east young man.”
Peter Tromans is a member of the Circle of Wine Writers (U.K.) and the Fédération Internationale des Journalistes et Ecrivains du Vin et Spirtueux (France).
