Washington wine industry testing the waters in Asian markets

Jun
2012

Anne-Marie Hedges and Sara Goedhart stand behind the Hedges Family Estate booth at Vinexpo. Held in Hong Kong from May 29-31, Vinexpo is the largest wine and spirit expo in Asia, a testament to the changing tastes of the Chinese city.

By Elsie Puig for TCAJoB

As a successful business owner and wine merchant Stacie Hamilton has been wine tasting all over the world. Even places where wine appreciation is a relatively new trend brought on by new money — and lots of it.

Hamilton, who co-owns Hamilton Cellars with her husband Russ, remembers a dining experience at a high-end restaurant in Shanghai. A quick perusal of the wine list revealed the restaurant’s crown jewel: a prized Opus One bottle, which can retail anywhere from $100 to $200 or more in the United States, being sold for $2,000.

“I was shocked,” recalled Hamilton, “I looked at the wine steward and said ‘You obviously don’t sell very much of that,’ and he said “It’s not a big seller for us, we probably sell about ten a week.”

As China’s stable urban middle class – now numbering between 200-300 million people – comes into more financial prosperity, their tastes change and their perspectives are becoming more cosmopolitan. With that comes a new love for high-end wines, said Joseph Borich, president of the Washington State China Relations Council.

For Hamilton Cellars and other local wineries, Asian countries are the new frontier of wine consumption. Hamilton Cellars doesn’t yet export its wines there, but it remains a possibility for the near future.

“There is real business there, but doing business in China is really tough,” said Hamilton.

Like Hamilton Cellars, other Mid-Columbia wineries are still too small of a production to invest the resources necessary for a successful debut in international commerce. For Red Mountain giants like Kiona Winery and Hedges Family estate, it is easier to put their wines on the map.

Kiona Winery sells its wines in Denmark and Hong Kong and Hedges wine is savored in over 28 countries.

“In a developing market, people usually look for two things — they either want cheap or famous. If it’s not famous, it better be cheap,” said Tom Hedges, owner of Hedges Family Estate, referring to the Chinese consumers’ nascent palate.

It’s a step up for a country (whose residents) used to drink its wine mixed with coke.

“We’re somewhere in the middle — with China we’re taking it slow,” said Hedges.

Hedges Family estate, which sells its wines worldwide, has started cautiously opening trails in Asia, selling about 2,300 cases a year in Hong Kong, Singapore, South Korea, Indonesia and Taiwan, which equals 2 percent of the winery’s total production.

It’s still relatively hard to find Washington wine labels in supermarket aisles in China, and even less likely to find them nestled in a restaurant’s wine list, said Borich. Long-established French, Australian and California labels flood the Chinese market, but it might not take long for the Chinese consumer to develop a palate for Washington wines.

On a recent international marketing trip to the northern European cities of Frankfurt, Copenhagen and Stockholm, Ryan Pennington, senior communications manager for the Washington Wine Commission, commented that Washington wines have garnered an admirable reputation abroad.

Yet, export numbers have yet to pick up enough steam to leave an indelible mark on overall sales.

In 2011 exports of Washington wine totaled more than 326,000 cases valued at just over $20.6 million. This accounts for only 3 percent of Washington’s total wine production.

Most major markets are intensely competitive, with other wine regions selling their wines far cheaper than Washington is able to, said Pennington.

Canada (75,000 cases), Japan (37,000 cases) and the United Kingdom (34,000 cases) are still the leading markets for Washington wine exports, with Germany (35,000 cases), Sweden (6,000 cases)) and Denmark (16,000 cases) following closely behind and labeled “the most promising markets for Washington wines.”

“With the exception of Japan, most of the Asian markets are still in the early stages of development as far as Washington wine is concerned,” said Pennington.

About 13,000 cases of Washington wine were exported to China last year at a value of $1.3 million. About 8,000 cases were exported to South Korea, worth more than $600,000.

But Chinese consumers are already guzzling wine at a rapid rate. According to a study done by The International Wine & Spirit Research, China has already passed the UK as a top wine-consuming nation, and Asia is expected to account for more than half of worldwide growth in wine consumption over the next three years.

“We sell quite a bit of wine in Europe, but we are starting to sell a lot more in Asia,” said Hedges, speaking of his own experience.

State officials are motivated to get in on the action, with the Washington Wine Commission planning exploratory activities for China and South Korea and contracting a trade expert to conduct educational seminars for importers, retailers and restaurateurs in Shanghai — all to the benefit of the state’s wineries gaining more access to China.

There is still a degree of risk involved in doing business in emerging markets warned Pennington, and the regulatory process is incredibly complex.

“The obstacles for wineries to export are significant but not insurmountable,” he said. “There is a risk in choosing the right partner with limited knowledge, risk ensuring that those partners will do what they say they’re going to, and in some cases risk of not getting paid for wines that have been delivered.”

Hedges said wineries should really think about exporting their wines, but offers a word of advice: Do not overprice, give a generous sample allowance at the beginning and most importantly, pick the right distributor.

“The distributor should also know your region, and preferably already carry a few Washington wines,” said Hedges.  “That also allows for joint marketing with other Washington wineries and makes it easier and cheaper to get the foreign importer to visit your region.”

“We are letting the Chinese learn about wine,” said Hedges. “Once they’ve tried the rest, they’ll come to the best.”

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 


Mary Coffman by Mary Coffman
Tri-Cities Area Journal of Business


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