Treasury entertains hopes of tempting Chinese tastebuds
Treasury Wine Estates, the world's largest pure play winemaker, is toying with the idea of opening bars, restaurants and entertainment venues in China as part of a strategy to win over drinkers.
An online article in the Wall Street Journal quotes Treasury Wine Estates chief executive David Dearie as speculating that the Australia wine producer plans to unveil wine outlets across China in the next three to five years.
Last week, Mr Dearie and the Treasury Wine Estates board toured China and Singapore to get a better understanding of the Asian market, which is expected to grow at double-digit rates in the coming years as more mature markets, such as North America and Europe, struggle in the face of a wine glut and recessionary conditions.
Research firm Euromonitor International reported sales of wine in China hit $US41 billion last year, up 20 per cent from a year earlier.
Treasury Wine Estates' aim is to use its own venues as a tool to help Chinese consumers learn more about wine, and drink more of it.
"If you're going to make great wine and be a leading brand in China, you also have to be consumer-oriented," Mr Dearie is quoted as saying in the Wall Street Journal article.
Mr Dearie said Treasury Wine Estates was working with one of its distributors to open a 6000-square-metre wine gallery, for tasting events, in Shanghai.
In 2012-13, the company posted a wine volume growth of 31 per cent in Hong Kong and China combined, with net sales revenue up 29.5 per cent for the year. The growth is still off a small base, however total Asian sales for the wine group already account for 20 per cent of total pre-tax earnings.
Mr Dearie has targeted China as a source of premium growth for Treasury Wine Estates and has directed a greater slice of the company's top wines, such as Penfolds Grange, to the region.
But like most winemakers it is struggling to overcome the cultural differences and consumer attitudes towards various wine styles and blends. Opening wine bars in China could help Treasury Wine Estates better understand and target the Chinese consumer.
Mr Dearie told the Wall Street Journal higher-quality import wines were often given as gifts between businessmen to be stashed in cellars rather than drunk. The company hopes that with wine bars or restaurants it will encourage consumption of the wine.
He said the move towards entertaining has not been influenced by China's recent austerity campaign, which led to a ban on government banquets and a flow-on affect on wine sales.
Liquor giant Diageo recently opened its second bar in China, and executives have said its Johnnie Walker Houses have been successful in helping the company identify its VIP consumers, while bolstering the brand and profits.
Treasury Wine Estates is also increasing its presence at duty-free shops where it is holding tastings, so Asian tourists in particular can learn more about premium brands, Mr Dearie said.