Winemaker in push to lift Asian consumption
An online article in The Wall Street Journal quotes Treasury Wine Estates chief executive David Dearie as speculating that the company plans to unveil its own wine outlets in 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 coming years as more mature markets, such as North America and Europe, struggle in the face of a wine glut and recessionary conditions.
According to research company Euromonitor International sales of wine in China hit $US41 billion in 2012, up 20 per cent from a year earlier.
Reportedly, Treasury Wine Estates' aim is to use company-owned drinking venues 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 report.
Mr Dearie said Treasury Wine Estates was working with a distributor to open a 6000-square-metre wine gallery, for tasting events, in Shanghai.
In 2012-13 Treasury Wine Estates posted 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 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 still struggling to overcome the major cultural differences and consumer attitudes towards various wine styles and blends. Opening company-owned and run wine bars in China could help Treasury Wine Estates to better plug into the mind of the Chinese consumer.
Mr Dearie reportedly 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 with wine bars or restaurants it will encourage consumption of the wine.
Frequently Asked Questions about this Article…
Treasury Wine Estates is exploring opening company-owned wine bars, restaurants and entertainment venues in China to teach consumers about wine and boost local consumption. The company has also been touring China and Singapore to better understand the market and is working with a distributor on a 6,000‑square‑metre wine gallery in Shanghai for tastings and events.
Asia — and China in particular — is seen as a high-growth market for wine, with research (Euromonitor) citing US$41 billion in Chinese wine sales in 2012 and 20% year‑on‑year growth. For Treasury Wine Estates, Asian sales already account for about 20% of pre‑tax earnings, so successful expansion in China could materially affect future revenue and premium‑wine demand.
According to comments reported in The Wall Street Journal and quoted by CEO David Dearie, the company is speculating it could unveil its own wine outlets in China within the next three to five years, though the idea is still being explored.
Yes. In 2012–13 Treasury Wine Estates reported wine volume growth of 31% in Hong Kong and China combined, and net sales revenue for the year rose about 29.5%, although that growth is off a relatively small base.
Company‑owned wine bars and restaurants can educate Chinese consumers about different wine styles, encourage people to drink imported wines rather than only gifting or cellaring them, and provide tasting events to shift behaviour from storing premium bottles to enjoying them.
The company faces major cultural differences and varying consumer attitudes toward wine styles and blends. The CEO noted that higher‑quality imported wines are often given as gifts and stored in cellars, rather than consumed, which presents a hurdle to increasing on‑trade consumption.
Yes. The CEO has targeted China as a source of premium growth and directed a greater share of the company's top wines, such as Penfolds Grange, to the region to capture demand for higher‑end imports.
Investors should watch for concrete rollout plans (timelines for wine bars, restaurants or the Shanghai wine gallery), ongoing sales and volume growth in China and Hong Kong, any shifts in Asian share of pre‑tax earnings, and evidence that consumer behaviour is changing from gifting/storage to drinking imported wines.
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