BTN Interviews Ian Ford, the General Manager and Co-Founder of Summergate Fine Wines, on What Wine Importers Look for when Sourcing New Brands as Long Term Supply Partners.
Founded in 1999, Summergate serves the Greater China drinks market from a platform of 13 registered and licensed offices and operations across the country, and a team of 500 professional staff. Summergate Fine Wines has built a reputation as one of the leading wine providers across Greater China, working with a direct distribution base of several thousand contracted retail trade buyers, as well as hundreds of downstream distributors. Summergate is also the sole distributor of Perrier water in mainland China, and has been since 2007, firmly establishing Perrier as the leading imported sparkling mineral water in China.
Photo on left: Ian Ford, right, with co-founder Brendan O'toole in Guangzhou, China
BTN: What do you think of the influx of Exporters looking to enter the China Market?
Ian: There is an initial and fundamental choice for wine exporters looking to sell wine in China. That choice is between long term market building, and near term opportunistic sales. That choice is between national importers that market and distribute brands across the country, in a systematic, comprehensive, and transparent way, consistently building brands and building a long term sustainable market (there are not many of us); and localized distributors that typically have what we would call a closed market - very localized, not employing structured or transparent pricing, systematic distribution, or any brand marketing or communications. The latter represents the large majority of registered importers in China. My comments will be from the perspective of the former, a national importer that engages with long term supply partners, with a large marketing organization that is geared to building brands.
BTN: What are the 3 main factors that Chinese importers consider when picking up a new winery?
Ian: First and foremost is partnership. We look for a winemaker that is intent on building a long term, sustainable market here with us, that expands year on year, in the face of the many challenges here that confront us, and throughout the ups and downs of a volatile emerging wine market. We look for level-headed brand owners that are not lured by the false promise of a China market "Eldorado" but are prepared for and committed to a serious effort to build a market here over time with us. Hand in hand with this is the patience required to stick to the disciplines and strategy of long term market building.
Second, we look for producers or brands that are in a leadership position in their category, whether that category is big or small. Our principle is to work with benchmark producers from the world's great wine regions, and deliver their wines and their stories to our very keen Chinese consumers. Integral to this of course is that they make great wine!
Last but certainly not least is integrity. This is a bedrock value for Summergate that guides everything that we do, and we need to see that same posture in our winery partners.
BTN: What support programs do Chinese wine importers expect from a supplier. Please list top 5.
Ian: In terms of the more practical measures required for building a market in Greater China, here are five important cornerstones from the Summergate perspective. Summergate has invested in a significant brand building and marketing team and capability, so much of what we require are the tools to empower us to build brands:
• Chinese language: The vast majority of Chinese consumers across the continent, don't speak a foreign language, or if they do many are not completely comfortable in that language. While this may seem like stating the obvious, serious brand builders need to fully adopt a Chinese language platform (back labels, tasting notes, marketing materials, website) to make their brand accessible and meaningful to Chinese consumers.
• Trademarks: This is a fundamental issue and must be addressed by the brand owner. All proprietary trademarks, in the original foreign language AND in Chinese, must be registered with the relevant Chinese trademark authority. It is surprising how many brand owners have failed to accomplish this basic requirement, and get caught out in the marketplace sooner or later.
• Marketing visuals and video materials: A picture says a thousand words, especially where your target audience doesn't speak a foreign language! Video materials, of the winery, winemaking, proprietor speaking about the family of history, are increasingly important. These are tools that we can deploy with social media, e-commerce platforms, and for trade education. These materials must be sub-titled properly in Chinese.
• Sales team motivation and inspiration: The brand owner should make every effort not just to educate, but also to inspire and motivate the trade in China behind their wines. Too often we see dry, boring educational presentations, and not enough that inspires the sales team, both ours and the trade people in the retail level, to advocate their wines.
• Marketing Investment: Every brand owner has a different appetite and capacity for investing in a market. It is a fact however that the China market will not materialize out of thin air, purely on the back of the hard work and effort of the importer and distributor. Some scale of marketing investment should be provided to a serious and capable importer, along with the trust in the importer that those funds will be deployed efficiently, effectively, and transparently. That trust of course must be reciprocated by the importer with a proper use of funds and clear and accurate reporting and evaluation.
BTN: Which varietals you see are HOT and what trends do you see for 2014. Like in US, blends and Moscato’s are HOT followed by Malbecs.
Ian: We have been noticing a significant expansion in interest and demand for both Riesling and Sauvignon blanc across the market, albeit from a very small base. Two of our top ten selling items across the whole portfolio are now a Sauvignon Blanc and a Riesling. I believe this reflects the evolution of a genuine consumer-driven demand, where some consumers are increasingly buying what they like to drink as opposed to labels or wines from a prestige region purely on reputation. It s still very early but it is an exciting trend to witness!
We have also seen a surge in consumer interest in Carmenere from Chile, which goes hand in hand with a general increase in interest in wines from Chile. In 2013, a challenging year for the beverage alcohol industry across China, shipments from Chile to China grew faster than any from any other major country of origin, twice as fast as the next on the list. Shipment figures can reflect unnatural surges in pipeline fill in China, but in market we are also building sustained demand and growth for Concha y Toro in China, a brand we have been building for almost fifteen years, and the leading brand of Chilean wine in China.
Finally, Pinot Noir, on the back of increasing interest in fine wines of Burgundy, is making great strides across the market.
BTN: Which are the 3 main markets in china that wineries should focus first.
Ian: The traditional core three markets in Greater China are no doubt the Pearl River delta area (Hong Kong and Macau and Guangdong province); Shanghai and the greater Yangtze River delta area (Zhejiang and Jiangsu provinces); and greater Beijing and the surrounding area. A major wine producer, or any brand really, cannot be strong in China without having wide relevant distribution and a unified brand position across these three areas. China is a massive territory with many important markets however, and the Northeast corridor, Sichuan province, Shandong province, and Fujian province also represent significant opportunities.
BTN: What are the 3 main challenges that wineries will face/or face while developing their brand with an importer in china
Ian: China is a huge and diverse geography, that is more similar to Europe then it is to a single country, in terms of diversity of language and dialect, culture, cuisine, and consumer habits. Likewise, the distribution platform across the country is very fragmented and diverse. National key accounts in the off trade channel for example, represent less than 5% of the volume of imported wine sold in China, by our analysis, compared to roughly 80% of the market for wine in the UK! Building a brand and a market in China therefore requires the ability to construct, manage, and serve a diverse and fragmented distribution platform across the entire continent. Summergate as a distributor owns 14 companies across the country, each managed by a team of professionals, focused on their specific regional or provincial market. This enables us to deliver a consistent product, service, price, and marketing message to a diverse array of buyers across the continent.
Transparency, Reporting, Market intelligence:
Lack of market intelligence and transparency is one of the biggest challenges facing an exporter to China. Many wineries already shipping to China, if asked, are mostly unable to specify where their wines are available to consumers in China, either cities, channels, or outlets, and at what price. For whatever volumes are shipped to China, they are mostly unable to specify where those wines have gone, where is the inventory, and how much inventory is there in the pipeline. The opacity of the market makes it virtually impossible to make decisions about promotion, investments, products, and pricing, to forecast future demand, or to develop brand plans or strategies to pursue market opportunities.
The reality today is that outside of the comfortable and familiar five star Western hotels and fine dining restaurants in major cities, wineries exporting to China will face a bewildering market that is still quite chaotic. There are a preponderance of buyer's own brands, commoditized wines, and "look -a–like" wines across the market, at a bewildering spectrum of prices. Buyers of all shapes and sizes will make outrageous and mostly hollow claims and promise everything under the sun to secure an advantage with a winery. The market is awash in wine competitions, trade shows, and events, the vast majority of which are only attempting to cash in on the international wine world's frenzy for China. Journalists, educators, consultants, and advisers most of whom have questionable credentials and motives, are abundant. All of this can lead to serious and brand damaging diversions from the path of building a strong and sustainable brand in China. It is crucial for a winery to make every effort to see through all of this chaos to the core of the consumer market for wine that is building in China, and an honest, serious, and professional importer and partner is key to that effort.
BTN: What advice can you give to people looking to enter the China market?
Ian: There is no question that the first and foremost concern is finding a strong, experienced, and honest importer to engage with. This has been said before and is more true now than ever. Find a true partner that can provide genuine market intelligence on the whole country, build, defend and steward the brand, build relevant and sustainable distribution that is transparent, manage an honest pricing structure, and engage in an ongoing dialogue about opportunities, threats, and strategies. The large majority of importer-distributors in China today are seeking short term, opportunistic profits, and are not in any way engaged in building a sustainable business or brand.
These companies will come in and out of the business frequently, and wineries working with them will learn very little if anything about their distribution, pricing, brand, and customers, and may find that serious damage has been done to their brand over time. A winery should take their time, conduct more due diligence than necessary in most markets, and make a sound and informed choice for an importer to represent their brand in the market.