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China’s light shines on Aussie export radar
Professional experience: Australia's First Families of Wine members Alister Purbrick (Tahbilk), Don McWilliam (McWilliam's Wines), Stephen Henschke (Henschke), Darren De Bortoli (De Bortoli), Jeff Burch (Howard Park), Peter Barry (Jim Barry Wines), Mitchell Taylor (Taylors Wines), Bruce Tyrrell (Tyrrell's), Colin Campbell (Campbells), d'Arry Osborn (d'Arenberg), Ross Brown (Brown Brothers) and Robert Hill Smith (Yalumba) enjoy a drop of red at the collective's launch in Sydney on August 31. The Federal Australian Government-endorsed collective formed as part of a strategy to improve the perception of Australian wine overseas.
by Malcolm Sutton
With the value of Australian wine exports continuing to dwindle for the second consecutive year, the Australian wine industry is looking to regroup.
Culpability for the export wane has been placed on a number of broad shoulders including the global financial crisis, the increasing market power of competing countries, and more damagingly, failing perceptions of the quality of Australian wine overseas.
But while who and what to blame is debated, there is little question over what needs to be done next, such as improving international perceptions by placing a heightened emphasis on quality bottled wine at good prices, a strategy recently seen in action with the launch of Australia's First Families of Wine (see photo), and the expansion of Australia's wine exports to China, which saw a staggering 84.3% increase in volume in the 12 months to June 2009 compared to the previous 12 months - the largest increase in Australian exports anywhere in the world.
Australian Wine and Brandy Corporation Emerging Markets regional manager Ali Hogarth says the Chinese market presents a good opportunity for Australia.
'We're one of the very few major exporters in the Asian region, which gives us a stronger stance than Europe, the United States and southern America,' she said.
'We are in the same time zone and we also have a lot of internationals coming to Australia from China who tend to take back Australian culture, which includes wine.'
China is already Australia's strongest export market in Asia, currently receiving 41% of Australia's Asian exports, with Japan the second largest at 20% and Hong Kong third at 11%.
Yet while growing strongly in volume, exports to China did not escape the worldwide fall in export value that saw Australian wine drop an overall $3.24 per litre in value in the 12 months to last June.
'Essentially what we are aiming to do is position Australia's wine as a fine wine and high value proposition,' Hogarth said.
'There is a growing middle class and as people become more knowledgeable and their taste and interest develops, we expect to see an increase in consumption.'
Wine export to China has subsequently become a priority for the AWBC, a corporation that flagged its intentions when it submitted recommendations to the Federal Foreign Affairs and Trade Department's China Free Trade Agreement Study Taskforce back in June 2005.
Those recommendations included the removal of wine tariffs for trade between Australia and China, which currently stand at 14% for bottled wine and 20% for bulk wine (in addition to a consumption tax of 10% and value added tax (VAT) of 17%, making a total effective tariff of 48.2% for bottled wine), the opening up of distribution channels to foreign-owned companies, removing convoluted and lengthy Chinese label registration processes, and making further changes to trade regulations to bring about an overall simplification of Australia's exports.
A spokesperson for the Department of Foreign Affairs and Trade says discussions are continuing for a FTA between Australia and China on a variety of levels.
'[But] the next round of formal negotiations has not yet been scheduled,' she said.
While a FTA still seems some way off, there have already been some accomplishments in the easing of export regulations.
In April this year, a Memorandum of Understanding was signed between Australia's Department of Agriculture, Fisheries and Forestry and China's General Administration of Quality Supervision, Inspection and Quarantine (AQSIQ) that addressed the AWBC's recommendations on labelling.
AWBC trade manager Andreas Clark says this included the establishment of a process for ongoing regulatory and market access issues between the relevant authorities, namely the corporation and AQSIQ.
'The AWBC has a close working relationship with AQSIQ, demonstrated through recent meetings in Beijing and Shanghai where we had an open and detailed exchange about our relevant roles and processes,' he said.
'These meetings and the developing relationship provided us with an opportunity, for example, to clarify how certain Chinese wine standards, including labelling issues are enforced.
'AQSIQ no longer applies a pre-approval process for wine labels, so that part of the 2005 submission is no longer relevant ... [meaning] that Australian exporters no longer have to endure long waiting periods to be able to ship their wines.
'[But] All of our comments in the 2005 submission other than those concerning the labelling pre-approval process still stand … tariff elimination is a priority as we would like to see Australian producers benefit from the same market access that Chile and New Zealand have.'
Chile and NZ benefit from FTAs that have left Chile with an import duty of 8.4% that will fade out to zero in 2015, and NZ with an import duty of 8.4% that will fade out to zero by 2012 (a consumption tax of 10% and VAT of 17% remain the same for both countries).
But with Australia's penetration of the Chinese market rising regardless of an elusive FTA, and currently second only to France (45%) by providing 20% of China's overall bottled wine imports, the AWBC is ramping up its marketing strategy.
This has included basing a market development officer in Shanghai and forming a partnership with AUSTRADE that gives AWBC access to its 13 offices in China, and a wider variety of export promotion initiatives.
Chinese and HK representatives were present at the AWBC's Landmark Australia tutorial in June that saw 12 wine media and educators from around the world participate in a five-day event in the Barossa Valley.
Two hundred and forty eight of Australia's finest wines were presented by leading winemakers and commentators, seminars took place and international participants took regional tours throughout South Australia, New South Wales, Victoria, Tasmania and Western Australia.
The AWBC has also launched an extensive China Market Program designed to use media and education methods in China to create category awareness and commercial opportunities, and increase trade and consumer knowledge with China.
'We have been actively marketing Australian wine in China since 2006, and this commitment and investment will continue,' Hogarth said.
'The Chinese market offers both mainstream and fine wine opportunities, and our marketing strategies will address these by encouraging new consumer creation through positive association with Australia as a country, as well as ensuring specialist trade, media and educators have access to our regionally distinct and fine wines.
'Australia is uniquely positioned to deliver to both audiences and the marketing strategy speaks to this.'
She says that unlike previous campaigns in the United Kingdom and United States, the China marketing campaign will not have a focus on price competition but will concentrate on establishing a reputation for high quality.
'China has a very strong domestic market and Australia will never be able to compete with that,' Hogarth said.
'A lot of what we do is very education based and focuses on trade and media.'
One Australian state has thrown its own marketing campaign into the ring. This year the NSW Government organised several initiatives to boost the state's exports to China. This included investing $100,000 of in-kind support to NSW wineries to encourage their involvement in penetrating the China and HK markets, as well as running business workshops for wineries to gear up towards an advance on the Chinese market. All of this is leading up to a government-led promotional tour of China and HK next month.
NSW State Development Minister Ian Macdonald says the tour will be the first step in developing a long-term marketing strategy to boost opportunities.
'Up to 20 NSW wineries from a range of regions are expected to participate in this first round of promotional activities,' he said.
'NSW wine exports to China grew from $A7.4 million to $A14.8m between the 2006 and 2008 calendar years ... and NSW wine exports to HK from $A3.2m to $A5.2m during the same period.
'Over the past few years, China and HK have emerged as the most important market in Asia for Australian wine.
'We are focused on growing these markets into the future.'
Hogarth welcomed the NSW initiative but says the AWBC is concentrated on a nationwide approach to building the leading Asian recipient for Australia's wine exports.
'It's important that we all work together, and finding the right distribution is probably the most significant challenge exporter we'll encounter, so financial and on-ground support from regions and/or states offices located in China may help to overcome this,' she said.
'(But) it is important to note that although China has experienced significant growth, it is from a relatively small base from a global perspective.
'Currently Australia exports 723m litres to the UK compared with just 25mL to China.
'Of this 25mL, just over half of this is bottled wine, which equates to approximately 1.5m dozen bottled wine exports that have been sent to China in the past 12 months.'
While China may twinkle as a saving grace for the Australian wine industry, with such a little percentage of Australia's overall export market, it seems the industry is a long way from winning its ongoing battle.
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