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CULTURAL BRIDGE BUILDING FOR
SUCCESSFUL BUSINESS RELATIONSHIPS

12 November 2013
www.heinonwine.com
COMPONENTS OF PRESENTATION
• Traditional wine markets
• Developing wine markets

• The importance of BRICS
• Why China?
• The Chinese Challenge & Our Approach
o Chinese Wine Market
o Culture – traditions & tastes
o Distribution
o Marketing opportunities

• Conclusion – bridging the cultural divide

www.heinonwine.com
TRADITIONAL WINE MARKET
What is happening in our traditional wine markets?

www.heinonwine.com
TRADITIONAL WINE MARKET
What is happening in our traditional wine markets*?
Bulk wine exports 2006 – 2012 (litres)

* United Kingdom, Germany, Sweden, Denmark, Belgium & The Netherlands
www.heinonwine.com
TRADITIONAL WINE MARKET
What is happening in our traditional wine markets*?
Bottled wine exports 2006 – 2012 (12 x 750ml packs)

* United Kingdom, Germany, Sweden, Denmark, Belgium & The Netherlands
www.heinonwine.com
DEVELOPING WINE MARKETS
What is happening in the developing countries?

www.heinonwine.com
DO THE BRICS STACK UP?
2012: SA wine exports to Eastern
Europe: 435 477 x 12

2012: SA wine exports to
Far East: 912 736 x 12

2012: SA wine exports
to Middle East:
430 785 x 12

2012: SA wine exports to South
America: 80 477 x 12

www.heinonwine.com
DO THE BRICS STACK UP?

SA wine exported from Jan - Dec 2012:
China

Far East

Litres

Total

12-Packs

Litres

12-Packs

6045390

671710

8214626

912736

China accounts for 73.6% of all SA wine exports to the Far East

www.heinonwine.com
DO THE BRICS STACK UP?
Russia per capita
consumption: 7.14L
China per capita
consumption: 1.31L

India per capita
consumption: 9ml

Brazil per capita
consumption: 2L

www.heinonwine.com
WHY ASIA?

www.heinonwine.com
WHY CHINA?

www.heinonwine.com
WHY CHINA?

Population statistics (2012)
China

1 351 000 000

UK

63 223 000

USA

313 900 000

Europe

739 200 000

Earth

7 046 000 000

China as a percentage of the
world's population

19.17%

www.heinonwine.com
WHY CHINA?
Wine Consumption per capita in China (litres)
2011
0.5

2012
0.9

Growth of 0.4 litre per year

•

If wine consumption in China grows with 0.4 litre per year:

•

The growth potential is 320 000 000 bottles for the next year

•

20% of total wine consumption in China is imported wine =
64 000 000 bottles of imported wine

•

2% of the imported wines to China comes from South Africa =
1 280 000 bottles of wine from South Africa

www.heinonwine.com

2013
1.31
OVERVIEW OF CHINA

•

1 351 000 000 people

• Massive shift of rural to urban populations
(200 cities with more than 1 million people, 25 greater than 5 million)
•

23 provinces, 5 autonomous regions, 4 municipalities, and 2 Special
Administrative Regions

•

All power within People’s Republic of China - three bodies:

 Communist Party of China
 State Council
 People’s Liberation Army

www.heinonwine.com
OVERVIEW OF CHINA
WINE INDUSTRY

www.heinonwine.com
OVERVIEW OF CHINA
FOREIGN INVESTMENTS

www.heinonwine.com
OVERVIEW OF CHINA
FOREIGN INVESTMENTS

Bordeaux domains owned by Chinese investors at the end
of August, 2013, as listed by BORDEAUX SUPERIEUR:
1.
2.
3.
4.
5.
6.
7.
8.
9.
10.
11.

Château Vieux-Brondeau
Château Branda Cadillac-en-Fronsadais
Château Baby
Château Blanchet
Château de Lugagnac (Pellegrue)
Château la Bourguette
Château Thébot
Château de Cugat
Château Latour Laguens
Château Bertranon
Château La Dominante

www.heinonwine.com
CHINA OVERVIEW
SOUTH AFRICAN INVESTMENT

www.heinonwine.com
CHINA OVERVIEW
SOUTH AFRICAN INVESTMENT

WINE EXPORTS TO CHINA (12x750ml packs)

2011

2012

Total SA Wine

592244

671710

Total La Motte + Leopard's Leap +
L'Huguenot

127600

158400

La Motte, Leopard's Leap &
L'Huguenot as % of SA wine
exported to China

21.55%

23.58%

www.heinonwine.com
THE CHINESE CHALLENGE

www.heinonwine.com
THE CHINESE WINE MARKET

www.heinonwine.com
THE CHINESE WINE MARKET
Drinking Patterns
Growth of alcoholic beverages in China in 2011

www.heinonwine.com
THE CHINESE WINE MARKET
Wine Production vs Wine Consumption
•
•
•
•

China’s consumption in 2009 was 116 million cases
2011 consumption was 156 million cases
= 5% of world consumption and exceeds global growth
Deficit between consumption and production continues to grow

www.heinonwine.com
THE CHINESE WINE MARKET
The importance of Festivals

www.heinonwine.com
THE CHINESE WINE MARKET
Niche is good

www.heinonwine.com
THE CHINESE WINE MARKET
Trends

www.heinonwine.com
THE CHINESE WINE MARKET
Also keep in mind
•

M a ny g o o d o p t i o n s o u t s i d e t h e B i g 4 – B e i j i n g , S h a n g h a i , G u a n g z h o u a n d S h e n z h e n

•

E x p l o r e s e c o n d t i e r C i t i e s s u c h a s : D a l i a n , N a n j i n g , Wu h a n , C h o n g qi n g

•

H i g h to u r is m – X i ’ a n

•

H a n g z h o u – C a p e To w n ’ s s i s te r c i t y

•

2 holidays account for ≈ 60% of annual wine sales

•

Fa m i l y r e u n i o n s a r e v e r y i m p o r t a n t

•

G i f t B ox e s a n d a c c e s s o r i e s – v e r y i m p o r t a n t

•

C o m p et i t io n w i t h B r a n d y, C o g n a c , B a i j i u

www.heinonwine.com
THE CHINESE WINE MARKET
Percentage of sales via main channels

www.heinonwine.com
THE CHINESE WINE MARKET
Consumption

www.heinonwine.com
CULTURE – TRADITIONS & TASTES
The Chinese Consumer
What motives the Chinese consumer to drink wine?

www.heinonwine.com
CULTURE – TRADITIONS & TASTES

www.heinonwine.com
CULTURE – TRADITIONS & TASTES
PALATE PREFERENCES

• Coastal regions – seafood is popular. Style of
wine fresh and light, accessible.
• Southern regions – seafood still popular, also
spicy dishes. Style of wine sweetish and fresh.

• Northern region – more red meat and spicy
dishes. Style of wine more full bodied and dry.

www.heinonwine.com
BEST-SELLING POTATO CHIP FLAVOURS IN
CHINA

10 th French Chicken
9 th Cucumber
8 th Mexican Tomato Chicken
7 th Blue Berr y
6 th Lemon Tea
5 th Hot and Sour Fish Soup
4 th Little Tomato
3 rd Italian Red Meat
2 nd Numb and Spicy Hot Pot
1 st American Classic Flavour

www.heinonwine.com
TASTE CUSTOMIZATION

Fruit flavoured Oreos for China

The much loved traditional
Oreo cookie

Growth:
60% per
year
Since changing to fruit flavours 5 years ago

www.heinonwine.com
CULTURE – TRADITIONS & TASTES
PERCEPTION OF PACKAGING

www.heinonwine.com
CHINESE WINE LABELS

www.heinonwine.com
CHINESE PACKAGING

www.heinonwine.com
PACKAGING CUSTOMISATION
“CHINESE-FRIENDLY” HIGH END LABELS
Xu Lei for 2008 Mouton

Lafite with 8 for 2008

www.heinonwine.com
CULTURE – TRADITIONS & TASTES
SOCIAL PRACTICES

www.heinonwine.com
CULTURE – TRADITIONS
BUSINESS ETIQUETTE

www.heinonwine.com
CULTURE – TRADITIONS
DECISION-MAKING

www.heinonwine.com
DISTRIBUTION IN CHINA

www.heinonwine.com
DISTRIBUTION
WHAT WE HAVE DONE
3 Channels of Distribution

1. Agent
2. Gifting
3. Joint Venture

www.heinonwine.com
DISTRIBUTION
WHAT WE HAVE DONE - AGENT
With our Agent, Aussino Fine Wines
Take time to identify your agent

•

•

Build a relationship

Take time with exclusive agreements

•

•

Be the point of difference

•
•
•

Support!

Focus on your strengths

Brand building is very important
www.heinonwine.com
DISTRIBUTION
WHAT WE HAVE DONE - CORPORATE GIFTING

www.heinonwine.com
DISTRIBUTION
WHAT WE HAVE DONE – JOINT VENTURE
Joint Venture with Perfect China
•

JV’s are not always straight-forward

•
•
•

JV’s can be very rewarding

Take care when selecting your partner

Spend time and effort building relationships and support their initiatives.

www.heinonwine.com
DISTRIBUTION
WHAT WE HAVE DONE

In October 2011 we shipped the largest single wine
order shipment from SA:
106 containers or 1.3 million bottles to start our JV.

www.heinonwine.com
MARKETING OPPORTUNITIES
HONG KONG – A GOOD ASIAN OPTION

www.heinonwine.com
MARKETING OPPORTUNITIES
CHINA GLARE

www.heinonwine.com
MARKETING OPPORTUNITIES
FREE TRADE AGREEMENTS

www.heinonwine.com
MARKETING OPPORTUNITIES
CHINA’S CURRENT FTA’S
MACAU
2003

HONG KONG
2002

NIGER
2005

THAILAND
2003

PAKISTAN
2006

CHINA

SINGAPORE
2008
NEW ZEALAND
2008
(wine tax reduced to zero in 2012)

PERU
2008
COSTA RICA
2010

CHILE
2006
(wine tax reducing to zero in 2015)

www.heinonwine.com
MARKETING OPPORTUNITIES
E-COMMERCE
Food & Beverage 4%

Maternity/Child care 4%

Personal care 5%

Others 20%

Jewellery 6%

Clothing 17%
Electronics 44%

•

Total E–Commerce: RMB 252.8 billion (€ 27.5 billion) of which food and beverage
accounts for RMB 10.1 billion (€ 1.1 billion) (2009 figures)

•

*Internet users (netizens) in China have grown from 22 million in 2000 to
500 million in 2012

•

CHINESE CONSUMERS TRUST THE INTERNET
www.heinonwine.com
MARKETING OPPORTUNITIES
SOCIAL MEDIA






Largest search engine is “ baidu”
Facebook → RenRen
Twitter → Sina Weibo
Youtube → Tudou or Youku

www.heinonwine.com
MARKETING OPPORTUNITIES
WINE TOURISM

www.heinonwine.com
MARKETING OPPORTUNITIES
CELEBRIT Y ENDORSEMENTS

www.heinonwine.com
MARKETING OPPORTUNITIES
CELEBRIT Y ENDORSEMENT - WHAT WE HAVE DONE

www.heinonwine.com
IN CONCLUSION
BRIDGING THE CULTURAL DIVIDE

www.heinonwine.com
BRIDGING THE CULTURAL DIVIDE

• Learn a few words Chinese
• Respect their culture
• Be sensitive to customs
• Use familiar flavour references

• Use familiar wine reference - 100 point scheme
• Allow enough photo opportunities…

www.heinonwine.com
KEY RECOMMENDATIONS

• Look beyond the big cities

www.heinonwine.com
KEY RECOMMENDATIONS

www.heinonwine.com
KEY RECOMMENDATIONS

• Educate consumers through ambassadors and online and visit
the market regularly
• Coordinate a specific marketing campaign direct to trade and
industry
• Point of sale helps showcase your image
• Highlight your own cultural aspects and history
• Do not only sell to an agency – help them to sell through to
customer.
www.heinonwine.com
IN CONCLUSION

www.heinonwine.com
www.heinonwine.com

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China symposium, Cultural bridge building for successful business relationships

  • 1. CULTURAL BRIDGE BUILDING FOR SUCCESSFUL BUSINESS RELATIONSHIPS 12 November 2013 www.heinonwine.com
  • 2. COMPONENTS OF PRESENTATION • Traditional wine markets • Developing wine markets • The importance of BRICS • Why China? • The Chinese Challenge & Our Approach o Chinese Wine Market o Culture – traditions & tastes o Distribution o Marketing opportunities • Conclusion – bridging the cultural divide www.heinonwine.com
  • 3. TRADITIONAL WINE MARKET What is happening in our traditional wine markets? www.heinonwine.com
  • 4. TRADITIONAL WINE MARKET What is happening in our traditional wine markets*? Bulk wine exports 2006 – 2012 (litres) * United Kingdom, Germany, Sweden, Denmark, Belgium & The Netherlands www.heinonwine.com
  • 5. TRADITIONAL WINE MARKET What is happening in our traditional wine markets*? Bottled wine exports 2006 – 2012 (12 x 750ml packs) * United Kingdom, Germany, Sweden, Denmark, Belgium & The Netherlands www.heinonwine.com
  • 6. DEVELOPING WINE MARKETS What is happening in the developing countries? www.heinonwine.com
  • 7. DO THE BRICS STACK UP? 2012: SA wine exports to Eastern Europe: 435 477 x 12 2012: SA wine exports to Far East: 912 736 x 12 2012: SA wine exports to Middle East: 430 785 x 12 2012: SA wine exports to South America: 80 477 x 12 www.heinonwine.com
  • 8. DO THE BRICS STACK UP? SA wine exported from Jan - Dec 2012: China Far East Litres Total 12-Packs Litres 12-Packs 6045390 671710 8214626 912736 China accounts for 73.6% of all SA wine exports to the Far East www.heinonwine.com
  • 9. DO THE BRICS STACK UP? Russia per capita consumption: 7.14L China per capita consumption: 1.31L India per capita consumption: 9ml Brazil per capita consumption: 2L www.heinonwine.com
  • 12. WHY CHINA? Population statistics (2012) China 1 351 000 000 UK 63 223 000 USA 313 900 000 Europe 739 200 000 Earth 7 046 000 000 China as a percentage of the world's population 19.17% www.heinonwine.com
  • 13. WHY CHINA? Wine Consumption per capita in China (litres) 2011 0.5 2012 0.9 Growth of 0.4 litre per year • If wine consumption in China grows with 0.4 litre per year: • The growth potential is 320 000 000 bottles for the next year • 20% of total wine consumption in China is imported wine = 64 000 000 bottles of imported wine • 2% of the imported wines to China comes from South Africa = 1 280 000 bottles of wine from South Africa www.heinonwine.com 2013 1.31
  • 14. OVERVIEW OF CHINA • 1 351 000 000 people • Massive shift of rural to urban populations (200 cities with more than 1 million people, 25 greater than 5 million) • 23 provinces, 5 autonomous regions, 4 municipalities, and 2 Special Administrative Regions • All power within People’s Republic of China - three bodies:  Communist Party of China  State Council  People’s Liberation Army www.heinonwine.com
  • 15. OVERVIEW OF CHINA WINE INDUSTRY www.heinonwine.com
  • 16. OVERVIEW OF CHINA FOREIGN INVESTMENTS www.heinonwine.com
  • 17. OVERVIEW OF CHINA FOREIGN INVESTMENTS Bordeaux domains owned by Chinese investors at the end of August, 2013, as listed by BORDEAUX SUPERIEUR: 1. 2. 3. 4. 5. 6. 7. 8. 9. 10. 11. Château Vieux-Brondeau Château Branda Cadillac-en-Fronsadais Château Baby Château Blanchet Château de Lugagnac (Pellegrue) Château la Bourguette Château Thébot Château de Cugat Château Latour Laguens Château Bertranon Château La Dominante www.heinonwine.com
  • 18. CHINA OVERVIEW SOUTH AFRICAN INVESTMENT www.heinonwine.com
  • 19. CHINA OVERVIEW SOUTH AFRICAN INVESTMENT WINE EXPORTS TO CHINA (12x750ml packs) 2011 2012 Total SA Wine 592244 671710 Total La Motte + Leopard's Leap + L'Huguenot 127600 158400 La Motte, Leopard's Leap & L'Huguenot as % of SA wine exported to China 21.55% 23.58% www.heinonwine.com
  • 21. THE CHINESE WINE MARKET www.heinonwine.com
  • 22. THE CHINESE WINE MARKET Drinking Patterns Growth of alcoholic beverages in China in 2011 www.heinonwine.com
  • 23. THE CHINESE WINE MARKET Wine Production vs Wine Consumption • • • • China’s consumption in 2009 was 116 million cases 2011 consumption was 156 million cases = 5% of world consumption and exceeds global growth Deficit between consumption and production continues to grow www.heinonwine.com
  • 24. THE CHINESE WINE MARKET The importance of Festivals www.heinonwine.com
  • 25. THE CHINESE WINE MARKET Niche is good www.heinonwine.com
  • 26. THE CHINESE WINE MARKET Trends www.heinonwine.com
  • 27. THE CHINESE WINE MARKET Also keep in mind • M a ny g o o d o p t i o n s o u t s i d e t h e B i g 4 – B e i j i n g , S h a n g h a i , G u a n g z h o u a n d S h e n z h e n • E x p l o r e s e c o n d t i e r C i t i e s s u c h a s : D a l i a n , N a n j i n g , Wu h a n , C h o n g qi n g • H i g h to u r is m – X i ’ a n • H a n g z h o u – C a p e To w n ’ s s i s te r c i t y • 2 holidays account for ≈ 60% of annual wine sales • Fa m i l y r e u n i o n s a r e v e r y i m p o r t a n t • G i f t B ox e s a n d a c c e s s o r i e s – v e r y i m p o r t a n t • C o m p et i t io n w i t h B r a n d y, C o g n a c , B a i j i u www.heinonwine.com
  • 28. THE CHINESE WINE MARKET Percentage of sales via main channels www.heinonwine.com
  • 29. THE CHINESE WINE MARKET Consumption www.heinonwine.com
  • 30. CULTURE – TRADITIONS & TASTES The Chinese Consumer What motives the Chinese consumer to drink wine? www.heinonwine.com
  • 31. CULTURE – TRADITIONS & TASTES www.heinonwine.com
  • 32. CULTURE – TRADITIONS & TASTES PALATE PREFERENCES • Coastal regions – seafood is popular. Style of wine fresh and light, accessible. • Southern regions – seafood still popular, also spicy dishes. Style of wine sweetish and fresh. • Northern region – more red meat and spicy dishes. Style of wine more full bodied and dry. www.heinonwine.com
  • 33. BEST-SELLING POTATO CHIP FLAVOURS IN CHINA 10 th French Chicken 9 th Cucumber 8 th Mexican Tomato Chicken 7 th Blue Berr y 6 th Lemon Tea 5 th Hot and Sour Fish Soup 4 th Little Tomato 3 rd Italian Red Meat 2 nd Numb and Spicy Hot Pot 1 st American Classic Flavour www.heinonwine.com
  • 34. TASTE CUSTOMIZATION Fruit flavoured Oreos for China The much loved traditional Oreo cookie Growth: 60% per year Since changing to fruit flavours 5 years ago www.heinonwine.com
  • 35. CULTURE – TRADITIONS & TASTES PERCEPTION OF PACKAGING www.heinonwine.com
  • 38. PACKAGING CUSTOMISATION “CHINESE-FRIENDLY” HIGH END LABELS Xu Lei for 2008 Mouton Lafite with 8 for 2008 www.heinonwine.com
  • 39. CULTURE – TRADITIONS & TASTES SOCIAL PRACTICES www.heinonwine.com
  • 40. CULTURE – TRADITIONS BUSINESS ETIQUETTE www.heinonwine.com
  • 43. DISTRIBUTION WHAT WE HAVE DONE 3 Channels of Distribution 1. Agent 2. Gifting 3. Joint Venture www.heinonwine.com
  • 44. DISTRIBUTION WHAT WE HAVE DONE - AGENT With our Agent, Aussino Fine Wines Take time to identify your agent • • Build a relationship Take time with exclusive agreements • • Be the point of difference • • • Support! Focus on your strengths Brand building is very important www.heinonwine.com
  • 45. DISTRIBUTION WHAT WE HAVE DONE - CORPORATE GIFTING www.heinonwine.com
  • 46. DISTRIBUTION WHAT WE HAVE DONE – JOINT VENTURE Joint Venture with Perfect China • JV’s are not always straight-forward • • • JV’s can be very rewarding Take care when selecting your partner Spend time and effort building relationships and support their initiatives. www.heinonwine.com
  • 47. DISTRIBUTION WHAT WE HAVE DONE In October 2011 we shipped the largest single wine order shipment from SA: 106 containers or 1.3 million bottles to start our JV. www.heinonwine.com
  • 48. MARKETING OPPORTUNITIES HONG KONG – A GOOD ASIAN OPTION www.heinonwine.com
  • 50. MARKETING OPPORTUNITIES FREE TRADE AGREEMENTS www.heinonwine.com
  • 51. MARKETING OPPORTUNITIES CHINA’S CURRENT FTA’S MACAU 2003 HONG KONG 2002 NIGER 2005 THAILAND 2003 PAKISTAN 2006 CHINA SINGAPORE 2008 NEW ZEALAND 2008 (wine tax reduced to zero in 2012) PERU 2008 COSTA RICA 2010 CHILE 2006 (wine tax reducing to zero in 2015) www.heinonwine.com
  • 52. MARKETING OPPORTUNITIES E-COMMERCE Food & Beverage 4% Maternity/Child care 4% Personal care 5% Others 20% Jewellery 6% Clothing 17% Electronics 44% • Total E–Commerce: RMB 252.8 billion (€ 27.5 billion) of which food and beverage accounts for RMB 10.1 billion (€ 1.1 billion) (2009 figures) • *Internet users (netizens) in China have grown from 22 million in 2000 to 500 million in 2012 • CHINESE CONSUMERS TRUST THE INTERNET www.heinonwine.com
  • 53. MARKETING OPPORTUNITIES SOCIAL MEDIA     Largest search engine is “ baidu” Facebook → RenRen Twitter → Sina Weibo Youtube → Tudou or Youku www.heinonwine.com
  • 55. MARKETING OPPORTUNITIES CELEBRIT Y ENDORSEMENTS www.heinonwine.com
  • 56. MARKETING OPPORTUNITIES CELEBRIT Y ENDORSEMENT - WHAT WE HAVE DONE www.heinonwine.com
  • 57. IN CONCLUSION BRIDGING THE CULTURAL DIVIDE www.heinonwine.com
  • 58. BRIDGING THE CULTURAL DIVIDE • Learn a few words Chinese • Respect their culture • Be sensitive to customs • Use familiar flavour references • Use familiar wine reference - 100 point scheme • Allow enough photo opportunities… www.heinonwine.com
  • 59. KEY RECOMMENDATIONS • Look beyond the big cities www.heinonwine.com
  • 61. KEY RECOMMENDATIONS • Educate consumers through ambassadors and online and visit the market regularly • Coordinate a specific marketing campaign direct to trade and industry • Point of sale helps showcase your image • Highlight your own cultural aspects and history • Do not only sell to an agency – help them to sell through to customer. www.heinonwine.com