Wine company makes inroads into Chinese market

Well known for producing the first New Zealand wine to be imported in commercial quantities into the UK, Nick Nobilo, majority owner of Vinoptima Estate, is finding success in the Chinese market. He spoke in Auckland recently at an event organised by the New Zealand China Trade Association.

Nick Nobilo, pioneer New Zealand winemaker and consistent advocate for the quality end of the market, has recently secured a large order to supply Vinoptima Gewürztraminer to the hotel market at China’s Hainan Island resorts. Mr Nobilo’s entry into the Chinese market was made possible through a fortuitous meeting with a Chinese couple who tried his award winning Gewürztraminer at a 2009 wine show. They turned out to be the owners of a well connected Guangzhou trading firm, through which Vinoptima Estate  distributes their product in Guangzhou, Hong Kong and now Hainan Island.

Describing the initial encounter with the Chinese couple Mr Nobilo said, “They tasted the wine and liked it; they were very interested and ordered ten cases because they wanted to show the wine to others. Later they invited us to a banquet style dinner in accordance with the Chinese way; they saw an opportunity and a friendship began to develop. They then came down to the winery where we showed them hospitality. It was clear a mutual relationship could develop; they then invited us up to Phoenix City in Guangzhou.”

“We managed to secure the opportunity and having established a relationship we then sat down and did the business. You need to negotiate - which can involve a bit of argy bargy - but when there’s longevity in the relationship both parties can win.”

As partners they then put together a five year plan based on volumes and prices and a going to market policy. Distribution was not going to bethrough conventional channels as in the US or UK or other developed markets with developed infrastructure. “They don’t really have that yet,” said Mr Nobilo.” It will come but they don’t have it yet.”

Instead, Vinoptima went in through their business partners to get directly to the right people at the high end market - the VIP market, the gift giving market. They created a gift pack especially for that part of the market, which people appreciated. “So if you’ve got something that fits the bill for them at a certain price point, that’s where you start to achieve success.” Now the company is shipping product up to Guangzhou, where the Chinese partners have a warehouse, and into Hong Kong where they’ve formed another company and also have a warehouse.”

Prior to going to China, apart from establishing business in Japan in the late 1980s, Mr Nobilo focused on New Zealand’s traditional markets for wine – the US, Australia and the UK.

Mr Nobilo says he prefers going to Asia these days as travelling through the US has become problematic since September 11, 2001. The events on that day and the collapse of the financial system in 2008 have made doing business in the US more challenging than it was.

“Before the meltdown in the US financial markets we had developed some very lucrative niche markets, but the restaurants in New York that used to flourish by relying on expense accounts had to close their doors. We went to Asia because of the downturn in the US market following the global financial crisis.”

Mr Nobilo first went to China 20 years ago to investigate opportunities for New Zealand wine. “At that time, viticulture was very primitive and the way of growing grapes was unsophisticated. Instead of wine being made from grapes, it was typically made from potato. And if you came across wine in retail outlets, the bottles would often have a layer of dust on them, suggesting it was a premature market.”

Sales of New Zealand wine to China have increased substantially in recent years as winemakers have sought new markets to absorb the current level of production and as the size of that potentially huge market grows rapidly. But China continues to be a predominantly red wine market and returns have often been at the lower end of the range of international market prices.

Although still trailing far behind Australia, the UK and the US markets in terms of volume, in 2009 China was New Zealand’s sixth largest export market for wine, importing NZ$9.92 million worth of wine made from grapes.

In recent years red wine has been embraced by wealthier consumers in China, and white wine is also becoming more popular.  In 2009 China was New Zealand’s fourth largest export market for red wine (NZ$5.64 million) and our tenth largest market for white wine (NZ$3.82 million).

Here are a few more of Mr Nobilo’s observations on doing business in China:

• The Chinese haven’t yet developed a wine palate. They drink mainly red wine because they like the colour, and are prepared to pay huge sums on well-known French wine.

• It’s important to match the varietal type to the food being eaten in China. The characteristics of Gewürztraminer are a good match for spicy Chinese food. When wine is consumed with Chinese food it needs to be suitable for the entire meal, so that it’s not necessary to change varieties.

• You have to establish a relationship before doing business – a relationship of trust and respect.

• The identified business opportunity has to be win-win, where both sides identify an advantage.

• The quickest way to cross cultural barriers is to partake in the food of the country.

• Decrees from the political leadership in China have a huge impact on the psyche of the market, for instancethe announcement by Premier Wen Jiabao that the people must stop drinking alcohol made from rice, which is for food, and must start drinking alcohol made from grapes.

Photos copyright of Vinoptima Estate.