The Indonesian Wine Market: Exploring Wine Export Opportunities Beyond China

There is an emerging export opportunity in Indonesia for Australian Premium Wine.

The Australian wine industry was for many years concerned about export markets eroding in the traditional wine markets in Europe and North America, particularly as a combination of rising Australian Dollar, Increased competition from other “New World” wines from South Africa, South America and North America started to compete at the lower price point with which Australian wines had been successfully marketed in the UK and Europe.  This challenge for shelf space, market share and profits was further impacted by the growth in grape output, and consolidation of wine companies in Australia through companies such as Treasury Wines (Formerly Southcorp, and Fosters) and Constellation Wines which standardised the Australian wine industry, and helping to entrench Australian wine industry perception of international export markets as low-end consumers. This industry perception and attitude was a short-sighted and a recipe for disaster. Something had to change, to snap the thinking of the Australian Wine industry.

The Indonesian Wine Market is open for business. Ignore this market to your detriment. The time is ripe for a new investigation of the wine export opportunities in Indonesia

In recent years there has been an explosion of wine sales/exports/ and investments in China. There is undoubtedly a great opportunity in China as the 1.3 billion people start to develop a taste for wine. This is not to say however that wine is saleable to all of the 1.3 billion people, as the favoured alcoholic drinks are still beer and spirits ( rice and barley wine drinks such as MaoTai, Beiju etc). Wine consumption is rising, and taping into the 5% of the population that currently drink wine is a boon for the Australian wine industry, and many successful Australian wineries are now exporting good and profitable volumes into China. There is of course a growing Chinese Wine industry, which is increasing in quality and exposure throughout China. This will likely become a competitive force in the future, for which Australian Wine Companies will need to strategically prepare. So what alternatives are out there in Asia?

There are obvious opportunities throughout South East Asia, in markets such as Vietnam, Thailand, and Singapore. These markets are in the main receptive to wine, and Australian Wine companies should be looking to export into these markets. However there is another market that Australian and other Western Wine companies overlook – Indonesia. There is  broad perception that Indonesia as a predominantly Muslim country holds no opportunities for Australian wine. This is a short-sighted view in my opinion and Wine Companies need to broaden their perspective.

A Wine Store in Jakarta is not uncommon, and increasingly provide premium wine to a rapidly developing domestic wine market.

Indonesia is a challenging place to sell wine, not least because of the Muslim cultural influence. There is however, a large opportunity emerging in Indonesia for wine sales in the right market segment. Opportunities in bulk wine and low-cost wine sales to Indonesia are non-existent. These price points do not work politically for Indonesia. This is not the same for premium wine  sales, for the US$15-50 price point on an Australian wine shelf . In Indonesia these wines would be sold at an added premium of between $40-150. People pay for these wines, and they are consumed by the emergent middle class in cities like Jakarta, and are sought after in restaurants and Hotels across Indonesia. It must be remembered that Indonesia is a moderate Muslim country, and there is no ban on alcohol sales. There is however some restrictions on the number of importers allowed to bring in wine. My main message here is that, Indonesia is a market of opportunity for the Australian wine industry, and it should not be ignored out of hand.

If your company is looking to tap into the increasing demand for wine in the Indonesian market, please feel free to send me an email (nathan@asiaaustralis.com), and we can have a chat about how AsiaAustralis can assist your company meet the needs of the Indonesian market. Alternatively come along to the Australia Indonesia Business Council Business Forum – “Identifying opportunities for primary industries in the Indonesian market”  in Adelaide on Friday 30th March, to learn more about the opportunities for food exporters in Indonesia.

Getting your wine to the Party: Understanding the Chinese wine market

The wine industry in China is only really in its infancy, and as I wrote in an article earlier this week ” Ignore the chinese wine market at your peril: How china can save the Australian wine industry” ( http://wp.me/pS6DN-1z ), the chinese market is a potential saviour for wine industries in countries such as Australia. This is however no simple exercise, and there are many challenges. Then primary challenge is that there is not the same wine drinking culture in China as there is in wine markets such as Europe, North  and South America and Australia. The drinking culture in China is more about consuming your drink in toasts, or “ganbei’s”  see my previous article on Chinese drinking protocols “Gan bei: Business and ritualistic drinking in China”  (http://wp.me/pS6DN-12 ).  This is very different from the comparatively considered method of wine drinking that exists in these other wine markets. Most wine consumers in Europe, North America and Australia wouldn’t dream of “shooting” glasses of wine. This poses a challenge for wine companies wanting to export their wines into the emerging Chinese wine market.  It does not pose a significant roadblock to success however, and just means that China will need to be looked at in a different light to the traditional wine markets around the world.

There are a number of reasons for the emergence of China as a potential wine market for wineries around the world, obviously the size of the population is important, but it is the growth in the middle class that is the most appealing to wine companies and distributors.  The thinking generally goes that as more people enter the middle class, the more people exist who can afford to drink wine. As I mentioned earlier however, this is not part and parcel of the drinking culture in China, and so the consumer needs to be activated to consider wine as a viable alternative to beer, whisky, cognac or traditional Chinese spirits at the dinner/banquet table. And this is where the Chinese government becomes important. Wine is lower in alcohol concentration than spirits, and so has advantages for public health if consumers turn to wine instead of the traditional spirits like Mao-tai.

Any trip to the hyper-market in China whether it Carrefour or Tesco will find you standing in a wine aisle full of French, Italian, South American , Australian and home-grown Chinese wine. The other thing you will notice is that the bottles of wine are generally covered in dust. Why would this be the case? Well this is the standard approach that global wine companies take when entering new markets – get them into the supermarkets.  Well the only people who are buying these wines off the shelf are expats working in China, or Chinese citizens who have lived abroad. Definitely not the mainstream, and probably a waste of money for the wine company who may be paying the supermarket chain for shelf space. So who drinks this wine in China? Well at the moment, somewhere around 70% of all wine sold in China is sold to Chinese Government and Chinese Communist Party buyers….wow! I bet you weren’t expecting that! It’s not that they are hoarding wine, but instead they are stocking up on drinks for the banquets that are necessarily held as part of doing business and government work in China. If you are hosting a banquet then you will need to provide the wine, and the government and the CCP host the most banquets and parties.

So what does this mean for wine companies looking to enter the Chinese market? It means that to get access to the current wine market, it is necessary to meet and greet with wine distributors in China with the connections and existing contracts with the government and party. It also means that to take advantage of the next generation of Chinese Wine drinkers, it will be important to help educate the Chinese how and why they should drink wine. Ultimately China is a unique market regardless of the industry, and for those in the wine industry looking to take advantage of the future opportunities as they emerge it will require a marketing and strategic approach that is unique and customised perfectly for China.

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