Reproduced from Year 16, Issue #91 of Spirito di Vino Italia... English Version (not-edited)
The experience of France and Australia in Hong Kong markets has demonstrated that focus on consumer-centric events and a high level of support to the importers is critical to their outstanding success.
When it comes to explaining their poor performance in China versus Australia or Chile, several players in the Italian wine industry tend to blame it on free-trade agreements. If it is the case, then how can they explain the same poor performance in Hong Kong, a Chinese territory that has had no import taxes on Italian wines since 2008?
Indeed, the figures paint a bleak picture. In 2018, the market share of Italian wines in Hong Kong accounted for a mere 5% in volume, well behind that of France (22%), Australia (18%) and Chile (9%) (Figure 1). Looking forward 5 years, Australia and Chile are set to continue growing by more than 2% each (Figure 2).
Perhaps because of this performance, I have noticed a worrying trend over the last few years in Hong Kong. It appears that several Italian wine producers at the premium level are giving up on the market and think that going to China directly will bring more return on their investments. If I am right about this trend, I firmly believe it is a misguided strategy. Simply put, if a brand cannot be successful in Hong Kong, how can it expect to be successful in the much more difficult market of China?
This opinion is based on the concept of “urban clusters” (Figure 3) developed by McKinsey & Company and today adopted by the Chinese government. The idea is that looking at China as a homogenous country is a wrong approach. Over several years of consumer behaviour research in the country, McKinsey has identified huge differences between urban clusters. So much that the government itself has also recognised this and is now planning its development around 19 “supercity clusters”. From a marketing standpoint, it is, therefore, better to approach each cluster with its unique adapted strategy.
The Hong Kong urban cluster is the perfect market for Italian wine companies to learn, test and develop critical skills needed to tackle the more complicated markets of China. The territory has a per capita consumption of 5.3 liters (figure 4), compared to China which is around 1.3L. The city is generally seen as more open to the outside world than any other Chinese cities. It has a thriving expat community, its local population travels extensively, and many have lived for several years in Canada, Australia, and the USA making its population the most modern and cosmopolitan in China.
To be successful in Hong Kong, it is necessary that Italian wine brand managers change the approach that has not worked until now. Working closely with more than 50 Italian wine importers in the city and having spoken to countless wine producers over the last 3 years, I have learned that, a major reason of poor results is not so much because “the government does not invest”, or that “Italians are not able to work together”, as I often hear, but because unsuccessful Italian wine companies have not seriously committed to the market with a strategic and long-term approach in their way the French and the Australian counterparts have done.
Many Italian companies seem to think that by joining a fair once and finding an importer will be the end of their bargain and sales will develop from then on. Many do not want to participate to B2C events, perhaps assuming them a waste of time and wine. When they do participate, some think that a single event organized by a famous wine critique will be enough to do the trick. Others believe that the approach to the market should be similar to the strategy that worked in the USA: sell to Italian restaurants and things will take care of themselves. Too many Italian wine companies I have spoken with still believe that Italian wine education is the responsibility of someone else. The list could go on.
The reason why the French and the Australians are successful in Hong Kong and in China is not because of their government or because “they work together”. It is because they have committed to the small, constant, and tedious actions needed for sustainable business development.
For example, the Union des Grands Crus of Bordeaux used to come several times a year in Hong Kong for consumers to taste their wines “En Primeur”. Each year since its foundation, the CIVB, the Bordeaux Wine Council equivalent to a Consorzio, has had a serious presence on the grounds of the Wine and Dine Festival which attracted 168,000 visitors (many from Mainland China) in its 2018 edition. Their stand included a wine school with courses each ½ hour and 40 suppliers from Bordeaux came to support their efforts. In fact, the marketing of the CIVB since Hong Kong dropped its import taxes in 2008 has been exemplary with regular activities and programs to stimulate the sales of wines already imported in Hong Kong. This strategy is key. Through concepts involving local personalities and tied-in with promotions at the retailer level, they were able to be consumer’s first taste of wine and stay on top of minds making their wines the number one choice of the local population.
Each year, owners of many Chateaux travel several times a year to Hong Kong to support their importers at various events mostly targeted to consumers. Champagne Houses fully support consumer initiatives such as l’Ordre des Côteaux de Champagne with generous wine donations to increase the prestige of their event and attract attention to the wines already on the market.
The Australians, on the other hand, have leveraged tourism to their country in an extremely efficient way. They have also invested heavily in wine education, and thanks to the strong support of several producers their wine courses have access to a great diversity of wines and information.
It seems that it is little known that the Italian Government in Hong Kong represented by the Consulate General of Italy and the Italian Trade Commission is not only willing but also active in supporting several initiatives in Hong Kong. In fact, for a few years ago already, the Consulate has initiated a 2-month long Festival called “Bellissima Italia”. It aims to promote the Italian way of life to the Hong Kong population through a series of events. The Consulate also co-organizes the “Italian Wine Celebration”, a yearly gala dinner designed to stimulate wines already on the market. Another example, the Trade Commission sponsors classrooms at the Hong Kong International Wine & Spirits Fair for the conduct of masterclasses and other wine and spirits-related presentations. However, if only a few Italian wine organisations support these events, how can they be successful?
At this time, there is a need for wine companies to work more closely with their importers. Firstly, before assigning exclusivity, it is critical for the wine importer to conduct due diligence. I have seen a great many misfits between the Italian wine brand and the importer which ultimately wastes time and resources. Then, they must support their partners in the market with samples, budget, marketing materials and regular visits. The appointment of Brand Ambassadors physically based in Hong Kong is also a critical step in the right direction. In this extremely saturated market, an importer cannot be expected to do the hard-educational work by themselves.
This is where the Italian Consorzi come in. It has been made clear to me that, today as the newly appointed Ambassador of Franciacorta in Hong Kong and China, the mission of such organisations is to represent all of their members. Therefore, it is only reasonable that many of their activities would be geared towards helping wineries find importers. However, in Hong Kong today, there are simply too many brands fighting with each other for a tiny overall market share (at present, there were more than 900 Italian wine brands imported in Hong Kong). It is, therefore, my view (in fact, this article solely represents my view and not that of anyone else or organisations) that, just like the CIVB and the Australian Marketing Board, more resources must be invested by various Consorzi to support the efforts of brands already on the market. When these brands become successful, the category as a whole will improve its standing and will then open the doors for newcomers.
As suggested by figure 4, Hong Kong wine consumption is relatively flat with only small growth potential. Therefore, the necessary work going forward is to work to increase the drinking population. To achieve this objective, participation to B2C events such as the Wine and Dine Festival and Bellissima Italia and more support to Italian wine education outfits such as Vinitaly International Academy becomes critical.
It is a well-researched fact that a wine drinker 1st taste will influence their consumption pattern for the rest of their lives. The experience of France and Australia has demonstrated that focus on tasting activities and a high level of support to the importers considerably change the picture painted at the outset of this article. Experimenting with a different approach in Hong Kong will build a knowledge base that will be exceedingly helpful when tackling the tougher markets of China which itself will need tremendous efforts by wine companies to develop its wine drinking population which is today extremely small by any standards.