Asia's Glass Half Full by , by Anna Diep
Published in Australia & NZ Grapegrower & Winemaker Magazine, June 2011 edition
Article published by Dynamic Export in July 14th, 2011
The Asian wine market has plenty of potential for savvy Australian wine exporters set to capitalise on the region’s growth and reap the rewards on the back of the strong dollar.
Wine popularity is souring in Asia according the top ten list of the ‘Good Pour Wine Trends’ for 2011. With projected double digit growth of up to 20% annually and total consumption of wine forecasted to reach US$9 billion by 2013, the Asian wine market is a glass half full whichever way you look at it.
So, where should wine exporters target their efforts for the best returns in this huge region?
In a word – Vietnam.
It is among the strongest emerging markets in South East Asia and is rapidly becoming a lucrative export market for Australian wine producers. Increased personal incomes and growth of urban consumers switching from beer and spirits to wine are driving a consistent trend of increased demand for imported wines in Vietnam. According to the Wine Institute, the per capita wine consumption grew 46.7% between 2006 and 2009. In 2009 alone, Vietnam spent in excess of US$32 million on imported alcohol products according to the General Statistics Office (GSO).
In large Vietnamese cities like Ha Noi and Ho Chi Minh City drinking wine is commonly perceived as a prestige symbol, many young consumers also consider wine to be a healthier and more modern social drink than beer. Fuelled by the demand for imported wines, wine boutiques and retail outlets are popping up at a break-neck rate in main urban areas, it is estimated that in Ho Chi Minh City there are currently more than 45 wine operators.
Three main categories of wine are predominant with the approximate sales split 65% red wine, 25% white wine and 10% sparkling wine. Quality is sought by consumers, however the wine market is highly price sensitive and ultimately price is a significant factor in purchase decisions.
Although the Vietnamese wine market is far from saturated, Australian wine exporters do face competition due to the established presence of reputable brands from France, Chile and Argentina. French and Australian wines currently dominate the market both in terms of brand recognition and market share; with Australian wines accounting for 15% of the market share and enjoying annual growth of 25% year on year thanks to their reputation of consistent quality and being complementary to Asian food.
So, what’s the catch? Although the Vietnamese market presents significant long-term potential to Australian wineries, a word to the wise – successful entry requires time, effort, and patience. As an emerging market, the lack of infrastructure and transparency still presents challenging issues for new foreign investors. It is therefore critical for Australian exporters to take the time to research the country, understand the culture and establish reputable local contacts prior to entering the market.
Attending trade fairs such as the Australian Wine & Food festival and the Food & Hotel Trade show, both hosted in Ho Chi Minh City annually, offer an excellent opportunity for new exporters to get a glimpse into the local market. Planning a visit to Vietnam’s main cities and personally meeting with potential local importers and distributors face-to-face are also highly recommended first steps.
Successful trading in Vietnam is all about getting the right connections, meeting the right people and establishing a close working relationship. The challenge however is that Vietnamese business contacts are primarily sourced through referrals; a new business relationship effectively forms from another business recommendation, and the best deals often come from a recommendation.
Unlike Western business relationships which remain professional and sometimes even detached, Vietnamese business relationships are built upon trust and inevitably become a social relationship. When meeting with potential partners, it’s likely that a significant amount of time will be spent discussing matters outside of business premises; it is in these times that the local partner will form an opinion of you as a business person.
Many Australian wineries do not have the time or resources to personally engage with their export markets which can be a barrier to entry in Asia. Opting for a Vietnam-based Australian owned or foreign managed agent for the exporting of wines to Vietnam is one way of covering the market - another is to engage the services of a third party specialist and utilise their local knowledge to successfully enter the market.
Australia's wine industry boasts some of the top wine producers in the world. Thanks to global consumer trends and demand, a good drop of Australian wine can be enjoyed almost anywhere in the globe. Vietnam is no exception which begs the question - will yours be one of the Australian wines they’ll be enjoying?