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|Cheviot Bridge's China division approaches 10 years|
Cheviot Bridge may only have been active in this market since 2009 but not so the China division.
March 2012 will signify the 10 anniversary of the division's first and tentative research visit to the China to assess the potential to "solve a mounting wine surplus" that was confronting founder Ken Waldron and his extensive vineyards in Limestone coast.
Now as a fully integrated part of Cheviot Bridge the China division notes it carries a relatively large responsibility. There is simply no other wine market in the world offering such potential for dramatic growth. Most are in decline and see consolidation and shrinkage.
In 2002 western style wine represented only a minor share of the huge alcohol consumption that occurs in China; less than 1% in fact. Today, the estimates vary quite a bit depending on the level of enthusiasm of the commentator and the numerator being used, but it is regularly reported to represent 7% of total alcohol spend. Considering that the whole value spend on alcohol has also increased we can see why the Australian industry has become "goggle-eyed" about China. (See it's not about the volume")
In June this year A9 wines of Changzhou officially launched its RMB 5.0 million flagship store. After nearly 18 months of meticulous planning and long hours of negotiation and marketing discussion the Cheviot Bridge ArrowfieldTM Brand partner was ready to go into action.
Rob Stanway, made a special visit to attend the launch. Rob along with, Naomi Li, Albert Wong and Ken Waldron spent 2 days with A9 staff and management training them in wine culture, the Arrowfield story and Cheviot Bridge Company.
Four containers later and the A9 story continue to impress with their marketing capability and the vision of its founder. On the 29th and 30th November Rob, Albert and Naomi will again be in Changzhou, this time to assist with the launch of the A9 Franchise initiative. Several A9 franchisees is planned to be rolled out during the next 6 months adopting a similar store and cellar model to the successful changzhou flagship. This is exciting news for ArrowfieldTM brand giving it some real momentum in eastern china.
For further information visit www.arrowfieldestate.com for our Chinese and English website.
QI SHAN and THE SEVEN SPIRITS
Nanning is not a place visited regularly by westerners or at least the non-Chinese version. Tucked away in the Southwest province of Guangxi in China, Nanning is a vibrant community and well known throughout Asia as the host for the annual China-ASEAN EXPO.
Recently Jenny Lai & Naomi li followed an enquiry that leads the division to one of our newest customers and a leading baijiu distributor in the province.
The Directors of the company wanted to launch western wine and were keen to maintain the company philosophy and existing brand image.
The China team's enthusiasm for "keeping the customer satisfied" stimulated us once again into action as label designers and new product developers. The outcome is a very satisfying result for the whole team both in Australia and in China.
Qi Shan, literal translation is seven spirits and with a bit of help from our experienced graphic designer, Daphne plus some creative energy from Sage Wang and commercial focus by Jenny Lai we will launch in January 2012, the new 7 Spirits wine range in Guangxi in conjunction with Qi Shan.
The team has worked tirelessly on this product range and has a very satisfying two container initial order of very high value wines.
LAUNCH OF THE Chloe FAMILY RESERVE
One of our longer-term customers, Jason Wang, from Zibo, Shandong province, has placed the finishing touches on his "Chloe Family Reserve wine". Right from the outset of his wine developments Jason has been determined to release a superior premium wine.
Jason's commented recently. "We run very big and diverse businesses in Zibo and hold many meetings with senior government official and businessmen. So we want to treat our guest with respect due to their position".
But Jason openly acknowledges, "It is partially a sentimental release!" The Chloe series is named after his daughter who also will achieve the ripe old age of 4 this coming year. "I want something for the family as well".
It has taken cheviot bridge winemakers nearly 18-month search to identify a wine good enough. Finally Shane Virgo discovered a small volume of super-premium Barossa Shiraz tucked away in the Irvine family winery.
Notwithstanding some sentimentality, Jason is all business when it comes to his wine development. It is small fry compared to his copper mines and his pharmaceutical businesses but he insist on it being profitable and the wine all being packaged to the highest quality. At Cheviot Bridge we like this customer because his demands are all about quality and presentation. According to Jason the price will look after itself if you get these things right in the beginning. Chloe label sells in Zibo for around RMB 500/ bottle and Jason reliably orders 2 or more containers each year. The family reserve may be given away, but it is expected to list at RMB 1,200/bottle.
IT NOT ABOUT THE VOLUME!
Success in China wine sector should not to be measured by the volume of sales it can only be about the gross profit and GP growth. Perhaps this is not good news if you own bulk wine but a great philosophy if you sell brands and believe that customer equity is the most important asset in this market.
Each year on our journey in China, the team has listened to grand claims of success with big 10,000 case sales. We too, have had moments when we have succumbed to the tantalising offer of 20 containers a year "if you give us a good price on our first container" and foolishly agreed to selling wine at below cost on the promise of good sales next time. The follow-up quality sales just never happen.
"You do it once as part of the learning curve", says Ken, "You do it twice because you are a slow learner and also you put in peril your place in the market" he concludes.
Cheap wine may have a sustainable place in the wine market; the Australian domestic market is testament to that. However there is no single wine supplier in the world that has a sustainable advantage in this segment. Any low value sale can and will be stolen by the next cheap wine source, be it France, Chile, Spain, South Africa the liquidator or perhaps most significantly Chinese wine producers. Every year a new source of cheap wine appears in this commodity end of the business. Customers who build a business distributing cheap "entry level" wines demonstrate a loyalty only to their own margins and none to their suppliers.
Ken notes: "We have become numb to the pleas for cheap entry level wine. Unless an order delivers at least 30% GP, no amount of volume will attract us to the customer. You do not have to be Warren Buffet to understand that 60,000 cases at a $1.0/cse GP is a lot harder work and carries much more risk than 1,000 at $60/cse GP. At this low end you pit yourself against every other entrant in the market with no point of difference and no room to move. Customers place no value on your time effort and product. They see no value difference between what you offer and any other supplier".
The division is proud of the fact that we have customer who are now into their 7th year purchasing our wines. We may still have to argue about price but they keep coming back to us because our service support and whole philosophy is genuinely about success, for them and us.
DÉJÀ VU KOALA BLUETM
Well there are not too many brands that have a legacy like that of Koala Blue. Cheviot Bridge & Best Bottlers and the odd Director are no doubt pondering in disbelief that this brand has surfaced again in the groups' portfolio. In the word of Olivia " it must be love
Rob, David and Cheviot China division have just landed Longchen (dragon Journey) a long-term customer from Ken's old business. We commenced supplying Longchen in 2005 and got off to a great start. This all slowed down as the AUD$ started to sky rocket, business migrants started to dump undervalued wine in China and Adelaide bottling plants forgot to put cork in some of the Koala Blue bottles.
This time round we hope this will be a really good news story for the company. Longchen visited Australia recently and with genuine hard work, lots of dinners and really tough negotiations by both parties, Rob and team secured a 20-container commitment from Longchen.
The division believes this customer is one of those customers "that you have to have!" They are big, they are professional, they know how to market and believe in the power of Brand marketing in this emerging market. The challenge for Longchen is that they also must compete in all sectors of the market and must maintain expensive product listing s in high volume retail stores. This puts huge price pressure on them and therefore on Cheviot Bridge as the supplier.
The exciting part is that even despite seriously tough discussions which at several points nearly ended in a stand-off Cheviot has been able to meet the customers entry level needs and still get the sales mix to meet our own value and GP expectations.
DESTINATIONSTM, IN CHINA FOR KEEPS
Brands may be dying out in Australia, but this is not the case in China where brand image and brand building represent a significant opportunity to secure sustainable product placements.
Cheviot Bridge has been sitting on the perfect brand for the China market in its DESTINATIONSTM Brands. It is a natural in a market that knows very little about our regions but has a craving to learn and try. The Regional Hero's concept allows us to leverage off the already established images of Barossa, Coonawarra, and Mornington or Yarra valley. Equally the series is well positioned at its price and quality points sitting above the commodity level and able to distinguish itself with a unique value proposition.
The challenge confronting Cheviot Bridge with launching the DESTINATIONS Brand in China was to find a suitable brand & distribution partner. We needed a Distributor with depth of market coverage and the professional infrastructure and finally a well-developed knowledge of brand and image development to warrant our own investment in the Brand.
Albert Wong our Shanghai manager took on the challenge for us and his search resulted in us meeting Keep wines of Shanghai around February of this year. As Albert reflects, "we flirted with each other and had a couple of very formal dates before we agreed we could be great partners in this brand in China".
KEEP Wines is one of the modern style distributors emerging in China wine sector. They were not in wine distribution when Cheviot China Division commenced in 2002. But today they are one of the leading wine distributors, adopting a franchise Model of expansion. At the commencement of this financial year they had 75 franchised retail outlets across the greater PRC and are on track to 100 by end of this financial year.
KEEP Wines love the concept of DESTINATION as a brand because it allows them to build a communication message around the concept of a journey. This is where they see the China wine sector at the present time "Commencing a journey into the world of wine" and the Destinations motto "Let your palate guide you" is simple and relevant.
In September Jenny Lai, made the journey to China to attend the launch of their new Flagship store in Shanghai. Accompanied by Naomi, Albert and Ken the team introduced the brand to more than 150 guests representing the franchisee investors.
KIRRIHILL ACHIEVES A WIDE EXPOSURE IN CHINA
RED HILL ARRIVES IN CHENGDU
Mid November Auzbond opened their flagship store in Chengdu (Sichuan). Auzbond are another new generation wine distributor. They have established a 4 story restaurant, club wine retail store and underground cellar.
This is the first of its kind in Chengdu, a city of 13 million people and capital of western China's Sichuan province. Auzbond has spared no expense in the development committing over RMB 5.0 mill in the building and another RMB 500,000 in their launch party.
In their initial 3container order Auzbond has purchased a full range of the Cheviot portfolio including the Red Hill, Tynans View, GS and Long Flat.
In attendance at the Launch was Ken Waldron, Connie Xu & Linda Ren our Chengdu team. The sales staff of Auzbond has received several days of wine training conducted by Connie, Linda & Naomi.
CHEVIOT BRIDGE WINE COMPANY - CHINA DIVISION
ROOM 1521, FLOOR 15, VILI INTERNATIONAL APARTMENT,
NO. 167 LINHEXI ROAD, TIANHE DISTRICT,
GUANGZHOU 510000, CHINA
MOBILE (HK) : + 852 5411 7754
MOBILE (CHINA) : + 86 (0) 139 8191 8286
PHONE (AUSTRALIA) : + 61 (0) 8 8121 7900