While headlines focus on the increasing growth of the Chinese market, what opportunities do other Asian markets present for the Australian wine community?
While the headlines on Australian wine exports focus on the increasing growth of the Chinese market this belies the opportunities in the greater Asian region. Apart from mainland China and Hong Kong, Australian wine is exported to another 23 destinations in Asia. In the twelve months to September 2016, combined exports to the rest of Asia increased by 11% to $237 million. Australia is now the top-ranked imported wine category in Malaysia, second in Singapore, Thailand and the Philippines, fourth in Vietnam, fifth in Taiwan, and sixth in Japan and South Korea. So what opportunities do these markets present for the Australian wine community?
APAC Export Report - Australian wine: reinvigorated in Asian markets
Advanced Asian wine markets such as Singapore, Japan and South Korea have long been strong, albeit small, markets for fine wine. In these markets, like many others around the world, Australian wine initially built its reputation on value. These were commercial wines that represented great value for money. In each of these countries the recent challenge has been to reposition the Australian wine category as an exciting and diverse fine wine offer. How can we do this?
- By challenging what sommeliers, key wine influencers and wine buyers Singapore think about Australian wine.
- By helping the wine trade in Japan and South Korea unlock a whole new world of world-class fine Australian wines which exceed expectations but still represent value.
- By engaging closely with the key wine trade the Australian wine community can influence these more advanced Asian markets.
But how does this look in export value terms? The market for Australian wine in Singapore was up by 9% to $82 million, while in South Korea the value of Australian wine exports was up by 42%. But this success isn’t just the result of education and a rise in consumption across Asia with nascent consumer awareness and interest in wine. Recent free trade agreements are also a cornerstone of current and future success for the Australian wine community in Japan, South Korea and Thailand.
Free trade agreements – foundation for success?
We’ve discussed free trade agreements in some detail previously, but how do they impact these important markets for Australian wine? These agreements give us not only the provisions of tariff-free or reduced entry to the markets but more importantly trigger interest and attention of wine businesses to do more with the Australian wine category. To put it another way, it is extremely important for Australian wine exporters to understand exactly how these free trade agreements work. What is the required documentation and procedures? What are the tariff reduction schedules applied to different product categories (HS codes) so that they can communicate with importers and distributors with confidence and relevance? This communication will hopefully lead to a more in-depth discussion, bringing a shared sense of challenges and opportunities for Australian wine in these markets.
South East Asia: A new frontier for Australian wine
Compared to other key mature markets in greater Asia, South East Asia is a relatively new frontier for the Australian wine community and for fine wine in general. This is a region that is quickly gaining in importance as consumers in markets like Malaysia and Thailand continue to change their drinking preferences. Malaysia has grown to the position of our eighth largest destination by value, following China, Hong Kong and Singapore. Australia is the number one exporter to Malaysia with particularly strong value growth, up 24% to $55 million dollars in the twelve months to September 2016. With a population of 31.2 million and a GDP growth of 6% (as of 2014) and the third highest GDP per capita in South East Asia after Singapore and Brunei, there is obvious an upside – despite some key challenges – if the Australian wine community engage with this market more closely than ever.
The on-trade: opportunity knocks?
According to Andrew Tierney, Sales and Export Director for Torbreck in the Barossa, the horeca segment is key to success for Australian wine businesses in Malaysia. Primary drinkers of wine are people of the Chinese Malay descent (25% of the population) as well as Indians (7%), foreign tourists and expats. Andrew believes that, in a society where alcohol is tolerated less as part of its cultural diversity than most other countries in South East Asia, 60-70% of the wine drinkers there are locals who use private dining outlets as safe places to drink. This makes up a very large proportion of wine consumption in Malaysia and highlights the importance of the on-trade sector for Australian wine businesses.
Thailand – tourism a key factor
The market segment that is of most interest is that of travellers to Thailand. Bangkok was already a top global destination, but in 2016 has pushed aside London to be the world’s most visited city – with around 21.47 million international overnight visitors according to the latest MasterCard Worldwide Global Destination Cities Index. Bangkok is emerging as a fine dining gastronomic centre; with a number of Michelin chefs opening restaurants. Australian wine is highly valued for its quality in the restaurant and food retail scene and, with the right approach, exporters of wine can leverage that. But the market isn’t without its challenges. Thailand applies the highest excise against wine of almost any country. However, Australian wine is included in the tariff reductions secured through the Thailand Australia Free Trade Agreement (TAFTA), providing Australia with a competitive advantage against other countries. The applicable tariff to Australian wines is 0%, however, Stuart Rees, Trade Commissioner at Austrade Bangkok, points out that exporters must remember this does not automatically apply and TAFTA benefits need to be claimed by the importer and supported by Certificates of Origin from Australia.
The future for Australian wine in greater Asia
While it is clear that there are opportunities for the Australian wine community in greater Asia, it is important to have a detailed understanding of the market and the cultural nuances that make it unique. If this is combined with the patience, commitment and consistency that are always required for export success then the future truly looks bright for Australian wine in greater Asia.
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