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12 November 2013

CULTURAL BRIDGE BUILDING FOR

SUCCESSFUL BUSINESS RELATIONSHIPS

• Traditional wine markets

• Developing wine markets

• The importance of BRICS

• Why China?

• The Chinese Challenge & Our Approach o Chinese Wine Market

o Culture – traditions & tastes

o Distribution

o Marketing opportunities

• Conclusion – bridging the cultural divide

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COMPONENTS OF PRESENTATION

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TRADITIONAL WINE MARKET

What is happening in our traditional wine markets?

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TRADITIONAL WINE MARKET

What is happening in our traditional wine markets*? Bulk wine exports 2006 – 2012 (litres)

* United Kingdom, Germany, Sweden, Denmark, Belgium & The Netherlands

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TRADITIONAL WINE MARKET

What is happening in our traditional wine markets*? Bottled wine exports 2006 – 2012 (12 x 750ml packs)

* United Kingdom, Germany, Sweden, Denmark, Belgium & The Netherlands

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DEVELOPING WINE MARKETS

What is happening in the developing countries?

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DO THE BRICS STACK UP?

2012: SA wine exports to South

America: 80 477 x 12

2012: SA wine exports to Eastern

Europe: 435 477 x 12

2012: SA wine exports to

Far East: 912 736 x 12

2012: SA wine exports

to Middle East:

430 785 x 12

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DO THE BRICS STACK UP?

SA wine exported from Jan - Dec 2012:

China Far East

Litres 12-Packs Litres 12-Packs

Total 6045390 671710 8214626 912736

China accounts for 73.6% of all SA wine exports to the Far East

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DO THE BRICS STACK UP?

Brazil per capita

consumption: 2L

Russia per capita

consumption: 7.14L

China per capita

consumption: 1.31L

India per capita

consumption: 9ml

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WHY ASIA?

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WHY CHINA?

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WHY CHINA?

Population statistics (2012)

China 1 351 000 000

UK 63 223 000

USA 313 900 000

Europe 739 200 000

Earth 7 046 000 000

China as a percentage of the

world's population 19.17%

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WHY CHINA?

Wine Consumption per capita in China (litres)

2011 2012 2013

0.5 0.9 1.31

Growth of 0.4 litre per year

• If wine consumption in China grows with 0.4 litre per year:

• The growth potential is 320 000 000 bottles for the next year

• 20% of total wine consumption in China is imported wine =

64 000 000 bottles of imported wine

• 2% of the imported wines to China comes from South Africa =

1 280 000 bottles of wine from South Africa

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OVERVIEW OF CHINA

• 1 351 000 000 people

• 23 provinces, 5 autonomous regions, 4 municipalities, and 2 Special Administrative Regions

• All power within People’s Republic of China - three bodies: Communist Party of China State Council People’s Liberation Army

• Massive shift of rural to urban populations (200 cities with more than 1 million people, 25 greater than 5 million)

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OVERVIEW OF CHINA WINE INDUSTRY

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OVERVIEW OF CHINA FOREIGN INVESTMENTS

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OVERVIEW OF CHINA FOREIGN INVESTMENTS

Bordeaux domains owned by Chinese investors at the end

of August, 2013, as listed by BORDEAUX SUPERIEUR:

1. Château Vieux-Brondeau

2. Château Branda Cadillac-en-Fronsadais

3. Château Baby

4. Château Blanchet

5. Château de Lugagnac (Pellegrue)

6. Château la Bourguette

7. Château Thébot

8. Château de Cugat

9. Château Latour Laguens

10. Château Bertranon

11. Château La Dominante

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CHINA OVERVIEW SOUTH AFRICAN INVESTMENT

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CHINA OVERVIEW SOUTH AFRICAN INVESTMENT

WINE EXPORTS TO CHINA (12x750ml packs)

2011

2012

Total SA Wine 592244 671710

Total La Motte + Leopard's Leap +

L'Huguenot 127600 158400

La Motte, Leopard's Leap &

L'Huguenot as % of SA wine

exported to China 21.55% 23.58%

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THE CHINESE CHALLENGE

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THE CHINESE WINE MARKET

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THE CHINESE WINE MARKET

Drinking Patterns

Growth of alcoholic beverages in China in 2011

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THE CHINESE WINE MARKET

• China’s consumption in 2009 was 116 million cases

• 2011 consumption was 156 million cases

• = 5% of world consumption and exceeds global growth

• Deficit between consumption and production continues to grow

Wine Production vs Wine Consumption

THE CHINESE WINE MARKET The importance of Festivals

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THE CHINESE WINE MARKET

Niche is good

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THE CHINESE WINE MARKET

Trends

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THE CHINESE WINE MARKET

• Explore second t ier C i t ies such as : Dal ian, Nanj ing , Wuhan, Chongqing

• High tour ism – Xi ’an

• Hangzhou – Cape Town’s s is ter c i ty

• 2 holidays account for ≈ 60% of annual wine sales

• Family reunions are ver y impor tant

• Gif t Boxes and accessor ies – ver y impor tant

• Competi t ion wi th Brandy, Cognac, Bai j iu

Also keep in mind

• Many good opt ions outside the B ig 4 – Bei j ing, Shanghai , Guangzhou and Shenzhen

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THE CHINESE WINE MARKET

Percentage of sales via main channels

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THE CHINESE WINE MARKET

Consumption

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CULTURE – TRADITIONS & TASTES

What motives the Chinese consumer to drink wine?

The Chinese Consumer

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CULTURE – TRADITIONS & TASTES

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CULTURE – TRADITIONS & TASTES

PALATE PREFERENCES

• Coastal regions – seafood is popular. Style of

wine fresh and light, accessible.

• Southern regions – seafood still popular, also

spicy dishes. Style of wine sweetish and fresh.

• Northern region – more red meat and spicy

dishes. Style of wine more full bodied and dry.

10 th French Chicken

9 th Cucumber

8 th Mexican Tomato Chicken

7 th Blue Berry

6 th Lemon Tea

5 th Hot and Sour Fish Soup

4 th Little Tomato

3 rd Italian Red Meat

2nd Numb and Spicy Hot Pot

1st American Classic Flavour

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BEST-SELLING POTATO CHIP FLAVOURS IN

CHINA

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TASTE CUSTOMIZATION

Since changing to fruit flavours 5 years ago

Growth:

60% per

year

The much loved traditional

Oreo cookie

Fruit flavoured Oreos for China

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CULTURE – TRADITIONS & TASTES

PERCEPTION OF PACKAGING

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CHINESE WINE LABELS

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CHINESE PACKAGING

Xu Lei for 2008 Mouton Lafite with 8 for 2008

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PACKAGING CUSTOMISATION “CHINESE -FRIENDLY” HIGH END LABELS

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CULTURE – TRADITIONS & TASTES SOCIAL PRACTICES

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CULTURE – TRADITIONS

BUSINESS ETIQUETTE

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CULTURE – TRADITIONS DECISION-MAKING

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DISTRIBUTION IN CHINA

3 Channels of Distribution

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DISTRIBUTION WHAT WE HAVE DONE

1. Agent

2. Gifting

3. Joint Venture

With our Agent, Aussino Fine Wines

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DISTRIBUTION WHAT WE HAVE DONE - AGENT

• Take time to identify your agent

• Build a relationship

• Take time with exclusive agreements

• Support!

• Be the point of difference

• Focus on your strengths

• Brand building is very important

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DISTRIBUTION

WHAT WE HAVE DONE - CORPORATE GIFTING

Joint Venture with Perfect China

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DISTRIBUTION WHAT WE HAVE DONE – JOINT VENTURE

• JV’s are not always straight-forward

• JV’s can be very rewarding

• Take care when selecting your partner

• Spend time and effort building relationships and support their initiatives.

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DISTRIBUTION WHAT WE HAVE DONE

In October 2011 we shipped the largest single wine order shipment from SA:

106 containers or 1.3 million bottles to start our JV.

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MARKETING OPPORTUNITIES HONG KONG – A GOOD ASIAN OPTION

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MARKETING OPPORTUNITIES CHINA GLARE

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MARKETING OPPORTUNITIES FREE TRADE AGREEMENTS

CHINA

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MARKETING OPPORTUNITIES CHINA’S CURRENT FTA’S

MACAU

2003

THAILAND

2003

HONG KONG

2002

SINGAPORE

2008

COSTA RICA

2010

PERU

2008

NEW ZEALAND

2008

(wine tax reduced to zero in 2012)

NIGER

2005 PAKISTAN

2006

CHILE

2006

(wine tax reducing to zero in 2015)

MARKETING OPPORTUNITIES E-COMMERCE

Electronics 44%

Clothing 17%

Others 20%

Jewellery 6%

Personal care 5%

Food & Beverage 4% Maternity/Child care 4%

• Total E–Commerce: RMB 252.8 billion (€ 27.5 billion) of which food and beverage

accounts for RMB 10.1 billion (€ 1.1 billion) (2009 figures)

• *Internet users (netizens) in China have grown from 22 million in 2000 to

500 million in 2012

• CHINESE CONSUMERS TRUST THE INTERNET

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Largest search engine is “baidu”

Facebook → RenRen

Twitter → Sina Weibo

Youtube → Tudou or Youku

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MARKETING OPPORTUNITIES SOCIAL MEDIA

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MARKETING OPPORTUNITIES WINE TOURISM

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MARKETING OPPORTUNITIES CELEBRIT Y ENDORSEMENTS

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MARKETING OPPORTUNITIES CELEBRIT Y ENDORSEMENT - WHAT WE HAVE DONE

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IN CONCLUSION

BRIDGING THE CULTURAL DIVIDE

• Learn a few words Chinese

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BRIDGING THE CULTURAL DIVIDE

• Respect their culture

• Be sensitive to customs

• Use familiar flavour references

• Use familiar wine reference - 100 point scheme

• Allow enough photo opportunities…

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KEY RECOMMENDATIONS

• Look beyond the big cities

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KEY RECOMMENDATIONS

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KEY RECOMMENDATIONS

• Educate consumers through ambassadors and online and visit the market regularly

• Coordinate a specific marketing campaign direct to trade and industry

• Point of sale helps showcase your image

• Highlight your own cultural aspects and history

• Do not only sell to an agency – help them to sell through to customer.

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IN CONCLUSION

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