AM Vineyards co-owners Andrew Robinson (right) and Matthew Karan saw an opportunity open up in the Chinese market. (Pic: AM Vineyards)
When countries all over the world went into Covid-19 lockdowns, and alcohol sales were restricted in South Africa, AM Vineyards’ co-owners Andrew Robinson and Matthew Karan set their sights on the Chinese wine market.
The company produces fine wines, predominantly for export.
Robinson and Karan saw opportunities opening up in that market due to the Chinese government increasing its tariff on Australian wines to more than 200%, alleging dumping. The increased tariffs led to a 90% year-on-year drop in Australian wine imports to China. But the high import tariff doesn’t apply to South African wine.
China has a population of 50 million wine drinkers who consumed approximately 1.24 billion litres of wine in 2020 – despite it being considered a low consumption year due to the pandemic. China imports about 55% of wine consumed in that country. In 2020, South Africa was the world’s eighth-biggest wine-producing country, accounting for 4% of wine drunk globally. China is South Africa’s fourth top destination for wine exports and accounts for 4% of total local wine exports.
“Interest in South African wines is on the rise in China. Despite 2020 being a relatively low-consumption year – down 15% on 2019, South African exports are back on a growth trajectory in value and volume. Other East Asia markets such as Hong Kong are also growing,” says Robinson.
Both Robinson and Karan had been entrepreneurs in China for many years and opted to put their experience to the test. They decided not simply to export their existing wine products to China, but developed their Karan range, which includes two new red wines – The Collection and The Selection – specifically targeted at the Chinese market.
“Given the cultural symbolism associated with the colour red in China – happiness, success and good fortune – it’s no surprise that 80% of the wine consumed in China is red,” says Karan.
Red meats, particularly, fine beef, is popular, so the Chinese export wines were created with this pairing in mind. The Karan range is focused largely on high-end restaurants and hotels, especially in Beijing and Shanghai.
With harvest currently underway, AM Vineyards will be producing more blends in the Karan range to further capitalise on the growing Chinese market.
“Our business model is different from that of a typical wine estate. We partnered with growers and farms in areas like Franschhoek, Elgin, the Hemel-and-Aarde Valley, and the Swartland, where our winemakers manage specific blocks of vineyards. We harvest and bottle our own wine and use our own cellars. It is a versatile business model and gets us the best grapes, best product and scale,” says Robinson.
“Wine is a massively growing sector in China, while in SA, we have a wine production history of more than 300 years. SA wine is not well known in China, while they are more familiar with French, Australian, and Chilean wines. That means there is a huge amount of work to be done by the SA wine industry in China to showcase their great products.”
Some SA companies are doing it, but only on a small scale.
“Our philosophy is never to put a square block into a round hole. Rather make sure you understand your customers and what they want. We did a lot of consumer testing in China when we developed our Karan range to be just right for the Chinese palate. [The consumers] well-aged, easy-drinking wine with low acidity and low tannins,” says Robinson.
‘In China, we compete against world’s largest brands’
“Our strategy is not to develop products in SA and then send it to China. That is why we developed the wine in China and then got our winemakers in SA to match that. We spent a lot of money on consumer testing in the Chinese market. It is easy to send a first container of wine to that market, but the challenge is then to get repeat orders – which they will only do if they like your product.”
Asked about a possible impact of the crisis in Ukraine on their wine exports to China, Robinson said they currently had containers on the water on their way to China. Chinese customs have cleared other shipments already.
“It is too soon to tell what any impact of the Ukraine crisis might be for us at this stage. We don’t have any products destined for Russia and Europe. We will just wait and see,” said Robinson. He adds that the Covid-19 pandemic had a huge impact on price increases in shipping and logistics.
“That makes it difficult for business owners to manage price increases without ending up pricing him or herself out of the market. It makes business more challenging, but it also creates opportunities if one can be nimble and understand the numbers game,” says Robinson.
“In China, we compete against the largest brands in the world. So, it is important to get the product right for that environment. It is also about getting sommeliers and restaurant staff to taste our wine and learn more about it. We invest in educating Chinese consumers that SA wines can compete with the best in the world.”
What is the story about SA wine they are spreading in China?
The Chinese market likes the history of SA wines – its long tradition. At the same time, they want wine that is different and new.
“Our story is that SA wine straddles both the old world and new world approach to wine making. We honour the history and tradition of the SA wine industry, but also use fresh, modern and clever techniques to blend our wines for the Chinese palate. And of course, we make sure we sell a prime product to our Chinese customers,” says Robinson.
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