The buyers were out in force at the Hong Kong Trade Development Council (HKTDC) International Wine and Spirits Fair, held in November. They formed long queues that snaked around the cavernous receiving area, waiting to get in. Exhibitors reported seeing high-quality visitors who showed a genuine interest in their products. Normally, this would not be surprising.
Business is, after all, the business of Hong Kong.
But this year was different. Anti-government protests have rocked Hong Kong since March, becoming more aggressive over time. The city, normally filled with light and activity at night, was eerily quiet and dark. This has had a chilling effect on hospitality. Hotel occupancy rates are at an all-time low, and there was noticeably less bustle at the airport than usual. Local wine professionals reported cancelled events, vacant retail spaces and shuttered restaurants.
If that wasn’t bad enough, the HKTDC fair also faces increased competition. Last year, it was Vinexpo making its bi-annual appearance. This year, Vinexpo went to Shanghai in late October, with ProWine Shanghai happening the week after HKTDC. That is too many fairs for one region, no matter how fast it’s growing.
But the Hong Kong government takes business extremely seriously, so protests or not, it was never going to allow one of its flagship events to fail.
The show goes on
“All our fairs are going on as usual,” said Byron Lee, senior exhibitions manager with HKTDC. “Our teams – we have over 50 offices around the world – tried to secure as many visitors and buyers [as possible] to come to our fairs.”
Lee said that HKTDC used every means possible to ensure the right buyers and media were present. “We have been running this fair for 12 years, so we basically have a database with the contacts of all the key players. We also asked our overseas offices to identify the new players, especially in South-East Asia.”
The HKTDC is, he says, particularly strong in the ASEAN countries, including Thailand, Malaysia, Singapore, Indonesia and Vietnam. “We ask our offices to find these really important people and invite them. We fly them in and then match them with our exhibitors.”
Once a buyer has confirmed their attendance, HKTDC’s business team will match them with exhibitors and specific products. “We will arrange a meeting at our customer centre or bring the buyer directly to the booth. We offer this free of charge.”
Hong Kong, Lee said, still attracts buyers from the region because there is zero import tax on wine, and because the fair brings in producers from very different regions. “For exhibitors it’s easy because there is no customs tax or visa, so it’s easy to do an exhibition. They don’t have products going into bonded warehouses.”
Plenty of information
The HKTDC always runs a conference during the fair, of a quality that can be variable. Whether it was because they were pulling out the stops or not, the speakers this year were uniformly excellent, offering presentations full of practical data. The main topic was Millennials, on which the panellists all had something new to say.
Tommy Tse, the Asian region head of PR and communications and global travel retail at Treasury Wine Estates (TWE), displayed examples of typical wine labels and explained that for someone who has neither a Western language nor Western cultural references at their fingertips, the labels are unintelligible. “Newer consumers are very puzzled,” he said. “They may not know how to read the difference between the brand name and the appellation.”
TWE struck it lucky because its Penfolds range is distinguished by bin numbers rather than words (Bin 389, Bin 407, Bin 707 and so on), making it easy for consumers to recognise the different labels. Better yet, the Wolf Blass range is characterised by colour coding, from the Yellow Label entry level range through to the ultra-premium Platinum range. This helped the company get traction with Chinese consumers early on.
It also confirmed that creating better labels and packaging is a key tool to engage with new wine consumers in Asia, and now the company uses extensive market research to learn how to present information in an appealing way. “Younger consumers have a shorter attention span,” said Tse. “They’re used to watching 15-second videos or flicking through TikTok at lightning speed.”
Design and packaging must be stripped back to its essential elements, he said. Producers also need to think about how their wines will look when listed on e-commerce platforms, which can be cluttered and overwhelming.
Tommy Keeling, Asia-Pacific research director for IWSR, said that e-commerce in China is now a third larger than the US. “Online alcohol sales in China are by far the largest of any other country. Imported wine has been very successful in entering the e-commerce channel, so about 25% of wine in China is now sold online which makes it by far the fastest-growing channel,” he said, adding that only 3% of Chinese wines are sold online. “Wine is well suited to e-commerce because there are no shelf space restrictions, so they can sell a bigger variety and can provide more information, more reviews, and it’s easier for consumers to find out about wine.” Crucially, he said, Millennial consumers are far more likely to buy wine online. “They’re young, tech savvy, on their phones.”
In good news for wine producers, fewer e-commerce platforms have been importing large volumes of wine and selling it under their own labels. “This seems to have fallen back in the last year or so and they are going back to traditional wine importers because they’ve realised they don’t have the expertise to buy wines and market them.”
For wine producers that want to go online, it’s important to note that Tmall and JD.com have about 80% of the market between them. “If you want to sell wine online, you have to list on at least one of those platforms, preferably both.”
Next up was Tina Chao, vice-president of marketing at McDonald’s, who gave a compelling presentation that offered four key market insights. Her first echoed what Tse said: packaging is crucial. “A well-known adage is you eat with your eyes first. Foods that look unappetising are often not eaten,” she said. “This has become true for beverages, fuelled by social media [platforms] like Instagram. Millennials pay a lot more attention to beverages.” She said that it’s likely more consumers will now choose their wines based on the look of the bottle.
Her second insight was that “premium goes casual goes premium”. “We see a lot of premiumisation, which is about brands previously seen as cheap stretching the category norms upwards,” she said. “It’s not about cheap prices, it’s about getting more bang for their buck.” Conversely, “we also see the casualisation of premium brands. Millennials are looking for authentic eating-out experiences. Their drinking occasions are becoming less formal.” In other words, wines that can distance themselves from their formal image, while retaining their cachet and authenticity, will resonate with younger consumers.
Third, tell a story. “Storytelling is not just about the story you tell but how you tell it.” You need to engage in a way that, young people are used to engaging, she said. If people are used to Googling, make sure they can Google your story.
Finally, “make it easy. Millennials are driven by technology and on-demand culture.” What this means is producers must “figure out when your consumers want to interact with your brand and simplify the process”.
Key China watchers also came together to discuss the economic situation in Hong Kong and China and its impact on the wine market.
Alice Tsang, assistant principal economist for HKTDC, said that her organisation had surveyed 2,400 Chinese consumers to learn more about their attitudes to wine. “We made sure the respondents have the purchasing power for imported wines.” Not surprisingly, 90% of the surveyed consumers preferred red wines, seeing them as good for health; 50% said they never drink rosé. They preferred to drink at home and, critically, wine buyers are becoming more rational: “They are buying for the quality of the taste, not for the brand.”
As to Hong Kong, Sabrina Hosford, general manager Hong Kong and Macau for Summergate, said that the first half of the year was full of excitement, with everyone reaching sales targets. And then came the unrest. Now she spends a lot of time communicating to suppliers and managing expectations and volumes. “Customers need better pricing,” she said bluntly. “They need a way to put butts on seats,” particularly with so many restaurants and other outlets closing. “We have enjoyed a very strong period of prosperity and we need to come to a greater understanding of what’s manageable,” she said, and to “focus on where there are areas doing well.” In Hong Kong, this includes private members’ clubs, which remain prosperous.
Hosford said that what she had found is that regardless of whether things are up or down, “everyone still likes to drink”. Mid-priced wines are doing well, as are some e-commerce merchants. “Where we see unfortunate declines is in bricks and mortar – we have a duopoly and they’re looking at a 35-50% decrease in revenue month-on-month.” Macau, at least, is seeing an increase in tourism.
The big question is whether Hong Kong will remain the gateway to China, or whether Beijing will decide to reorient that economic activity towards the mainland. What is certain is the HKTDC will do everything in its considerable power to make its wine fair a success.
The wine market research done by HKTDC is available on its research portal.Felicity Carter attended the fair as a guest of HKTDC.
This article first appeared in Issue 6, 2019 of Meininger's Wine Business International magazine, available in print or online by subscription.