Cristián López is Asian corporate export director for Concha y Toro, the world’s seventh-largest wine company. Based in Shanghai, he is responsible for all of the company’s operations in the region and has set up a Chinese distribution subsidiary called VCT China.
López took on his role in Asia 18 months ago, after helping to build sales in the UK from 265,000 cases in 2000 to 5.2m cases in 2009. In 2010, in recognition of that success, he was named ‘Man of the Year’ by UK publication The Drinks Business. Prior to his arrival in Britain, López wrote the most highly marked thesis as a student of the Wine MBA course. Today he is focused on trying to make the Casillero del Diablo brand – already nearly a 4m-case brand – the leading wine brand in the region.
MEININGER’S: Is there such a thing as Asia?
LÓPEZ: Looking at it from our company’s point of view… we see several markets and they’re very different. There are more mature and developed markets such as Korea and Japan where there’s strong retail distribution, and China that is totally the opposite. Hyper-fragmented and really not clear in terms of routes to market or pricing. And there’s a huge number of importers. I have the latest statistics, and a year ago there were in the region of 4,000 and now there are 5,000. Obviously, not all of them are just in the wine business. A lot are getting into the business in some way or form trying to buy the cheapest wine and marking it up as much as possible, so it’s very confusing. After a very organised market like the UK, China came as a total shock. Sometimes I have to take a pill for seasickness because you can get very dizzy here.
MEININGER’S: How do you handle distribution in Asia?
LÓPEZ: Our strategy worldwide in terms of global distribution has been to have three tiers. One is to have agreements like in the days of strong partnerships with a distributor to represent you with mutual exclusivity. Then we went to a model of having our own subsidiary, our own distribution company which is what I had the pleasure of forming in the UK. Then we have another model, which is joint ventures, associations or strategic alliances. Obviously in Japan the biggest wine distributors are beer distributors, and we work with Asahi. Who knows if tomorrow Qingdao will be in the wine business? The game is so open.
MEININGER’S: Does Chile have an image in Asia?
LÓPEZ: Yes, one would have to accept that. It’s 100% an image of very good value for money. At the top end it’s tougher, but we have had good ambassadors of fine wines from Chile and we have to mention Montes, for example, in Japan, through Enoteca. In the last three years we have made an important drive through a specialised distributor, Nippon, who are focused on top wines. So it’s about having the right distributor for that segment of market.
MEININGER’S: Do you deal with China as one country or do you deal with it as regions, as one has to in the US?
LÓPEZ: You have to look at different regions, different cities. It’s a huge and vast country. In the past and until now perhaps, we have been very concerned with the first tier. Recently, more with the second, but we’re looking at a greater focus on the third. Imported wines only represent about 20% to 30% of the total market. Half of that – about 14m to 15m cases – are French. Compare that to the UK where 140m cases are imported.
MEININGER’S: How is your distribution different in China?
LÓPEZ: In China we have the agreement and relationship with Summergate. We also work with other brands and other subsidiaries and with other distributors and importers. We’ve formed a company in China called VCT China. So we are gaining an understanding of the best alternatives and routes, and there will be models that we will implement in the future together with our partners to enhance both our position and of course their position. We need to be very clear that our objective is to be an importer and brand. And our ambition is to be the most important and biggest wine brand in China. Don’t ask me when, because I don’t know, but I will have less hair and it will be much greyer, but we will do it. I’m sure that we will do it, especially with Casillero Del Diablo.
MEININGER’S: What are the biggest challenges?
LÓPEZ: We’re obsessed with route to market. Retail is very small in China. The supermarkets and the major retailers represent perhaps 5%. Compare that to the UK where the majority of wines - 80% - is off-trade and sold by five retailers. We work very closely in the Casillero portfolio with, for example, Summergate, our distributor, and they have a process of category management which they share absolutely with us.
We’re also buying the information to make sense of import statistics, to see who is doing what to build the landscape. Today I think we have a clear understanding of where Casillero is being sold, who is buying it, at what prices it’s being bought and who the competitors are. Another thing is that in China everyone is looking for a brand that’s exclusive to them. They all want to appear to be national, even if they are not. The biggest challenge is how to build a brand with real distribution and really build it with the consumers. The challenge is that no one distributor in China can really give that scope in all of the market.
MEININGER’S: Do you believe the official statistics?
LÓPEZ: Yes. We have a more critical picture of the numbers than ever before. But the picture is made difficult by the amount that is parallel [imported]. So our company in the UK can sell to a customer who then sells to someone in mainland China. And wine comes via Hong Kong. Some well-known brands, including one Australian brand, might have over 50% being paralleled.
MEININGER’S: How is the market changing?
LÓPEZ: While everything is slightly standing still, e-commerce is driving the market - growing significantly by about 45%. The dynamism of the e-commerce companies is something I have not seen in my almost 19 years in the wine business. I think e-commerce will probably be the main route to market in China.
MEININGER’S: How much are you selling at the moment?
LÓPEZ: We should hopefully reach around half-a-million cases this year, of which Casillero Del Diablo will be over 100,000. So compared to the UK, where it’s over a million cases of Casillero Del Diablo, it’s still very small. But again, we want to do it responsibly, not in partying or banquets, but with real consumers that are interested and getting involved in wine.
MEININGER’S: How strongly affected has the market been by the anti- corruption clampdown on banquets and gifting?
LÓPEZ: I’ve seen a report that talked about the shutdown of almost 3,000 outlets and about 100 or 200 government officials being sanctioned for corruption. The clampdown has affected companies quite a lot, but in the middle of the austerity measures, Casillero Del Diablo has had a growth of 40% to 50%. So that distributional platform allows us to continue to grow organically. I celebrate the austerity drive. It’s one of the big steps to regulate or reduce corruption in a big way. It will give a lot more transparency in the market.
MEININGER’S: The Chinese market is moving to more online sales and more female buyers. How are you exploiting this?
LÓPEZ: By having a good Chinese team. It’s so important. Not only with the communication about e-commerce, but the communication with customers. You really can get lost in translation. Some of our Chinese marketeers and sales people have brought a new life to our understanding. It’s all good to work with your distributor and there is always a sense of good partnership and communication but there’s always a slight difference in agendas.
We ask Wine Intelligence, with whom we are working for many years now: “What is going on with the female consumption? How are the decisions being made?” So we do specific communication. We’re going to be launching a female-oriented campaign very soon in lifestyle media and very much in social media, but very targeted. You can do wonderful things with social media if you have a good agency.
MEININGER’S: Do you see China having a place for the sweet red and white blends like Menage a Trois and Apothic that are doing so well in the USA?
LÓPEZ: It’s not what we do at Concha y Toro, but I think there is a space and a category, in the sense that consumers share a need for simplicity so you have a red and a white. It’s simple. It’s upfront. It’s direct. We are going to test something of that kind outside Concha y Toro. Moscato works, and we have a wine that is selling 10,000 to 15,000 cases in China in year one. So there is a consumer there for it. But there are consumers for a lot of things in China.
MEININGER’S: Some companies are pulling back from China because they are not getting enough return. What is your strategy?
LÓPEZ: Three years ago people said about the UK that “the island is sinking” and the market is finished and all this crazy stuff. Now it’s much better. You cannot be so opportunistic. You need to commit. You need to be persistent. You need to understand where you are and continue, continue, continue. So we take a really long-term approach. We’re not going to leave China because things got tighter. No. We’re going to work better. We’re going to invest more. We’re going to get even stronger.
MEININGER’S: How about the rest of Asia?
LÓPEZ: We’ve separated Asia recently into south-east, north and central, and we do Kazakhstan and Kirgizstan and all the ‘Stans except Pakistan. In the north is mainly Japan and Korea. I’m very positive about Japan because more people are drinking more wine. And the retail picture is changing there. You have more tier channels, more buying direct. But there is a lot of the dynamics of a more mature market. You have very interested consumers, and over 10,000 sommeliers. Chile has been growing there over 20% in the last three years. For us, Japan is the number three or four biggest market for Concha Y Toro after the UK and the US. We’ve also been extremely happy with Korea. It was the first country to sign a free trade agreement with Chile, in 2004. Free trade agreements don’t really make a huge difference in terms of pricing but there is an emotional aspect for the consumer.
We were, I think, running behind when I first joined the area, but we obviously had a great opportunity with Casillero. We have a single distributor for Casillero and one for the rest of our brands, and that has really helped us a lot.
They’ve invested in the brand significantly on television and in-store activities: a 360 degree campaign. Now, in general, Korea has been able to deliver a really good average price for Chile. As a company, we’ve seen extraordinary growth and are probably going to be by far the leading brand in the price sector this year.
We have really good distribution in the south-east of the region, with long-term partners. So we have an operation in Singapore and the people there are very close to the customers. Taiwan is a little bit flat but always delivering good value. We are doing very well in Vietnam, with very good growth and packed audiences for our fine wine events there. Laos is working too, from a small base and obviously with a lower tier of wines. What about India? We’re doing very little there. It is not easy to make it work, and obviously, yes one has to prioritise.
MEININGER’S: You spent a lot of money on sponsoring Manchester United. How have you exploited the relationship?
LÓPEZ: In Asia we have a million fans. There are huge amounts in China and Korea. Everyone loves them. Last year the team was here in the region and we did a lot of corporate entertainment. When they went to Japan, our top customers came to the match and they got to meet the players. They also got the ‘Legends’ tour, where the legends of Manchester United give interviews and have pictures taken with the fans. There are also very popular implementations in store like win a shirt or a trip to Old Trafford.
MEININGER’S: What’s the most important thing to get right in Asia?
LÓPEZ: You need to be here to be able to build a solid structure of our company in Asia, with the time difference and jet lag and so on. I mean they are having breakfast in China while I am having a pisco sour with the team. So everyone’s in a different state of mind. The attitude towards work is different. You need to be here. You can have the best distributor or importer or whatever but it’s impossible to rely on that.
MEININGER’S: And, is there one thing that if you were warning somebody else, “I wouldn’t have done that again”?
LÓPEZ: I would say I regret not having formed VCT China sooner.
MEININGER’S: Finally, how long are you going to be in this job? Do you have a time scale on it?
LÓPEZ: I thought I’d probably spend a year and a half in China to be really consequential to how I do things. But I said I would live in the UK for three years and I stayed for 10! So, we’ll see.
