New York Wines in China: Opportunities, Challenges and a Unique Education
Editor’s Note: Tomorrow, Jim Silver, general manager of Peconic Bay Winery and Empire State Cellars, will fly to China as part of a delegation set to represent and eventually sell New York wines there. While he’s there, he will be publishing a travel diary here on the New York Cork Report. I asked him to introduce that diary before he left.
Bloomberg reports that the Chinese Gross Domestic Product grew 7.6% in the third quarter of this year over last year. The same report considers that a “drag from inventory restocking…” One has to wonder what they would consider robust growth.
Sparing you the boring economic facts and figures, it’s no secret that the Chinese economy is one to behold. The emergent middle-class, numbering about 300 million people (roughly equivalent to the entire United States population) are finding themselves with disposable income, and with a curiosity for western “things” and wine is absolutely chief among them.
The Chinese want wine. Imported wine, and they want it right now.
It may surprise you to know that the wine industry within China — the domestic wines — are improving too and have started to catch some recognition from the rest of the world, even if they are met with indifference at home. In fact, Jancis Robinson, wine writer and expert made a special trip to the country just last month to report on the progress being made there. That country’s nascent wine industry reminds me a lot of another young, up and coming wine industry that has made great strides in quality after years of hard starts and disappointing results, and despite an apathetic response from the home team: that would be New York.
It may also surprise you that I have personally fielded dozens and dozens of direct inquiries for New York wines for export to China since 2003, which, had they been all fulfilled would have wiped out my production ten times.
So what happened? Well, the Chinese market and the Chinese consumer are harder to understand. You must abandon all pre-conceived notions of how business is transacted, how the wine is received, and how the wine is appreciated. In fact, this may be the hardest thing I’ve ever done in the business, with the greatest potential reward, if I (we) can just be patient enough to see it through. There are serious conditions attached to this though — one does not just waltz into the
People’s Republic, samples under your arm, expecting to be greeted warmly by a curious and thirsty middle class.
As is true with getting a Visa to visit the country — you must be invited.
And so New York received its invitation finally. Like Cinderella’s invitation to the Prince’s ball, the government officials behind the grand China International Exhibition and Trading Center of Wine and Beverage at the Waigaoqiao Free Trade Zone in the Pu Dong district of Shanghai (population twenty three million and growing) sent word through their officials that New York has been requested to occupy a pavilion. Not California, not Washington, not Oregon or Virginia…just New York, please.
Why us? The quick answer: Prestige. More on that later…
Word quickly spread through the industry that upon paying a fee, the participating winery would be granted exposure through the newly created New York State Wine Outlet (a 3,000-square foot pavilion among many others in the Free Trade Zone) directly to trade professionals, regional distributors, writers and press, as well as a smattering of consumers. In fact, the purpose of the pavilion is match-making — wineries to distributors. There is a lot we don’t know about the Chinese way of doing business, but it is also true there is a lot they don’t know about the New York wine industry. And the
key part was not realizing just how small these wineries here really are.
A distributor in China focused on selling a particular wine is capable of obliterating the whole production of any given winery in a matter of hours. We couldn’t possibly provide enough to satisfy the stunning demand and astonishing appetite of China. They have the power to buy everything we make — everything. And this is bad why?
Well…let’s talk about prestige — and other things.
The Chinese buyers have a lot of money right now, and a great enthusiasm for wine, so long as is meets certain conditions.
First, they demand authenticity above all — so much so that written guarantees of authenticity and certificates of origin accompany all shipments. Original labels must never be altered, and any Chinese language placed on the label for the convenience of the consumer is greeted as a nearly insulting marketing ploy. They want what we buy here at home. They want it to be and to look the same as it is here.
Secondly, the wine should be prestigious. It is frequently a gift, and it is always a special occasion. Since wine as a part of the daily diet is not part of this culture, the wine is in fact an event in and of itself — and therefore no average wine will do. Only a respected, noble and important wine will suffice. When the Chinese consumer spends money on a wine it is a significant purchase — one they take seriously — they do not have time for animals, cartoons and funny faces on the labels.
Thirdly, the wine is red. They have almost no use whatsoever for white wine — except that some may be sold to hotels for foreign visitors. Almost all of the wine consumed is red –- dark red.
The Chinese consumer can be forgiven for the next part, which is the stuff they don’t really appreciate or understand just yet. I’m not really referring to a lack of taste; don’t get me wrong — it’s much more about value. That is, the value of wine especially in relation to relative scarcity, relative quality and historical stature.
Petrus, Lafite and Latour are not difficult to understand. They are extremely expensive, extremely prestigious to own and consume, and make the ultimate gift in a society that places very high importance on gift exchanges. So how does the culture place value on things that are not as obvious as Petrus? What value will they place on a wine from the United States?
We have learned quickly that “place” is key. California may be a well-known place; it’s where movies are made after all; but New York is the bigger and more admired place — it’s where the movies happen. It’s the center of our power, both financial and cultural. New York is grand, larger than life and desirable. It’s a brand. So it makes sense that the wine must be better from New York, right? Right or not, New York is more prestigious, and that makes it better.
Further, there are barriers to our trade that are cultural; Language certainly, but also business practices. It takes a tremendous amount of time to develop a relationship with a partner in China. It could take a year — or two. There is a long courtship period where we get to know one another. Gifts are exchanged, business is discussed. Style of wine, quality, guarantees of production quantities, pricing issues are all discussed at great length, and repeatedly. And here is where the relationship becomes strained — often wine isn’t consistent. It isn’t always readily available, and it certainly isn’t the same
every year. So long courtships become difficult when the conditions keep changing. Language doesn’t always help the matter either. How to translate the untranslatable? The incredible subtlety of the Chinese language makes business discussions minefields one must traverse with very knowledgeable translators. Now mix in high concept like terroir, elegance, balance, history, agricultural practices, and of course taste and aromatic sensations and you have one very interesting discussion.
On Tuesday October 23, aided by the U.S. Small Business Administration, the New York Small Business Development Center and the New York State Department of Agriculture, a delegation of New Yorkers, including me, will fly to Shanghai to spread the word about our wine industry, together with representatives of Spring Valley Winery, Sparkling Pointe, Lieb Family Cellars, Vizcarra Winery, Black Willow Winery, Thousand Islands Winery, Pleasant Valley, Brotherhood Winery, Damiani Wine Cellars, Wolffer Estate, and the Winery of Ellicotville.
I am fortunate to be representing ten wineries at once, all under the aegis of Empire State Cellars, which is a store readers of this site know well. When the delegation from Shanghai toured New York State to convince the wineries to participate with them in the New York State Wine Outlet over there they visited our store and told us directly “this is exactly what we want for you, in Shanghai.”
After some brief negotiations, I offered to pull together a portfolio of willing and outstanding producers; one that would offer the potential distributor some of the very best wines produced in the state with the efficiency that comes with a full portfolio of brands. That means a distributor partner wouldn’t need to fill a container with one or two wineries a couple of times per year. We would be able to pull thirty or forty wines from ten or more wineries and fill containers with small, manageable quantities with more frequency. After all, the “pipeline” is open to the wineries already, the cash is guaranteed and counted here on these shores, and the communication is easier –- one-stop shopping if you will. This consortium of producers includes these wonderful names, and it is my honor to pour their wines for them: Bedell
Cellars, Jamesport Vineyards, Medolla Vineyards, Peconic Bay Winery, Channing Daughters Winery, Anthony Road Wine Company, Hudson-Chatham Winery, Shaw Vineyards, Paumanok Vineyards and Shinn Estate Vineyards.
If you think it’s our mission to sell wine you’re only partly correct. Selling wine is not hard. Selling wine for a high enough price is very hard. Here we have a grand opportunity to introduce ourselves to a new market, and a well-heeled one at that. This is a market that prides itself on being able to pay for the best, and to negotiate the lowest price possible based on volumes.
Our mission is to sell our products as a rare, expensive, and prestigious wine and to position ourselves in the upper echelon. We cannot possibly compete with Australia, Chile and France for volume and so we cannot cave into a demand for discounts. We know China can swallow us in a single bite — they should not get it for a bargain price too.
Our wine is too precious to “dump” because if we look at China as a place to “dump” quantities we will never regain the status they demand and respect. The same negotiation that would establish New York as an ultra-premium luxury product is the one that would strip us of that prestige if we let it.
As I’ve said before, we are finally stepping onto the big stage, and we’d better act like we belong there.