Some people are scared of spiders, others are frightened of public speaking, I fear the dominance and sales growth exclusively to ‘private label’ wines in China.
Buyers-own-brand (BOB), own label, private label are the various names given to wines that are made and labeled for someone other than the original ‘owner’ or brand. The phenomenon took off in the UK in the 90s and is now seen across all grocery products – butter, tinned soup, carrots and wine. The level to which this has evolved is quite advanced with BOB now owning not just the discount and lower price segments of a retail shelf, but also developing into higher price brackets and gourmet products e.g. Tesco Finest.
In China, the term ‘private label’ takes on a completely new meaning with not only the multi-grocers offering these wines, but also individuals and corporate businesses: a manufacturing magnate; an ex-party millionaire; a successful family business looking to access Australia’s migration visa. This is where the real growth of private label wines, albeit in a different format, has taken-off in China.
Exports of Australian wine to China are seeing double digit growth. There is an increase of exports at higher price points making the average value per litre of bottled Australian wine higher than its rival, France. China is also Australia’s largest market for bottled wine exports valued over $10 per litre and Hong Kong now sits at number two, out-ranking the USA, UK and Canada.
So, who is making this wine, who is selling it, what are the top ‘brands’ and who is buying and drinking these wines?
From my experience, looking at the statistics and talking to people in market, I estimate that more than 50% of Australian wine exported to China has a private label. A small percentage of these are sold via the traditional channels (ie available in retail stores such as Carrefour) but the majority of this wine is distributed via the ‘closed’ market, so-named because it is not visible and ‘closed-off’ from the consumer. Of the wines valued over $10 per litre, I am fairly confident that private label wines make up the lion’s share as well.
Why does this scare me? I wonder how many Australians are shipping wine without knowing how or where it is sold and who actually drinks it. The price points might be good, but if you do not know where or when the next order is coming, and you cannot tell me where I can buy your wine, how much of this current growth is sustainable and who is going to get hurt when the bubble bursts?
I don’t think Penfold’s, Henschke or Vasse Felix need to be scared. Do you?
- Invest in building your brand
- Partner with an importer/distributor who understands your brand and works with you to support and tell your story
- Understand the long-term prospects and don’t just consider (or rely on) short term results
- Private label wines can be great for business but they need to be carefully managed
- Ask yourself, if consumers cannot buy your wine, is your brand real?