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Special Report: The China wine story is taking off, after e-commerce giant Alibaba sank 2 billion yuan ($407m) into a local wine importer and retailer.

Alibaba, which is worth $US375 billion ($531b), is buying into rising demand in China for imported wine with an investment in 1919.cn by buying 39.3 million shares in the company, valuing it at $US1 billion.

Consumption by the Chinese market is expected to be second only to the US within five years, with consumption forecast to rise to $US23 billion a year, according to wine fair operator Vinexpo.

Alibaba’s investment in 1919.cn validates an opportunity that Australian wine makers have already recognised.

Aussie wine exports to China in the year through this September hit $1.06 billion, up 24 per cent on the prior year and the Chinese market is now the biggest in terms of export value for Australian wine and second only to the UK in terms of volume.

1919.cn already sells a range of Australian wines, from a $6 ‘Koagaroo’ Shiraz to a $1,400 Penfolds Grange.

Dawine (ASX:DW8), one of just three publicly-listed wine companies, is positioning itself to capitalise on the growing demand for wine in China, with it’s recent acquisition of Wine Depot.

Providing access to the lucrative Chinese market

Currently, getting wine anywhere can be tricky.

Fragmented markets and slow, costly distribution make moving wine even inside Australia difficult, let alone making a single bottle available for sale on a Chinese ecommerce site.

Dean Taylor, Dawine’s incoming CEO says Wine Depot will provide Australian wine producers an ‘end-to-end solution’ that allows them to make their products available to a wide variety of Chinese sales channels without them having to try and develop those relationships directly.

“Our integrated B2B trading and logistics platform will also make it a lot easier for Australian wineries and retailers to sell directly to consumers in that market.”

Taylor also believes that what we are witnessing now is just the tip of the iceberg.

“The Chinese middle class is rapidly expanding and they aspire to western values including food and wine.”

“At the moment, there are about 50 million wine consumers in China. That’s only about 3.5 percent of the adult population. Per capita wine consumption is about 1.4 litres compared to France’s 47 litres.”

“You don’t need to be a rocket scientist to see that it’s a market that’s going to rapidly grow for some time yet.”

It’s all about finding the right partners 

As many foreign businesses would attest, the key to success in doing business in China often centres around finding the right partners.

Mr Taylor says 1919.cn is exactly the kind of business Wine Depot intends to partner with in order to offer Australian producers the ability to get exposure to the rapidly growing Chinese wine market.

He says Alibaba’s investment in 1919.cn has the potential to accelerate the growth of the imported wine category in China, which currently is less than 1% of the country’s total alcoholic beverage market.

“Combined with the favourable trade tariffs on our wine, Australian wineries are in pole position to capture a large slice of the expected growth. However, we need to make it a lot easier for Australian wineries to get their products into that market.

“That’s where we see Wine Depot come in – providing Australian wineries a unique package of services that provides them much easier access one of the largest and fastest growing wine markets in the world.”

 

 

Dawine is a Stockhead advertiser. 

This advice has been prepared without taking into account your objectives, financial situation or needs. You should, therefore, consider the appropriateness of the advice, in light of your own objectives, financial situation or needs, before acting on the advice. If this advice relates to the acquisition, or possible acquisition, of a particular financial product, the recipient should obtain a disclosure document, a Product Disclosure Statement or an offer document (PDS) relating to the product and consider the PDS before making any decision about whether to acquire the product.