China’s leading wine importer, ASC Fine Wines, affirms pledges of long-term commitment to Chinese wine market in an effort to boost market confidence, as the company cautiously navigates in a slowing wine market after the exit of DBR Lafite’s two volume brands and key personnel changes.
ASC Fine Wines and many key importers in Greater China region are faced with what’s generally believed to be one of the most challenging years in Chinese wine industry.
Years of warp-speed, double-digit wine growth halted in 2018, and downturn continue to deepen in 2019, as a result of slowing economy, prolonged China-US trade war, and currency fluctuations.
“In a very difficult time last year, we achieved RMB 1 billion (US$142.6 million) of sales,” says ASC COO Simon Wang when interviewed at ASC’s portfolio tasting in Hong Kong. Its first half year sales also increased by 5-6% year-on-year, according to him.
This would make ASC the biggest wine importer by value in the country, if excluding logistics operators and spirits importers.
At a time when over 2,000 bottled wine importers went bust in the first five months of the year, all eyes are on the country’s leading players like ASC Fine Wines to gauge market interest and growth prospects.
Earlier in the first quarter of the year, ASC lost DBR Lafite portfolio’s two volume brands, Légende and Saga, two generic Bordeaux blends that have become extremely successful in the Chinese market because of their association with the Lafite brand.
The two brands are rumoured to account for roughly 20% of ASC’s wine sales. Asked about the impacts, Wang says that the “break-up” did not dent its wine sales.
“For financial results for our Q3, we are aligned with our budget and exceeded the same time last year marginally,” he stated without giving specific details.
Although Légende and Saga exited ASC’s portfolio, ASC is still distributing DBR Lafite’s Chilean brand Los Vascos and Domaine d’Aussières in Languedoc, two wineries described by the executive of having their own vineyards and estates.
Wang also played down the split as being sudden, saying it has been properly thought through, and “it’s not out of the blue and somebody unplugged it.”
In addition to changes to DBR Lafite brands, the company is also tapping into spirits with Greater China distribution of Beam Suntory’s spirits portfolio as a part of deeper integration with Japanese parent company Suntory.
Meanwhile with more cautious and prudent consumer spending, he says this year consumer interest towards Bordeaux En Primeur campaign is also lukewarm and “average”. “It’s not a year that everyone jumps up and down, not necessarily saying the vintage is bad, but currently with the situation people are a little bit skeptical, so the average refers to consumer sentiment,” he explains.
“It’s a good vintage but is it a right time to put money upfront? For a lot of wine companies like us [ it’s about] cash flow management cause you pay immediately and you need to manage cash flow,” he continues, adding that company CEO Yoshihiko Shibuya is directly in charge of fine wine and En Primeur campaign after departure of Richard Li.
Across the border in Hong Kong, ASC is also adjusting to new changes in the market. In September, Jonathan Mather left the company as its general manager for Hong Kong and Macau. Monthslong protests in Hong Kong caused by now-withdrawn extradition bill dampened citywide wine sales.
Hong Kong’s food and beverage businesses posted the steepest fall in the third quarter of this year since the 2003 SARS outbreak, according to a SCMP report.
The impact of Hong Kong protests is “especially severe on on-trade sector,” Wang says. The protests in commercial centers such as Central, Wanchai, Causeway Bay and Tsim Sha Tsui adversely affected restaurant goers and drinkers. As a result on-trade sales shrank by 30-40% this year during the protesting months this summer, Wang reveals.
However, he’s quick to note, “We think this is an opportunity for us to demonstrate our commitment to the market, right time for the customer to see who the real players are. We Suntory with our 100 years are not looking at short term, and we are here to stay.”
Looking ahead, Wang says ASC will strive to become more agile to better respond to market changes, and is in no rush for short term profits.
“We look at China with a long-term view we don’t short-change the future for immediate profit, ” he stated.