Shinji Hori, President and CEO of Enoteca (pic: Enoteca)

Shinji Hori, President and CEO of Enoteca (pic: Enoteca)

Shinji Hori, President of Asia’s leading fine wine merchant Enoteca, reveals the growth drivers behind the Japanese wine company’s expansion in the past two years and how the wine conglomerate is tackling the ever-tightening squeeze on wine prices.

As key economic drivers in Asia still tread on uneven recovery to pre-pandemic level, Shinji Hori, President of Asia’s leading fine wine merchant Enoteca, highlights the strength in South Korea and mainland China that has propelled the wine conglomerate’s growth during the pandemic.

Founded in 1988 by Yasuhisa Hirose, Enoteca was bought by Japan’s drinks giant Asahi in 2015. Ranked as Japan’s biggest fine wine merchant, today it has over 60 stores within Japan and has expanded its presence across Asia with wine stores operating in Hong Kong, mainland China, South Korea, Singapore, Taiwan and Thailand.

Mr. Yasuhisa Hirose, founder of Enoteca (left), with Shinji Hori (right) in Burgundy in June 2022 (pic: Enoteca)
Mr. Yasuhisa Hirose, founder of Enoteca (left), with Shinji Hori (right) in Burgundy in June 2022 (pic: Enoteca)

South Korea, Hong Kong, mainland China

Speaking to Vino Joy News, the veteran wine merchant who assumed his current role earlier in March reveals that in the past two years, South Korea and mainland China have outperformed traditional markets like Hong Kong.

South Korea for the first time surpassed Hong Kong to become Enoteca’s biggest market outside of Japan. Mainland China, a market that usually lags behind Hong Kong this year is also projected to overtake the tax-free Asian wine hub.

“In particular, South Korea is currently growing nearly 3 times of year 2019,” he exclaims when comparing sales revenues. The 4th largest economy in Asia has emerged as one of the most bullish wine markets during the pandemic. The country’s wine imports alone in 2021 grew by 70% in value over previous year.

The reasons behind the blistering growth as he explains is due to increased number of wine beginners and wine lovers who buy and drink more than usual. Due to pandemic. “We felt people look for better quality of life with wine drinking at home and spent more money for luxury goods such as cars, watches and wines, which led to expansion of those markets (because they can’t spend money on travels and some leisure),” he analyzed, adding that average price point of wine spent by Koreas is around HKD 250 (US$32).

Another market that has been defying expectation is mainland China. Despite China’s declining wine imports during the pandemic and sporadic lockdowns, sales generated from the market are roughly 1.6 times of that recorded in 2019 in terms of value, he highlighted. The company currently operates upscale wine stores in China’s first-tier cities including Shanghai, Suzhou, Hangzhou and Shenzhen.

The executive counts Enoteca’s loyal customer base and high demand for premium wines chiefly for Bordeaux and Burgundy as key reasons behind the company’s strong mainland performance. The market’s thirst for top Bordeaux in mainland market was so strong that it compelled the company to divert half of Bordeaux En Primeur allocations earmarked for Hong Kong to the mainland, he explains while giving an example.

Hong Kong island (pic: iStock)
Hong Kong imposed prolonged ban on bar operation, leaving many bar operators hanging by a thread (pic: iStock)

Hong Kong, on the other hand, in a role reversal is sluggish amid the city’s stringent Covid measures, restaurant closures and more than two years of absence of mainland tourist.

“Hong Kong market has dropped and value has decreased because we lost mainland customers who used to be major buyers for first growths and top burgundies,” he continues. For the market to return to pre-pandemic level, it might have to wait until 2025, he estimates.

However, he cautions that Hong Kong is still too important to write off. “People are very pessimistic about Hong Kong but we did not close any shops and we still believe in Hong Kong market. Hong Kong has advantage of zero wine tax and the culture of fine dining… 2-3 years later, it might rise again after pandemic,” he says reassuringly.

In other parts of Asia, Thailand where Enoteca opened its first store in 2020 is also lagging in recovery due to the country’s alcohol sales restrictions and lack of tourists, he added, but markets such as Singapore, Taiwan are on fast recovery.

Unavoidable Squeeze on Wine Price

Japanese shoppers are customed to stable prices and are more sensitive to price rises (pic: Getty Image)
Japanese shoppers are customed to stable prices and are more sensitive to price rises (pic: Getty Image)

But the seasoned wine merchant is faced with a problem that confronts many of his peers – rising wine prices.

Global supply chain disruptions, compounded by energy crisis and inflation have driven up wine costs globally, and in Japan, one of the most inflation-resistant countries in Asia, raising consumer prices for wine will be a hard pill to swallow, says Hori.

Although consumers in developed countries across the world have been experiencing the impact of inflation for more than a year, shoppers in Japan have become accustomed to stable prices for the better part of the past three decades.

This essentially means “Japan is one of the most difficult places to increase the price,” says Hori. Japan’s rising inflation has pushed Enoteca’s parent company Asahi to raise retail price for its beers and other beverages for the first time in 14 years. Another drinks giant Suntory also announced price hikes for 31 different products including whisky and other beverages.

“Wine prices as a result will increase,” he says before adding that Champagne will probably see the sharpest price rise due to two years of consecutive production drop and high demand. 2020’s Champagne production dropped by around 20% and in 2021 due to frost and adverse weather conditions, volume could drop by up to 60%.

If LVMH and Pernod Ricard, two biggest producers of Champagne, reduce their allocations in Japan due to production drop, supply will be heavily strained, he cautions. “We are a bit worried that in 2020, these producers reduced production by 20% and in 2021 because of frost, production declined and in the future supply will be less while demand is high,” he explains, pausing for a second before warning that, “in 2-3 years, the market will not have enough allocation for Champagne.”

Japanese yen dropped to a two-decade low against US dollar (pic: iStock)
Japanese yen dropped to a two-decade low against US dollar (pic: iStock)

Additionally, weakening of Japanese yen this year adds more pressure on wine importers and merchants. “Japanese exchange rate depreciation has a big impact for us,” he admits since Japan accounts for 70% of Enoteca’s business, but the newly elected president is quick to add that gains in its international markets such as Korea, Singapore, China are able to offset some of the impacts.

“Thankfully, we have other international markets, and they are getting stronger, and we consolidate results in Japanese yen and we can offset some of the blowback,” he explains. The company’s strategy to hold back new wine releases (about 30%) as he believes will also help to balance costs and stabilize supply with fair prices.  

Looking ahead, the experienced merchant is looking to increase international market shares in Enoteca’s overall business to 50% in the coming years, on the same par with Japanese market.

“Enoteca is now becoming one of the largest operations of fine wine business in Asia and will keep going on with expansion of area (region) and sales channels (both on-trade and off-trade). Multi-area and multi-channel distribution across in Asia is our uniqueness and strength, which set us different from others,” he states.

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