Shipping to China
Chinese consumers have a growing thirst for wines, and an increasing number of Canadian wineries are trying to capitalize on the opportunity to sell into the world’s largest and fastest growing wine market. According to IWSR Research, China’s total wine consumption increased over 18 percent between 2011 and 2015, and indications are that those numbers will continue to grow.
For Canadian wineries looking to diversify, selling wines to China can be an attractive proposition, but success requires determination, a sense of adventure, and commitment to learning the ropes in a totally new environment.
“Exporting takes a lot of time and a lot of work,” says Allison Boulton, an international trade advisor who specializes in exporting agri-food products to Asia. “China is not just a new market, it’s a new culture, new country, new language. Wise exporters realize it’s a challenge and seek out some help.”
Boulton’s first foray into shipping wine to China was working with Paradise Ranch Ice Wines in 2001, a winery that specialized in late harvest wine and ice wine, with a focus on exporting into China, Taiwan and Hong Kong.
In 2011, she moved to China as director of marketing for the winery’s Chinese buyer, representing an extensive portfolio of North American wines. Today Boulton works with small and mid-sized agri-foods businesses, including wineries, looking to make the leap into Asian markets.
“Large distributors in China are not that interested in smaller Canadian wineries, partly because we don’t have the volume or production,” explains Boulton. “Canadian wine is not cheap, it’s a specialized market. Our wines are more finessed and specific.”
The Chinese demand for high value wines is borne out by the statistics. According to the Canadian Vintners Institute, China accounted for only 2.5 percent of Canadian wine exports by volume, but 28 percent of the value between 2011 and 2015.
Ontario-based Pillitteri Estates Winery has been exporting ice wine to Asia since 1995. The winery produces 100,000 cases per year, and currently exports one third of their production to China. Richard Slingerland has been managing China export sales since 2009, when the winery made a conscious decision to move into the luxury market.
“When I took things over we moved from a low priced, do anything to get a foot in the door approach to a focus on Canada’s position as a premium production country, and not bothering to compete on price,” he explains. “For us to compete and take low margins didn’t match well with making the world’s rarest wine.”
The success of Canadian ice wine is also opening the door for other wines, particularly reds. While Pillitteri’s early sales to China focused exclusively on ice wine, their dry red reserve and late harvest wines are an increasingly important part of their Chinese business.
Slingerland credits much of Pillitteri’s success in China to the winery’s commitment to being consistently present in the country, and the relationships that they have built with their customers.
“I have been to China over 25 times inthe last seven years,” he says. “Every market is different. We joined in on a few government trade missions, and went ourselves to work with the embassies. It seems like I should be in China more because the market changes a lot year to year.”
The speed of change in the Chinese market cannot be overstated, according to Allison Boulton.
“It’s such an entrepreneurial culture in China – they are constantly reinventing themselves,” she says. “Comparing China to Canada is like counting in dog years. They move so fast and adapt so fast that you have to really work to be on top of that market. If you can’t go there yourself, send someone in your place, invite them to Canada, keep that relationship going.”
John Skinner from Painted Rock Estate Winery in Penticton, B.C., has been exporting red wine to China since 2011. Of the 6500 cases they produce every year, 20 to 40 percent is exported to China. Their wines are reported to sell for up to $950 USD per bottle in restaurants, and $500 USD in wine stores.
“China is a very young wine market. The first entrée for Canadian wine was ice wine, but I thought there was a ripe opportunity for table wine to get a toe hold,” says Skinner. “We started with a distributor from Vancouver who was exporting a number of B.C. wines, and through her, met a very substantial distributor who now buys large quantities reliably.”
Finding a Distributor
There is no single path to selling wine in China, so the value of a well-informed advisor or timely introduction is priceless. The enormous size and diversity of the markets is exciting, but can also be confusing for people who are new to working in China. Wineries often start with a small distributor, and meet other buyers as their Chinese networks expand.
John Skinner was introduced to his first Chinese distributor through James Stewart, founder and former CEO of Paradise Ranch Ice Wines and Bench 1775. After making his first sale, he got on a plane to Shanghai, where he was introduced through networks there to a much bigger customer.
“The first group that I worked with had their particular market, but it wasn’t anywhere near as big as the group that I work with now. This is one large buyer that has their own channels,” he says. “I don’t have any influence or input on what they are doing with the wines.”
In comparison to the Canadian wine market, where many estate wineries have a close relationship and sell directly to their customers, it may seem odd at first to be so disconnected.
“It’s quite common to not know who’s buying your wine in China,” explains Allison Boulton. “Your buyer will sell it to their networks. You don’t often see Canadian wine on store shelves because it’s not the way the market works there. Wine is mostly sold through personal connections.”
Shipping Logistics and the Value of Good Information
Global shipping is a well-established industry, and the logistics of shipping to China doesn’t differ greatly from shipping wine anywhere in the world. Unlike shipping to more established wine markets, there is a much greater need to provide guidance and education for buyers.
“Like any good business relationship, if the winery is aware and can help educate their buyers it will strengthen their relationship and they’ll become a preferred supplier,” says Boulton. “It can be as simple as knowing the Chinese holiday calendar so you know that your wine needs to be there ahead of time, for the gift giving seasons.”
- Being aware of the regulations and export requirements is a must. According to Agriculture and Agri-Food Canada (AAFC), the following is required to export wine and icewine to China:
- A certificate of health for the product issued by the Government of Canada. China accepts the Canadian Food Inspection Agency’s Manufacturer’s Declaration. By signing and sealing this form, the wine manufacturer agrees the product meets the health and safety requirements of Canada’s Food and Drug Act, is safe for Canadians to consume and can thus be exported to China.
- A proof of product of origin. A Certificate of Origin can be provided and certified by a local Canadian Chamber of Commerce.
- Label in Chinese: The Chinese importer should be able to agree in advance what is an acceptable translation.
Keeping up to date on changes to the Chinese label and import license requirements will also go a long way towards building the relationship with a customer.
“Relationship is huge, and it’s going to help a sale,” says Boulton. “When you go to two wineries and one winery knows the Chinese labels and understands what’s required and the other doesn’t, who are you going to want to work with?”
When it comes time to actually shipping the product, most export arrangements are made Ex Works, putting the onus for shipping and product handling on the buyer as soon as the wine leaves the gate.
“Once the wine leaves our property in Niagara, it becomes the customer’s property,” says Richard Slingerland of Pillitteri Estate Winery. “We are a family business, and it can be so risky when shipping. Shipping ex-works means the buyer takes on the risk of clearing the product through customs. We’ll assist them, but we are leaning on them to take charge and pull through to get it into the country.”
The team at Pillitteri puts a lot of effort into educating their customers about the proper handling of wine.
“Sometimes people think of wine as a commodity, not as a living product. It can’t get too cold or too hot, or be handled roughly, or the product quality will dramatically change,” explains Jamie Slingerland, director of viticulture at Pillitteri. “A lot of times customers don’t realize the impact of weather on the product. We try to convince them to ship at specific times of year to avoid high risk weather temperatures, and make sure wine is below water line on ships to ensure the temperature is consistent. If product is at the top of boat or sits on dock for a few days, it could be bad, particularly at 40-50 C.”
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Winter Grape Harvest
Night wine harvest at Pillitteri Estates Winery.
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Winter Grapes
Grapes ready to pick at Pillitteri Estates Winery.
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Straightened Vineyard
The family owned Pillitteri vineyards are located in Niagara-on-the-Lake, Ontario.
Building the Canadian Wine Brand
Ultimately the efforts made by pioneering wineries like Pillitteri Estates have built the foundation for others in the industry to succeed in the Chinese market, but they have not done it alone. Cooperation among a committed group of small and mid-sized wineries from across the country, coupled with strong federal and provincial government support have created a strong brand for all Canadian wine.
“Government is held with a different regard in China. You go with the backing of the Canadian government or the B.C. government, and you’re going to get a better meeting, a faster meeting than if you just go on your own,” says Allison Boulton. “We’re spoiled because Agriculture and Agri-Food Canada has people in a lot of the embassies and trade offices who deals with the Chinese government for us.”
Businesses can access exporter preparedness programs and information through AAFC, the BC Ministry of Agriculture and Small Business BC. The Canadian Trade Commissioner Service provides on-the-ground intelligence and practical advice on foreign markets, and the Agriculture and Food Trade Commissioner Service helps Canadian businesses succeed in markets around the world.
Growing Forward 2 funding to support international marketing efforts has also benefited wineries from across the country.
“We have really benefited from the Agri-food Export Program, and always try to take advantage of what’s promoting our industry,” says Richard Slingerland. “We are constantly trying to work with other wineries and draw in other wineries. When we group together as a wine industry from Canada, it gives us tremendous strength.”
In addition to international trade show support and market intelligence, AAFC’s AgriMarketing Program funding has helped the Canadian Vintners Association play an active role in the World Wine Trade Group, an industry-government
organization whose participants reached an Agreement on Requirements for Wine Labelling. Included in the agreement is a definition of Icewine specifying Icewine must be produced from “grapes naturally frozen on the vine.”
VQA Sticker Proof Tags
Two items used to guarantee the authenticity of wine overseas are the proof tags that verify product authenticity and the VQA Sticker.
The Fight Against Fakes
These efforts have been instrumental in addressing a growing threat to the Canadian wine industry in China – counterfeit product. Estimates are that upwards of 50 percent of the icewine in China is fake.
“They have smartened up, they aren’t selling fake wine for $5 anymore, they are selling it for $500,” says Boulton. “It’s usually cheap bulk white wine with sugar and possibly alcohol added. It’s damaging to Canadian icewine in terms of sales and image, so education is key.”
The Canadian Vintners Association holds the trademark for icewine in Canada, and to VQA in Canada and China. They have been working with wineries, embassies and trade commissioners in China and other Asian countries to crack down on counterfeit icewine at tradeshows. At some of China’s major food and beverage tradeshows, counterfeiting has become a serious concern.
“Last year the Canadian Consulate put on a workshop at the show to help buyers identify counterfeit products,” says Beth McMahon, VP Government and Public Affairs for CVA. “If there has been counterfeiting they will contact me and ask them to verify authenticity of the production. We go back to the associations in Ontario or B.C., to confirm that the wineries are approved.”
While the CVA helps make the connections and verify producer authenticity, it is often up to the people working on the ground to identify and challenge counterfeits at tradeshows.
“Once you have a body like VQA Ontario that can verify the production, it makes a big difference,” says Slingerland, who has had to do exactly that. “There’s a big push in China about authenticity with regards to fake products. Websites are now subject to losing their license if they knowingly sell fraudulent products. It’s the organizations like CVA and VQA that work with us that enable us to be able to protect the name of icewine in Canada.”
Pillitteri Estates has added proof tags to their packaging to verify that their product is authentic, and provide reassurance to their customers. The new packaging is complex and expensive, but has helped the winery differentiate itself and build trust in its brands.
“Packaging is very important for an elite product,” says Slingerland. “We have been successful in being able to brand our winery in China by offering a proof tag.”
More broadly, the CVA has made a significant push to raise awareness of the Canadian VQA designation in export markets. Like any brand, consistency is the key to recognition and success.
“The Canadian wine industry did a huge push on the VQA logo, and now the second largest wine region (B.C.) isn’t using it anymore,” says Boulton, adding that the inconsistency is causing confusion. “Ontario has the VQA sticker, but B.C. wines don’t. That’s a detriment to the B.C. wineries. If Chinese customers don’t read English, writing VQA on the label isn’t going to help. They want to see the VQA logo.”
Tips From The Experts On Exporting To China
Pillitteri Estates Winery:
- Build the relationship and trust with your customer.
- Don’t risk the whole farm for a big sale, make sure you get the payment in advance.
- Go see the market, what it’s like and how it’s sold. It’s a very different sales system from the North American and European model.
- Be realistic in your prices and value for money. Chinese wine purchasers are becoming more astute and knowledgeable about wine When it doesn’t make reserve, don’t sell it as reserve. Like any customer in the world, they want value for their products.
Allison Boulton, Export Specialist:
- Getting established in China requires long-term commitment.
- Exporting is not easy. You need to really define your unique selling proposition, not just against your neighbours, but against $4 wines from California.
- It’s a relationship business. It’s also important to utilize strong Canadian and provincial government networks that are there. They are there to help you, not do it for you.
- You have to be export ready and ready to get on a plane. If you’re not willing to book a ticket and go, you’re not ready to sell to China. That sense of adventure has to be there.
The New Face Of Canadian Wine
Over the past several years, interest in Canadian wines has expanded as Chinese investor groups and families are buying established wineries, particularly in the Okanagan. In 2014, Bench 1775 and their brands including Paradise Ranch Ice Wines, was sold to a Chinese investor for $8 million.
“It’s a new model for the wine export business,” says Allison Boulton. “There’s been a lot of interest from investor groups or families that want to get involved in agriculture. They have a philosophy of wanting to be involved and have ownership. It’s one way of getting greater control of the supply chain.”