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Lucrative Chinese partnership for Australian winery

By Kacey Culliney , 23-Jan-2012

A lucrative business tie with China for Australian winery Ferngrove
A lucrative business tie with China for Australian winery Ferngrove

A strong Chinese investment in the Australian wine company Ferngrove has enabled it to expand its premium bottled wine business and successfully enter and market to China, according to the firm’s managing director.

The Chinese food company Pegasus bought into the Western Australian winery last year and now owns 72.5% of the wine company.

The family-owned food business had a vision of investing in premium Australian wines and has since set up a distribution company in China with 12 retail shops across 12 provinces stocking Ferngrove brands.

As it stands, more than 60% of Ferngrove’s sales come from China and according to date from China Market Research (CMR), China’s wine market is growing at 20%-30% each year; a growth set to continue for the next five years.

“It is no secret that the Australian wine industry has been tough, so we needed capital to re-establish new markets and new customers as we transitioned our business,” Anthony Wilkes, managing director of Ferngrove, told FoodNavigator-Asia.

The Australian wine maker previously focused on supplying premium wine in bulk to the major companies in the country such as Carlton United Breweries, while strengthening the bottled wines arm of the business on the side.

It has now shifted its sole focus to bottled wine sales and thus needed further funds to re-establish in new markets and with new customers, Wilkes said.

“We wanted a partner joined at the hip that was really motivated and focused on selling our premium wines,” Wilkes said.

He noted that the partnership with the Chinese food business had been a lucrative one so far amid a turbulent industry with the wine glut, strong Australian dollar and the emergence of supermarket private labels.

China vision

This partnership has given the company the increased ability to market and sell our wines to more consumers around the world, he said, particularly in China and other parts of Southeast Asia.

“The close proximity of Western Australia to China and the rest of Asia, makes doing business very easy,” Wilkes said, and there is an increasingly greater understanding between the two countries due to the enormous mineral resource trading in iron ores, gas, oil, gold and diamonds.

China is the focus for all businesses in terms of marketing and sales at the moment, “but you still need the right partners to have access to consumer channels that we would never be able to get into normally via traditional routes to markets,” he said.

The access we now have to the market and its consumers is thanks to our Chinese shareholder Pegasus, who is also our distributor in China, Wilkes said.

China could become the largest global consumer of wine within the next five to six years if growth trends persist, he said.

Wilkes identified the key drivers of this growth as a growing middle-class urban consumer, a switch from traditional spirits such as baijiu and rice wine, and increased knowledge on the reported health benefits of red wine consumption as well as acceptance of wine as meal-time beverage.

Ferngrove has the second largest winery in Western Australia and markets its premium bottled wines globally throughout Europe, Canada and Asia.

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