Aussies Overseas – Meet Peter

Aussies Overseas

AN INTERVIEW WITH PETER DIXON

PETER DIXON IS THE REGIONAL MANAGING DIRECTOR - ASIA & GLOBAL TRAVEL RETAIL FOR ACCOLADE WINES BASED IN SHANGHAI. HE SHARES HIS CHALLENGES AND GOALS WHILE WORKING IN CHINA, AND HOW TO GRACIOUSLY EAT THE BRAINS OF A MONKEY WHILE RECOMMENDING A QUALITY AUSTRALIAN WINE TO GO WITH THAT.

What do you love about working in China and what are the challenges?

I like the pace. I like how things evolve and change, and you can’t sit still, ever, otherwise you get left behind. I love that side of it.

I love the passion that our partners bring to the wine category. The challenges are my grasp of the Chinese language. It is terrible. Communication is difficult, but I have a great team that supports me, and we find ways of getting around it. After a few glasses of wine, it is amazing what you can understand from your partners without having to speak directly! I had a few lessons when I got here, but one of my Chinese partners said to me - foreigners who speak fluent Chinese in China we don’t trust because they always have a different take on our culture and generally they are looking at things through a different lens. I use that as an excuse. I am not sure how true it is.

In terms of wine, what is hot, what is not, and what is on the rise?

Red wine. It sounds simple, but red wine is still 85 per cent of wine consumed in China. We are finding regional wine from Australia is starting to gain traction.

What is not hot is white wine. The taste profile of white wine is still taking longer than expected to find traction in the Chinese market.

The next big thing is sparkling wine. It is starting to get traction in celebration moments such as weddings and with the younger consumers.

If you want to get specific about white, Moscato is doing well, and sweeter white wines are doing well. Riesling is the number one white wine varietal in China. The sweeter style definitely is more palatable for the younger consumer, but I think red wine is easier for the Chinese palate to understand. Particularly with a lot of new drinkers coming into the category, they are finding red wine easier.

What are the key demographics consuming wine in China, and when are they drinking it or how are they drinking it?

The major base for wine drinkers is still the 40 to 50-year-old drinker; however, the growth is coming from the 25 to 35 year old or the Millenials, young females and the middle class that is emerging in third and fourth-tier cities. It’s hard to get good data in China, but I would say about 70 per cent would still be the 40 plus. But where our focus is and where the future of consumption is coming from is the young Millenials.

Can you describe the retail landscape in China? Where are they buying wine?

It is super fragmented. The largest retailer, China Resources Vanguard, still only has five per cent market share. That’s if you are talking bricks and mortar, but there is a huge shift towards e-commerce and online. E-commerce is growing 30 per cent year on year and has for the past five years. Alibaba now represents 20 per cent of all purchases in the retail segment. JD.com is number one. They are the largest in liquor followed by a close second by Alibaba.com.

The good thing about online is it is not only a great place to sell wine, but it is a great platform to tell stories as well. You can really interact with the consumer.

What about on-premise?

For wine it is growing, but the total onpremise market for alcohol is in decline due to changes in government regulations. People are more cost-conscious now than in the past. What you find is people are buying wine and then taking it with them onpremise, they are drinking wine in the onpremise environment, but whether they are

actually purchasing the wine there is hard to judge. I would say it is a small fraction.

So it is predominantly a BYO environment in China?

The government changed the regulations a few years ago so that legally restaurants all across China have to let people BYO if that is their preference.

And do consumers pay for that privilege?

It depends. If you are talking first-tier cities and high-end restaurants, absolutely they pay; if you are talking more casual dining about 50 /50.

How is Australian wine tracking in the region compared to other imported wines such as the French?

Compared to the French, Australia is doing really well. It is the number one market for wine sales. We have overtaken the French in terms of value for the last eight months, and I believe the French category is declining by around about 30 per cent. Australia is relatively flat but has a two to three per cent increase to date for the calendar year which is positive because the market is going through a bit of change at the moment so for Australia to hold its ground is remarkable. I think it is due to the positioning of Australian wine as being premium yet at the same time affordable plus the labels of the Australian wines are easier to understand for new consumers. All these factors help the overall Australian wine category.

Is the consumption of China’s domestic wine growing?

If you look at the trends, domestic wine once represented 70 per cent of consumption, and today it represents 40 per cent. The Chinese are very nationalistic. They are very proud of things that they do, and there are more and more boutique wineries popping up; in Ningxia for example. I think there is a propensity for people to try more domestic wines at the premium end than ever before, but if you look at the bulk wine it is dominated by two huge players Great Wall and Changyu and both of those businesses have found sales challenging. There is an opportunity in the premium end for domestic wine. Lafitte Rothschild for example has started a winery that has helped bolster the image of domestic wine, but the wines are quite commercial. It took Lafite ten years before they released their first vintage and they have done an incredible job. The quality of domestic wine is increasing. In terms of growing grapes they have only been doing it for 30 to 35 years, so they are still getting the right vines planted in the right varietals using the right clones. There is a lot of experimenting, but the thing about the Chinese is they are so determined to be successful when they put their mind and heart to it. The domestic wine scene is evolving quickly, and the quality is improving dramatically, which is positive for the entire industry.

Let’s discuss your new role at Accolade. How is the business performing over there, and where do you see the opportunity to gain ground?

I have been at Accolade now for just over six months, and we have restructured and made lots of changes. We have brought in a completely new team and set up a whole new route to market. For us, it’s about getting the right focus on the right brands, Hardys, Grant Burge, St Hallett and Banrock Station. All of them have different stories to tell, and all of them can relate to Chinese consumers in different ways at different price points. We need to make sure we have the right partners who can help us focus and drive the distribution and the availability, and we are investing quite heavily to build the brand awareness both online and in retail. It makes for exciting times, and I am loving the new role.

The largest retailer, China Resources Vanguard, still only has five per cent market share. That’s if you are talking bricks and mortar, but there is a huge shift towards e-commerce and online. E-commerce is growing 30 per cent year on year and has for the past five years.

How successful is the wine category in China overall at the moment? What is the biggest beverage category in China?

If you talk value then it is biajiu; beer is number two followed by wine. They are all fairly close. Baijiu is by far the category leader and growing. Some of the premium brands in baijiu are doing extremely well, and big estate-owned companies are doing a tremendous job getting consumers to drink their spirits everyday. If we can get more baijiu drinkers drinking wine and playing to the health-conscious, then the opportunities are endless. Also leveraging, and in some cases partnering, with some of the baijiu players is an opportunity to tap into their network as well, so there are a few different things that we are looking at.

Is doing business in China challenging from a cultural perspective?

I think you always have to be humble. Don’t pretend you know everything. Be genuine. People here respect that. I haven’t had too many challenges since living here, but I think if you come across as being arrogant and talking up how things are done because that’s the way it works in Europe you would find it difficult. If you try to use your knowledge and adapt it to what works in China and listen to your partners always, then I think you can set yourself up pretty well.

What are your main goals for Accolade in China for the next five years?

We are focused on the big four brands, and if we can make one of them a household name then I would be really proud of our efforts. China is an expensive place to play and it takes time and effort to build a brand here so if we can do that we will be in a strong position for the future. If people can walk into bars, restaurants, clubs and retail outlets across China and understand what

our brand stands for, that is what success looks like for me.

What are your thoughts on the Wine Australia investment in China?

It was a great start, and they spent the money well, but you just can’t make a two or three-year investment, walk away and expect the job is done. Chile particularly and the Italian industry have been investing in China for a long period of time, and you have to play that longer game. If Wine Australia and the government continue to do that then I think Australian wine will reach new heights. Three years is not long enough; it is only just gaining momentum.

You say Chile and Italy have been investing for years yet we are number one in value? What do you attribute that to?

Location has a huge benefit. The access so many people’s families study in Australia and are in Australia at some point in time, so that has a huge factor plus the food. Australia is seen as having the best produce, and obviously, the wine follows.

What is your favourite restaurant and bar in China?

Good question. I am going to be generic. I love going to hot pot restaurants in Shichuan or Chóngqìng, and you are sitting around with 12 people and sharing spicy food and drinking wine and talking, that to me is what this industry is all about, and that is what I love the most.

Specific restaurants? It is too hard to say; there are too many.

What is the most interesting cuisine you have eaten in China?

I have had donkey, scorpion, monkey brain, horse. For me, I try everything once, and I have tried some really odd things; things that should not be eaten! The monkey brain was in Guangxi. They lifted the hair from the head off, and that was the presentation, it was just sitting there on top, and it was glutenous. I didn’t want to know too much about it because I was about to eat it. You would be surprised about some of the foods you eat. In Liaoning Province, donkey is one of their go-to foods and over the course of one meal I had donkey served in about 18 different ways from dumplings to roast to soup. It was definitely a unique experience, and it didn’t taste so bad.

Compared to the French, Australia is doing really well. It is the number one market for wine sales. We have overtaken the French in terms of value for the last eight months.

What is your favourite Chinese dish?

I am quite an Australian, so I love my sweet and sour pork, and I love my Cantonese beef noodles.

What wine would you drink with your sweet and sour?

I would drink Riesling. I love Riesling, and I would try to educate the Chinese about the benefits of white wine with spicy food. It is the perfect match, and there is continuous education around it, but you can’t force people to like what you like.

What would you say to someone wanting to do business in China?

China is going through a very turbulent time, and if people want to set up business here, they really should make the effort and have someone based in the market and build for the longer term. If you are looking at China as a short term trading opportunity to make some quick cash, it’s the wrong way of going about it. The more winemakers from around the world visit and educate and talk about the stories, the histories and the nuances for each of their wines and brands, the better. There are only 70 odd million drinking wine in China on a regular basis which is small. If we can get that to the 100s of millions, which is possible, it’s an incredible market for everyone.