Where to from here for Aussie Wine in China?

Over the past year, Australian wine producers exporting to China have taken a battering.

Last year, Beijing imposed an interim 200% tariff on Australian wine imports into the Mainland. Furthermore, China's Ministry of Commerce has confirmed it would impose "anti-dumping measures on some Australian wine imports from March 28 for five years" has been recently reported.

According to the Australian Broadcasting Corporation (see the link above), "the Department of Foreign Affairs and Trade officials told Senate Estimates the value of Australian trade with China for almost all industries has plummeted by 40 per cent."

Further, the ABC reported that "wine exports had fallen to less than $1 million in January, from a high of $164 million last October."

Also, the ABC quoted the CEO of the Australian Grape and Wine, who said, "We know we're going to have a tough couple of years. The real pressure has come on those people who solely export into China and we have 1,000 businesses set up to do that."

But where to from here for Aussie winemakers exporting to mainland China?

The UK and Hong Kong have been flooded with cheap exports failing to find a home on the mainland. There is only so much produce that these island economies can consume. This can't be any long-term replacement for the mainland market.

Though "diversification" of export markets is the flavour of the month in Australia, the challenge is that there is simply no "China Mark II". Let's look at some Chinese wisdom to help solve the issue...

The "Thirty-Six Stratagems" is a classic compilation of Chinese strategic thought. In particular, the 36th Stratagem is said to be, according to the Chinese idiom:

Of the Thirty-Six Stratagems, fleeing is best" (三十六计，走为上计).

To put it simply, "If all else fails, retreat" (走为上策). Like all of the 36 Stratagems, the "Escape Ploy" is often applied to business:

Avoid engaging an obviously stronger enemy. Retreat and wait for the right moment to advance again. According to military principles, it is best to avoid confronting a stronger enemy when you are in a desperate situation.

(The 36th Stratagem)

During the Spring and Autumn Period of Chinese ancient history, the State of Chu was surrounded by smaller states. When the State of Chu fell upon hard times, the smaller States attempted to take advantage of Chu.

Instead of deployed its whole army, the State of Chu only sent out a small number of troops, holding its main force back. After successive losses to the State of Yong, the Chu army retreated. After Yong was lulled into being over-confident, Chu counter-attacked and the State of Yong was lost.

Lan Bercu's book, "36 Strategies Ancient Chinese Strategies for Modern Business," cites contemporary examples of corporations applying the thirty-sixth stratagem. She notes the during Walmart's global expansion, that it withdrew from several Asian markets and then redefined its market entry strategy. Further, she notes that KFC left Hong Kong and later re-entered the market with a different market position.

Surrender is a capitulation, negotiation is a partial surrender. A retreat is a tactical manoeuvre to live to fight another day. Sometimes in business, it is necessary to cut your losses.

What might a tactical retreat look like for Australian wine distributors in China? Downsizing any office footprint is trite to note. Nonetheless, if market conditions change (Beijing changes its policies or Australia is successful in any mooted WTO action), maintaining a minimal market presence is essential.

Maintaining a bridgehead in the market with a "letterbox" style office rather than throwing away any prior registered entity should be considered. At some point, international tourism could be back on the cards and Australia remains a popular wine lovers destination for Chinese tourists.

Further, wineries should conduct a self-audit of their trademark position in China. Trademarks expire after 10 years and producers need to be cognisant of when any trademark will expire. Otherwise, if the market re-opens, distributors will be back at the starting line.

Let's be honest, there have been some horrible OME Australian wine brands in China. This time could also be used to re-think your China marketing strategy.

Further, there are other Australian (or international) food and drink that can still enter the mainland market. Therefore companies should consider how they can re-purpose their hard-won China experience and develop the market for different F&B products in China.

Feel free to contact me for further advice concerning Australian wine exports to China for restructuring or trademark protection.