China Consumer

Penfolds protected

Australian wine heavyweight wins squatter case

Penfolds-bottle-w

Aussie wine producer Treasury Wine Estates (TWE) raised a glass earlier this month when the Beijing High People’s Court ruled in its favour in a row over the trademark for its iconic Penfolds brand

Winemaker and wine distributor TWE is now preparing to use its preferred transliteration of Penfolds in China – “Ben Fu”, which roughly translates as ‘towards prosperity’ – after the court decided that the intellectual property ‘squatter’ which had registered the name had not been making proper use of it.

The ruling was that the trademark is open to registration and the Australian wine giant must re-apply for the sole right to use it. The victory comes at a handy moment: Australia’s wine exports to China have never been better. It is now the top exporter to China by value and the second by volume, and China overtook the United States as Australia’s top market last year, when exports surged by half. Sales were valued at A$474 million ($355 million), up from A$27 million only a decade ago, in a vindication of the industry’s bet on demand from China’s growing middle class. Wine Australia, a trade body with a strong presence in China, sticks to that line today – that middle class Chinese want Australia’s quality goods.

Australian wine averages over A$7 per litre in China, the second-most expensive after Kiwi wine, and more than the $4 French. Jim Kirkpatrick of Best Bottlers and Harland Wines in Victoria isn’t surprised that his homeland has been faring well against the Old World stalwarts. French quality “drops away very quickly”, the partisan producer told WiC. “You can get a much better Australian wine dollar-for-dollar.”

In fact it was sales of the lowest and highest priced Australian wine – A$2.49 and under per litre and A$10 and over – that showed the strongest growth. The premium brands now want to lock in their pricing power (hence TWE’s two-year trademark battle) as more of Australia’s exporters move away from shipping bulk wine into China’s billion-litre swill.

Tastes are refining but the market is still pretty singular in one important regard. “It’s either red, or red,” says Fitzpatrick, although the alcohol-heavy, more robust shirazes and cab savs that are a feature of the Australian trade are sometimes modified for their final destination.

“It’s all about the residual sugar, six to 12 grams is normal [and] Australian wines tend to be very dry,” Fitzpatrick claims. “In effect the winemakers are catering to the Chinese palate.”

Moscato, that sweetest of wines, has also seen some success in China, especially among young women new to wine. However, its sales are marginal overall, at A$2.2 million of the total.

As WiC has discussed in previous editions of The Little Red Book, the so-called “Chinese palate” is something of a misnomer. Consumer tastes vary across age, gender and drinking experience, and preferences are changing rapidly as the Chinese develop an affinity for different labels.

That makes wine education an important task, and Wine Australia has been producing tasting notes with more traditional Chinese flavours, swapping star fruit for citrus or dried Chinese hawthorn instead of ‘hint of blackberry’.

Another of the factors being cited for Australia’s success is its relative proximity to the Chinese market. Flying there regularly is an easier proposition for Australian producers than Europeans, both price-wise and in terms of time spent. Fitzpatrick says trips with his son to China have taught them a lot about their customers, standing their business in good stead.

“We have learned so much… and once you build trust you’ve got them for life,” he told WiC.


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