TWE sets sights on being “part of the fabric of China”

By Mathew Lyons

Published: 15 August, 2019

Treasury Wine Estates’ chief executive Michael Clarke revealed the company’s ambitious plans for China yesterday.

“We consider increasing our presence and being part of the fabric of China as critical to demonstrating our commitment to – and realising the longterm potential of - our Asian business,” Clarke said as he announced the companies annual results.

Key to TWE’s China strategy is its warehouse in Shanghai, will will become increasingly central to operations.

“The next priority for us will be to expand the use of our Shanghai warehouse with the intention that over time we will sell the majority of our portfolio to partners via the warehouse model, thereby reducing our reliance on the direct exports or container model as we know it,” he said.

“We know that this new model will deliver substantive benefits for our customers through much shorter order lead times, smoother shipment profiles and reduced working capital tie-up, all of which will support our customers’ growth ambition.”

Clarke’s comments were echoed by chief operating officer, Tim Ford: “The use of our Shanghai warehouse and reducing reliance on the container model is a priority for us to deliver better speed to market and a better ability to fulfil smaller customer orders.”

The company also believes its in-house distribution model will give it greater competitive edge in the market as it matures.

“Our business model is centred on self-distribution through our own local team. It’s team that we continue to invest in heavily and who directly own and manage relationships with our wholesale and retail partners rather than selling through distributors,” Clarke said.

Our model in China positions us apart from other players, allowing us to continue executing a focused portfolio-selling strategy which is supported by additional investment in pull-through programmes that drive consumer engagement and deliver cash margin to our customers

“Within and beyond the wine category we believe that companies like TWE who have actively invested in their model to drive direct engagement with retailers are best placed to succeed in China over the longer term.”

Clarke’s comments were echoed by chief operating officer, Tim Ford, who highlighted the company’s ongoing investment in its sales force in China, particularly during the last quarter.

“Retailers and wholesalers are choosing to work with partners like us who can drive consumer engagement and pull-through on their brands that delivers to them cash margin,” he said.

“These are the brands that will win in China, but especially so during challenging times

Our model is working because we directly manage our connection in the market. We are investing in both people on the ground and the brands that we sell in that marketplace.”

Wine exports to China were up 7% to AU$1.2 billion in the year to end 30 March 2019, according to data from Wine Australia, while volume decreased 16% to 154 million litres.

“We are already the number one importer of wine into the China market and Asia, but with only a 5% share. Growing share further remains a priority for us,” ” Clarke said.

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