“With patience comes success,” according to Jeff Harder, managing director of Ex Nihilo Vineyards. The phrase is a Chinese proverb, he said, one of particular relevance to North American wineries looking to enter the Asian market. Ex Nihilo was one of five Canadian wineries in attendance at the Hong Kong International Wine & Spirits Fair this past fall, and the brand gained a Hong Kong distributor as a result of the trip, but Harder stressed that forging a trade relationship in the Far East is not a swift endeavor.

Finding the right business partner involves a significant investment of time and money, he said. “Don’t think you’re going to run over there tomorrow and find somebody to distribute your wines.”

Unlike the North American mentality of pouncing on a great investment immediately, businesspeople in Asia are more inclined to walk away and mull the deal over—and that’s to say nothing of the obligatory negotiating stage (note: your price will always be too high), said Harder, whose 4,100-case premium wine brand also has distribution in Japan.

“Once you agree on a price, then your business partner can be for life. When they make a commitment and give you a number in terms of wine and case sales, they will follow through on that,” he said of distributors in mainland China. “Hong Kong is a little different. It’s faster than mainland China, but they’re still cautious before making any large commitments.”

The demand
For wineries that are willing to invest the time and money required to enter the Asian market, consumer demand is growing. David Andrews, general manager (Hong Kong and Macau) for ASC Fine Wines Trading Corp., said that imported wines now represent 25% of the market share in China, where wine imports have grown more than 14 times in the past five years. If such growth continues, he said, China might be importing 28 million cases by the end of the year.

The bad news, at least so far, is that North American wineries have been reaping few of the benefits from this demand. Forty-five percent of the imported wine in China comes from France, with Australia, Italy and Spain taking the second, third and fourth seats, respectively. In 2010, Adams estimated that China imported just over 1 million cases of wine from the United States, or 6% of the total wine imported; Canadian imports of 44,226 cases represented 0.2% of China’s total wine imports during the same year.

Andrews assessed per capita wine consumption in China at just over one bottle per year. The volume sounds small initially—by contrast, in 2010 the Wine Institute pegged U.S. wine consumption at 13 bottles per capita—but when you consider that China is a nation of 1.3 billion people, one bottle per person adds up to a whole lot of wine—108 million cases, to be exact—and that figure is growing.

Strength in numbers
Jim Trezise, president of the New York Wine & Grape Foundation (NYWGF), hosted the Uncork New York booth to promote his state’s wineries at the Hong Kong fair. After extending an open invitation for New York wineries to have their wares poured at the fourth annual event, Trezise said about 30 wineries (most of them in the 10,000-30,000-case range) had bottles delivered to the NYWGF offices, and the response to them in Hong Kong was positive.

“We have an advantage in that New York is recognized around the world, but people think only of the city, so being able to present them with good wines is a fun surprise,” Trezise told Wines & Vines.

His trip was made possible by funding from the USDA’s Market Access Program (MAP), which finances U.S. producers and trade organizations in their efforts to promote U.S. agricultural products. According to the USDA, “MAP encourages the development, maintenance and expansion of commercial export markets for agricultural commodities.”

Put more simply, Trezise said, “Without MAP, we simply would not have an export program at all.” The day before the fair started, he added, staffers from the local USDA office provided a briefing for U.S. participants about doing business in Asia.

Jahan Byrne, a marketing and business development executive for the Port of Oakland (Calif.), had a similar idea for winery representation on a commercial scale. Since many Northern California wines ship wines out of his port, Byrne solicited area wineries interested in entering Far East markets and offered to represent their wines at the event in Hong Kong, where he previously worked as a news reporter. A handful of California wineries answered his call, and Byrne represented their selections at the Wines of California tasting area alongside firms such as wholesaler/export agent Crosbie Co., importer and distributor Drunken Dragon and wineries such as JC Cellars of Oakland and San Joaquin Wine Co. of Madera.

Small fish, big pond
Due to China’s enormous population, only the very largest North American wineries could hope to have a large prese nce across the country. For the rest, finding the right niche is key.

“As far as we can tell, China is looking for large volumes of very inexpensive wines, which we (in New York) simply don’t have,” said Trezise of the NYWGF. “New York is essentially a small winery industry that makes good quality wines.…The only real possibility that I see, in all of these countries including China, is for some New York wines to be featured in high-end restaurants and the better wine shops.”

Marc Mousseau of Vineland, Ontario-based Stoney Ridge Estate Winery agrees. Stoney Ridge set up a booth at the Hong Kong Wine & Spirits Fair to gauge the interest locals had in distributing ice wines around Hong Kong, mainland China and Vietnam. Representation in any of these areas would be a first for Stoney Ridge, which currently only sells inside Ontario.

“Inter-province regulations are so strict that it’s easier to penetrate China than other areas in Canada,” Mousseau said. “Very few could afford to come (on an exploratory trip) except the big guys.…It’s an investment to get here, but I think it’s a long-term investment.”

Trezise echoed the sentiment that entering new international markets demands long-term presence. Up until recently his organization concentrated its international marketing efforts in Canada and the UK, although trips to the Prowein show in Düsseldorf, Germany, in 2010-11 and the London Wine Fair in May 2011 have started to bear fruit for some producers in the Finger Lakes region.

The big leagues
Plenty of large wine corporations are following business prospects across the Pacific as well. Jackson Family Wines has a presence in 70 global markets, according to Nick Bevan, senior vice president of international sales and distribution. Within Asia, the company’s priority markets include Japan, South Korea, China, Hong Kong and Singapore.

“We definitely think there is a huge opportunity in the Chinese market, and demand for wine is growing exponentially,” said Jackson family representative Julia Jackson. “Hong Kong in particular is a very sophisticated wine market, where we want to showcase the highest end wines we have in our portfolio.”

For large companies that routinely receive sizable orders, the slow nature of doing business in Asia can be dual-sided. Jackson said that international marketing trips generate a good number of leads for the company’s wines, but the corporate arm behind its 35-plus wineries researches overseas importers before making any concrete agreements.

Global competition
As in North America, larger corporations have better access to the wine-drinking public in Asia; bulk deals on materials and supplies reduce the average bottle price, which is especially important in a country like China, where income swings wildly but the per capita average is less than $8,500 per year. Further, unlike French chateaus, which sell bottles for exorbitant prices at upscale restaurants in Shanghai and Hong Kong, U.S. and Canadian wineries can find themselves lumped in with other New World wine producers.

“Distributors go into other world markets and buy Argentine and Chilean wines for amazing prices, as we know those countries can offer,” said Harder of Lake Country, BC-based Ex Nihilo. This is where his saying about patience comes in.

Trezise opines, “The first time you appear at a trade show, it’s a surprise and curiosity; the second time, some people remember you, and the third time they figure you’re serious about the market and are willing to talk business.”