– By Dan Siebers

This is part 4 of 5. See also part 1, part 2 and part 3.

In part 3, I discussed some facts about importers as well as kinds of importers, including independent foreign-owned, independent locally owned, independent Hong Kong-owned, Chinese wine companies, and “cowboys.”  In part 4, I look at brands.

Here are some facts about brand distribution:
– The largest imported bottled brand in China in 2005 totaled 37,000 9L cases.
– The largest imported bottled brand in China distributed by an independent company, instead of the brand owner, in 2005 totaled 25,500 9L cases.
– Most key international brands (Penfolds, Wolf Blass, Hardys, Mondavi, Beringer, Torres, Mouton Cadet, Georges Duboeuf, Antinori) totaled under 10,000 9L cases in 2005.

Now, here are some “soft facts” on brand distribution. In particular, there are cases that might be labeled “the dangers of success.” Take as examples the experience of Canadian Ice Wine and of a Bordeaux brand in China.

In terms of Canadian Ice Wine, there were relatively large imports into China several years ago. Then, the market was severely damaged by fakes and imitations.

With a Bordeaux brand, a heavy marketing and distribution campaign made it relatively well-known across China. Then, the brand’s image and pricing structure was severely damaged by fakes, a situation exasperated, and possibly facilitated, by a distribution network based on wholesalers.

The advantage of wholesalers is that they provide instant access to their market geography and/or segments, prepayment terms, and single deliveries to the wholesaler’s warehouse. Their disadvantage is a lack of control of pricing and marketing, lack of proper storage and inventory control, and frequent treatment of the product as a commodity.

It is extremely difficult to stop supplying wholesalers as they will often use parallel or produce imitation products. In the case of the Bordeaux brand, a distribution network based on wholesalers allowed counterfeit products to instantly enter the entire distribution network. Some people theorize that it is the wholesalers themselves that develop and produce the fakes in order to save margin.

On Tuesday, part 5 of the series, covering distribution and “landmines” to avoid.

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