MELBOURNE (Reuters) - Australian winemakers are setting up replica cellar doors in China and running wine clubs and tastings as they intensify efforts to win Chinese buyers in a bid to offset shrinking demand in their traditional British and U.S. markets.
The wealthy Chinese consumer, with a growing appetite for luxury brands, is the main target for premium winemakers such as Penfolds, which next month will launch a new wine, Special Bin 620, in Shanghai.
"We have never done a global launch like this outside of Australia before," says Penfolds' global brand manager, Sandy Mayo. Bin 620 will sell in the same price range as Penfolds Grange Hermitage, widely considered Australia's best wine, at more than A$550 ($548) per bottle.
China has become the biggest market for Australian wine priced at more than A$10 ($9.95) a liter, a remarkable shift as Chinese tastes for imported wines grow. China imported more than $1 billion worth of wine last year, up 61 percent from the year before.
Chinese imports in the A$10-plus range almost equalled those of the U.S. and UK markets combined, according to data from government agency Wine Australia, selling in restaurants, hotels and gourmet supermarkets.
Australia's bottled exports to China grew 32 percent to A$190 million in 2010, while exports to the United States fell 20 percent and to the UK slumped 33 percent, hurt by a robust Australian dollar.
"Australian wines are gaining more and more popularity as they are mostly full of fruit and soft flavors and there is a lot of 'flavour for your money' as we say," said Espen Harbitz, who runs the Australian-owned restaurant Capital M in Beijing.
But the latest figures also show Australia has lost significant market share to France, which has long been the dominant player in Chinese bottled wine imports after pioneering efforts in the 1980s.
France supplies nearly half of China's wine imports, while Australia's share dropped to 16 percent last year from 20 percent, according to Chinese customs data.
To help boost sales, the French estates of Chateau Lafite Rothschild and Chateau Mouton Rothschild have incorporated Chinese characters and designs into their labels, while Burgundy wine growers are running tours and wine tastings in China.
"As far as brands go, there is a clear dominance of French Bordeaux. But the reality is that most people cannot afford premium Bordeaux and this is when they will try a variety of other options," Harbitz said.
The drop in share has prompted a broad new marketing push by Australian winemakers, from the world's second-largest wine company Treasury Wine Estates, which owns Penfolds, to boutique wineries nestled in the Adelaide Hills in South Australia.
Exports are critical to the Australian industry, which produced 1.1 billion litres of wine last year. Sales are down and another larger-than-expected harvest will add to oversupply.
One family-owned winery, Bird in Hand, has opened two stores in northeast China that replicate its Woodside Winery cellar door in the Adelaide Hills and include tasting rooms complete with original vines transported from Adelaide.
The first, which opened in Dalian in May, is located next door to a Ferrari showroom. It was followed in July by another cellar door in the coastal city of Yingkou, in the same northeast province of Laioning.
"Cellar doors are a new concept in those areas. China is the fastest-growing market for ultra-premium wine and it has got some terrific trends in growing consumption," says Bird in Hand global sales director Justin Nugent.
"You contrast that with the UK, where everyone is struggling with the financial crisis and it is a mature market anyway," he said. The Nest Egg label retails for about A$85 ($84.60) a bottle and sales in China doubled last year to 5,000 cases.
The high Australian dollar, which has traded above 95 U.S. cents for a year, has made traditional export markets barely break-even, according to Goldman Sachs.
In addition to the planned Bin 620 launch, Penfolds hosts luxury wine bars or "lounges" across China to showcase its top labels, including Grange, Bin 389, Bin 407 and Bin 707, which all retail above A$40 a bottle.
"For us, demand for our top-end wines in China exceeds supply. It is changing the shape of where the brand is focused," says Penfolds' Mayo.
Penfolds' parent, Treasury Wine, which was spun off from brewer Foster's this year, said its sales volume in China increased 38 percent in the year to June 30.
"If Treasury gets China and Asia right, the upside potential is huge," said City Index analyst Peter Esho.
Asian tastes for top-end wines also offer the prospect of higher margins than cheaper exports to other markets.
"This is a key growth market for us. I am extremely confident that our investments in this market will drive our top-line growth and make a significant contribution to our future earnings," Treasury's chief executive, David Dearie, told Reuters via email.
Shares in Treasury Wine surged 11 percent in July on a report that China's Bright Foods was considering a bid, which the Chinese company denied.
This year, Wine Australia, the Australian government's industry marketing body, brought 100 wine importers, retailers and restaurateurs from China and sent them to 16 wineries across Australia to learn first-hand about regional wines and the handmade nature of the winemaking process.
"It was an educational, lifestyle trip. They go back and share that experience about the country and the wine," said Lucy Anderson, Hong-Kong based director for Asia at Wine Australia.
She said traditional gift-giving and corporate markets had driven growth, but the rising middle class was developing a taste for Western habits such as wine drinking, especially people who had studied or worked overseas.
Wine Australia runs seminars and roadshows in many Chinese cities with government agency Austrade.
Yet some insiders warn the industry against putting all its bottles in one basket.
"I don't think it's going to be the silver bullet to solve Australia's woes," says Troy Christensen, chief executive of Accolade Wines, owned by private equity firm CHAMP.
"We have to be pretty cautious and play a long game here and not turn China into a dumping opportunity to dump a bunch of surplus wine," he said.
Additional reporting by Farah Master in HONG KONG; Editing by Matt Driskill