Alibaba bets consumers will develop a taste for California wines
Internet giant Alibaba Group Holding is betting that a country known for sipping black tea will develop a taste for Napa Valley red.
The e-commerce company will offer Robert Mondavi cabernet sauvignon, pinot noir and other varieties to its 367 million Chinese customers through its online store Tmall, in a partnership announced on Tuesday with Mondavi-owner Constellation Brands.
Alibaba chairman Jack Ma Yun is fighting slowing sales growth and a struggling Chinese economy by importing popular brands such as Converse trainers and Levi's jeans.
The deal with Constellation Brands marks the start of "Tmall Vineyard Direct", planned to feature wineries from around the world. Alibaba executives last week toured the Mondavi winery in California's Napa Valley, north of San Francisco, and are looking for additional partners.
The agreement gives one of America's leading wine brands prominent placement in one of the world's fastest-growing wine markets, where US wines have been overshadowed by exports from France, Australia and Chile. Demand among China's consumers is outpacing domestic production, creating an unprecedented opportunity for international labels, according to an April study by the Wine Economics Research Centre at the University of Adelaide in Australia.
Chinese wine consumption reached 15.8 million hectolitres last year, a 45 per cent increase from 2000. The country also more than doubled its vine planting, according to International Organisation of Vine and Wine.
France's labels were the No 1 wines imported by China last year, accounting for 34 per cent by volume, while sixth-ranked US has less than 5 per cent, according to Chinese customs data. The value of US wine exports to China fell 7.7 per cent last year to US$71 million.
The Mondavi deal on Tmall, China's biggest online store, will send wine labels such as Twin Oaks and Woodbridge - priced at about US$15 to US$20 a bottle - to China as its consumers seek middle-shelf options because of the economic slowdown.
Historically, the US has not had "a great deal of wine exports", said Tyler Colman, author of the popular wine blog Dr Vino. "It's been mostly for the prestige of saying our wines are at this restaurant in London or Copenhagen or Tokyo." The Alibaba deal opens a new frontier for New York-based Constellation Brands, which generated 89 per cent of its US$6 billion in sales of beer, wine and spirits in the US in the year to February.
Chinese tourists have been gaining prominence in Napa Valley and now account for about a third of the 200,000 visitors to Mondavi's winery each year, said Philip Kingston, who runs Constellation's international sales. In 2013, the winery began offering tours in Mandarin and Cantonese, hoping tourists get a taste for Napa Valley wines.
Robert Mondavi has become an iconic brand since its founder established the Napa Valley winery nearly 60 years ago. On Tmall, it will compete with wines from France, Australia and Chile.
The Napa region has a high-profile Chinese ally in former National Basketball Association player Yao Ming, who started Yao Family Wines in 2011 after retiring. Yao buys grapes from the Napa Valley for his signature cabernet sauvignon, aged in oak barrels for 18 months, which has raised the region's profile in China.
"He has a lot of star power at home," Colman said.