Ep. 1527 China - Rise Or Demise? | wine2wine Business Forum 2022

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Don't forget to tune in every Thursday at two PM central European time or visit point to wine dot net for more information. Thank you so much. Thank you, Andrea. Very excited to be here in wine to wine, and which I thank for inviting me here as a speaker. And today, as you can see from the title of today's presentation, this is going to be quite controversial. So, there's a saying in Chinese which is no winter lasts forever. But boy, I can tell you we've been looking to the end of this winter and to the spring for a very long time in China. So we are living through a diff difficult time. And, you know, first of all, when, you think about China, you really always want to, look at the larger picture, look at the big picture, and as some of you may know, last month in October, this is what happened in, in China. This is the National Congress. And the seven men you can see here, are the standing committee of, China's politburo headed by presidency, which is the man you see in the middle, and he's very close of media. It's So, this is a pillar, a pivotal moment, which happens every five years, and really sorts of sets the trends and, you know, expectation for whatever is going to happen within the Chinese society and therefore the economy. For the foreseeable future. So presidency came out as as once again, the winner. He's going to run the country for another five years. And all these other six men that you see here on, on this picture are he's very close affiliates and know, some people probably say cronies. Let's take a quick look at some fundamental data about China. So, one and a half billion people, population growth rate is not great at the moment. We'll dive into that later. And GDP per capita is about seventeen k USD per year. If you look at the GDP closely, there's an interesting, trend that you can notice in, especially if you look at twenty twenty, twenty twenty one, twenty twenty two. So the blue part of the pie is, consumer spend. And as you can see, consumer spend that's rebounded in twenty twenty one, but it's suffering very heavily in twenty twenty two. And this is the forecast for the end of the year. That was quite optimistic by the World Bank. This was this data were released a few months ago. Now the latest forecast by the world bank is actually we are looking to a drop in, Chinese GDP growth from eight percent in twenty twenty one to two point eight percent in twenty twenty two. Two point eight percent is actually not bad. If you look at if you consider you know, Europe, you know, a country like Italy or Germany or Spain. But for China, this is certainly below standard. If you compare this performance to their, you know, past twenty five years. This is a very important slide, and it really tells you, a story that, you know, not many not many people are aware of. China, nineteen ninety, China twenty twenty two, demographics. One data, which is, to me, it's really scary. In nineteen ninety, the average, the median age of the Chinese population was, nineteen years old. In twenty twenty two, it's thirty nine. That means that within the the last thirty years, the country has aged by twenty years. This is this is a crazy, crazy data that gives you really a a perspective on China. If you take the US, for example, back in nineteen ninety, the average age the median age was thirty two years old. And in twenty twenty two, it's thirty eight. So within the same amount of time, China has aged twice as fast. As the US. And this really, you know, tell tells a story about what's happening in this country. So aging population, this is FDA for indirect investment, changes in ownerships of bond and stocks. The, blue lines that you see at the end of the chart, it's, you know, basically outflows of capital from China. So those who can are divesting and trying to get out of China in terms of, you know, investment and financial decisions, which is certainly not another positive data. Logistics, you know, for those of you were slightly familiar with familiar with China, you know, that China is running a very strict zero COVID policy, which is really impacting the economy. And, this is very evident if you look at logistics. And, the the chart shows what happened in a few key cities, in the, quarter two, of, twenty twenty two this year. They had a really, really serious and strict lockdown Shanghai, which is the red line you see above me. And that's what happens when when you enact the street lockdown in China. So virtually, if you have only a few, cases of, COVID in in a given district, in a given city, there would there's gonna be a very strict and immediate lockdown with, you know, everybody's going to be attested. It's super, super serious and strict. And, that's what happens to logistics So, you know, our importers had, issues, shipping wise in and out of the bonded warehouse they have. They had issues delivering, wise, you know, no manpower to run trucks, no manpower to run logistics. It was a nightmare. Stock markets, I think, you know, Hong Kong, Shanghai, the picture really says it all. So I I don't think I really have to. Sorry. Comment this further. And I want to outline the key challenges that, producers are facing also. Well, the key challenges the countries is facing at this at this stage. I think unemployment rate is something that you will never think really, it's a problem for China. But then if you look at the major cities, unemployment rate at this stage in twenty twenty two, it's up to six percent. If you looked at at the younger part of the younger segment of population, so those age between nineteen to twenty four years old. The estimates are up to seventeen, eighteen percent, which is really massive, if you think, about, unemployment in other average unemployment in other countries. Closure of international borders still ongoing. If you want to get into China right now, it's actually very tough. You you do really need to have your papers in order, and you're still required to do a fairly long hotel quarantine. And this, of course, you know, is discouraging travel in into China and outside of China. So the lack of Chinese tourism for Asian markets has been very important feature. And, you know, Chinese are big spenders when they travel. They they spend a lot on duty free goods, especially on luxury items, and this has all stopped, since the end of twenty nineteen. Zero COVID policy. We saw what that does to the economy is certainly something not good. And overall, as you can imagine, consumer sentiment and the propensity to spend. Has really diminished. So there's less going out and less gathering on average. On one side, you're uncertain. You know, people are uncertain about their income at this stage. And there's when you go out, there's always a risk that you may be infected to some extent. And and that's that's really a major hassle that you have to go through, if that happens to you in, in Shanghai, or in any other city in China. So what does this imply for the wine market? This is a snapshot that I WSR has painted in, about the Chinese wine market. The Chinese alcohol market in twenty twenty one. So as we can see, the whole pie is algal market. Wine is only about five percent of this. And the latest estimates tells us that this five percent is equal to roughly two hundred and eighty nine million cases, nine liter. Which is, if I'm correct me if I'm mistaken, Andrea, but it's probably around half of the size of the US market. The vast majority of these two hundred and eighty nine million cases are Chinese wine anyhow. So that's something that we have to to factorize. In terms of growth of different categories, as we can see, you know, wine is really lagging behind in, in the past five years. And, certainly, also the outlook for twenty twenty one to twenty six, that IWSRs paint is not that positive. Whereas we see that other categories are slightly, you know, growing or, you know, doing fairly better. So let's focus on China wine imports. You know, we we have seen that the vast majority of, wine consume sold and consumed in China is Chinese wine. So what about imported wine? This is the picture of, wine imports in the past five years. So twenty seventeen was probably a time when the market had peaked. And then as you can see, it's really been downhill from from there. And if we zero into these dates, and we look, for example, at winding per value, just look at the first line, and this is, you know, first six months of the year, year on year data, nineteen to twenty two. Twenty twenty was was a disaster minus thirty percent, you know, twenty twenty one minus six. So not too bad. Twenty twenty two, we are looking at minus thirteen again over a very weak twenty one. So Once again, the picture here for imported wine is certainly not that exciting to say the least. If we look at volume, you know, the the situation is even worse. So it's minus nineteen percent. On, year on year data. There are some categories that are actually doing well in this landscape. You know, first and foremost, this, Chinese premium, Baijio, those of you who travel to China. By the way, let me ask you a question. How many of you have been to China? Okay. Okay. That's not too bad. So how many of you has has tasted by You're still alive that that's surprised. That's very good. That's very good. That's very good. So premium by geo is, it's almost like, like gold for us in, when times are difficult. That's the sort of commodity that people will, look for and invest some funds in if they have a chance to do so. So premium by geo including launch of new premium by geo brands and diversion of risk over a a biogeo driven portfolio has been a feature that we have seen happening with many, many wine importers that diversified into spirits and especially into biogeo. Cognac is an old, love of the Chinese mar market. So it's always a very strong category. And then we have seen some growth in, specific categories such as craft beer, ready to drink items, and sake, which is actually quite popular. What is changing in China? Certainly, thanks to the pandemic. We have seen more consumers drinking a home. So purchasing bottles are actually open and consumer home. And this is actually a positive trend. Patriotic consumption, what does this mean? So there's, there's a plan that the, Chinese administration has in place, according to which, wine's coming from Nixia, which is a very premium region, I will say, within the Chinese wine landscape. Chinese wines from Nixia will have to hit six hundred million by two thousand thirty five, which is a very ambitious target, but certainly doable. And you can really see that wines coming from this region. If you ever have a chance to taste and try some of the premium brands are actually quite serious and very well made compared to even five or six, seven years ago. So there's there's an increase and and there's a premiumization in, in, in Chinese wise, which is certainly a very interesting trend. In terms of imported wise, we have seen some steps, that Champagne has taken. Still a very niche category in China. It's champagne is not big in China. But, you know, starting to be there, mostly female driven consumption, interestingly. And Burgundy has really been the star. In, the Chinese market for the past two years. So, Bergland is really hot in the market at the moment, and these wines are all sold in very small allocated quantities, small offerings, And it's really very hard to find stock of, valuable brands. Very interesting trend that we saw happening in, places such as Shanghai is the popping up of natural wine bars. So, you know, we will ever think. But, you know, it's somehow natural wines have been very, have been popularized by the Somolia community and, you know, certainly by the trade. And it's not uncommon to find, wine bars that are themed according to this natural wine concept, you know, very, very funky, very young crowds, you know, young and dynamic. And actually, sustainable business models, which to me, you know, if you had asked me this question, is natural wine ever going to be a thing in China five years ago? I would have said never. But, they proved me wrong. And certainly for those of you who have, had a chance to travel to smaller cities within China, what they call tier two and three cities. It was very hard to find to find place where you could buy and consume wine on the spot such as wine bar. So wine themed outlets. You can see, more of these places popping up now. So even if, you know, when you go outside of Beijing, Shanghai, Guangzhou, the main city, you get to see more of these, wine bars, which are actually, a pretty interesting sign. It's a very positive development. So how does the tier city system work? This is quite a, an important feature of China. So, most of the consumption historically, for imported wine has been along the coast and in tier one cities that are Beijing, Shanghai, Shenzhen. And so traditionally, this is really where, most of the wine consumption took place. They these cities usually will have higher number of experts, you know, higher income. And certainly more exposure to people who, who who travel and therefore are more used to western, sort of consumption patterns. In recent years, however, you know, there's more consumers that we just highlighted in tier two and three cities that are just beginning just getting close to to drink and consume wine. In terms of wine importers landscape, you know, I think there's a clear trend there's a sort of rational rationalization happening in the market. And we can see that the number of importers of active wine importers have probably peaked in twenty seventeen, twenty eighteen and is now starting to decline. Most of the importers, especially for you, for those of you who are interested in to enter in the Chinese market, most of the importers will be located in the key tier one cities and along the coast of China that historically has been the more open and propensity area to import foreign goods, not only wine, but foreign goods in general. How does distribution work in this market? Well, this is a very complex picture to paint. And really, I've tried to do my level best to to put this on a slide, which is very challenging. However, you know, latest latest estimates for tier one tier two cities will tell us that, the, the consumption The distribution is actually quite spread out and well balanced between what we call on premise and what we call off premise. In terms of the on premise, you have specialists which are really similar to, you know, specialize on premise players you will find in markets such as US rather than UK or Italy. And then, these will serve tier one cities, hotels, international restaurants, fine dining, Chinese fine dining, where wine is widely consumed, and hotel with national contracts. And then you have the off premise is much more of a complex picture. So, it's really hard to summarize this in, into a few words, but let's say, wholesales are very important. And actually, one of the key features of managing your distribution successfully within China is really making sure that you have enough. You can control your value chain. You know when you control your value chain, and that you allocate enough margin along the value chain to make every single layer happy. And a major disruption in this system is, due to e commerce. So e commerce is actually something which is, you know, usually always always mentioned by the media as some sort of, you know, new route to market, which is disruptive and and, can't really work out for, you know, specific product categories such as Italian wise, but, you know, more often than not, this has proven to be quite far from reality. And at the end of the day, you know, most of the commerce platforms will be, will can actually cause you problems. If you don't have a way to control pricing and exposure, of your key flagship wines in this specific channel, we could really write a book about this this this topic alone. What are the latest brands in China? On a consumer level, we can certainly see a rise of a new audience. So, younger, newer consumers, whose knowledge becomes, more evolved and sophisticated, It's a country where probably female drinkers are on the rise and quite important. It's not uncommon to see many, female drinkers if you ever enter into a wine bar or, you know, a restaurant where wine is widely served. Young professionals who are, you know, taking an increasing interest in wine. One Education is really big in China. It's one of the main markets for a W set, for example. And, it's it's it's, you know, wine allocation is a hobby. It's also, you know, highly sought after as a certification if you're interested to develop a career in the trade. Wine tourism until twenty nineteen, which was, you know, the time when Chinese schools still move around freely without restrictions, you know, wine tourism to key, iconic wine region had been really widespread. And instrumental in creating new ambassadors, especially one of Australia had been really good in promoting when Australia, and I had been really good in promoting their regions in terms of, you know, attracting interests and attracting travelers to, to visit their regions and to, promote their brands. So overall, I I will say that we can see an increasing sophistication, by Chinese consumers. We tend to be these days, you know, more attentive to origin, and a sense of place. And this is actually a very good news for us when we see ourselves as a terroir wine producers in Italy. On the trade, We can see some trends for sure. You know, we mentioned online. So certainly e commerce, as we mentioned, is quite disruptive, and it's becoming very widespread, logistics in China. Until twenty nineteen, you know, before COVID hit the country. It was really smooth and really easy, and costs were actually quite low. So it's really easy for an e commerce player in China to develop one case of wine or even one bottle of wine anywhere in the country. We can now see, and this is something that is quite interesting. I was talking to, a few of our business partners in Shanghai last week, and they mentioned this point. We they see a rationalization I will say, of, retail pricing and margins across the country. So the, the markups of some players are getting more reasonable. And hopefully, wise, it's going to be slightly more, you know, affordable to a larger part of the population which is still a niche in China. I never forget this. And certainly, digital marketing. So we always talk about e commerce, but we often forget, that the possibilities that we now have thanks to technology to interact and to engage Chinese consumers are actually very, very important. And very often. Italian wine podcast. Brought to you by mama jumbo shrimp. This would entail engaging with, Chinese promoters that we often call KOL key opinion leader or or or influencer. And, some of these KOL have been quite instrumental in, making sure that some of the brands are, you know, really were received in the market. And, some of these achieved some commercial success. When you look at this, digital marketing picture, it's very important to be aware of how, who the main players are in China and how they interact with each other. So we don't really have time today to to dive to deep dive into this, but, you know, you should know that there are some platforms where you can promote the brand. Some other platforms that are more of a, you know, sales or retail avenue for your brands. And, they all have different models. Do you have generic marketplaces such as JD, T Mobile, and then you also have wine, specialist, wine, vertically integrated wine, retailers such as yes, my wine, or or a few more. And WeChat, which is, you know, the the low if you if you deal with China, you're certainly familiar with weChat. You cannot survive without a WeChat account in China. So WeChat is certainly a very important tool in order to make sure that you have your nice, you know, business card or, let's say, presentation for the Chinese market available. It's your really it can't really be your brand face on the market. So what it takes and what sort of brands can be successful in China? I think there's a few key elements that your brand will need. First of all, a serious brand history, something real, something consumers can relate to a clear value proposition. So where is your brand position and why and how? It's very important to control your price system within China. So you have to be familiar with concepts such a, you know, Chinese value chain. And, visual appeal is very important, especially for those brands that don't really have a long history, things such as packaging, you know, pack types, weight of the bottle, a color of the capsules. You know, it's there's no detail that must all details must be checked. And this is a very important, matter for Chinese consumers and trade. Awards certainly help. So if you manage to get, you know, good scores and good international recognition by international media. It's certainly a good element. And certainly, you know, once Chinese will be able to travel again, granting them an experience, a three hundred and sixty degree experience of the winery, it's certainly something, which is always very appreciated. This has been very challenging in the past few years because they couldn't travel. So some of the wineries, that have been really working hard on, on new media and newer retail tools have been, trying to develop, new experiences. You know, for example, we have been working on, virtual reality, which is something which is pretty cool. So our strength, you know, if your brand has what it takes, is is your brand equity. The weaknesses in the market are producers, especially Italian producers are heavily fragmented. On average, we have a very limited understanding of the Chinese market, which is always changing. The only constant thing in China is change. And so far there's still a very limited demand. Premium and super premium wise, which are really the bread and butter of, Italian wise, especially, but also of some some some other, you know, key iconic regions from, from all over the world. Opportunities. We certainly see this trend for, wines with a sense of place, thorough wines. We spoke about natural wines. We are seeing a decline on cheaper wine imports, which I personally think is a very good sign. And there's a temporary gap which is left by the decline of Australian wines. Australian wines have been imposed very high punitive tariffs in the past two years, and and that is going to stay for the next probably three to four years. So this is a time when other players such as France, Chile, Italy, really have to try to do their very best to to capitalize and to grab that market share. And lastly, the development of second and third tier cities that we, we discussed. In terms of threats, you know, you do have some spirits categories. You have Rtd, which are competing really, really heavily, competing fiercely to, to substitute wine. Especially among younger consumers. This is certainly one of the key challenges and the key words that we face. And there's already a very large number of producers, brands, and SKU on the market. So, it is really a time when importers and trade are trying to rationalize and narrow their efforts on a on a smaller number of items, which will make it difficult. If you if your brand is not in China yet to access the market, uncertainty, the uncertainty in, in shipping and logistics, which is, you know, something that we experience all over the world, but even more so in China. Make it quite hard to plan long term. So concluding today's presentation, I will say, if you want to invest in China, you have to think, first of all, is this the best time I personally think that March twenty twenty three, which is the time when the National Congress, election process is going to be over. May be a timing when things can actually start to open up and change in China. So, let's keep our attention span on that. The decline of cheaper wine imports may point to a new era where maybe possibly premiumization will be and consumers will be looking for more interesting wise with more character, identity, and a sense of place. And very important, what I call the signification of the white market. It's gonna be a market which becomes more local rather international. So having, some intermediaries or some of your own stuff that is familiar with the lang Chinese language, for example, or Chinese culture is going to be a key is gonna be a key component of your, commercial team structure, you know, be that could be something that if you have enough resources, you know, you could possibly afford to have somebody within the winery that can do that, or you can either outsource these two agencies or to third party their medaries or agents who can help you with that. But it's certainly going to be key to do your communication in Chinese language, you know, it's English will only get you that far. So it's very important for, you know, each single one of you who wants to crack and try to get into the Chinese market to think about this with care, curation, and effort, and try to design and implement your own go to market plan. And, you know, we opened today's presentation with a with a, you know, no winter loss forever changed. So I'm going to close it with another one of my favorite Chinese saying, which is how is, the road to success is very long and painful. And I think this really sums up China in a in a nutshell. Thank you, everyone. Thank you, Alberto. And and and despite, all the green pictures you you are describing, I think it's still worthwhile. I Can you hear me? Yeah. Okay. So I want just to support Alberto with our personal, experience into the Chinese market. And, basically, and give a few pieces of advice if if that could be possible. Basically, when we approached China, we went by the book, and I think that was really the mistake to go by the book. So We did the good guys. We found the national importance for China. We went to talk to online people, and we felt like our portfolio, the weight was would have worked in China. And then, for a couple of years, we didn't have anybody on the ground because we felt that we could follow the Chinese market from Italy. So going by the books was a mistake. In fact, in the years, we had to change basically our approach and going back and saying, alright, the national, distributors doesn't work for us, at least for our models. So we went local. We started to find regional distributors rather than a national guy. Find a Alberto cable board, so we had somebody in the ground. We had to modify completely our marketing and our packaging there is a world difference between what we sell in the rest of the world and what the Chinese really like. So I I'm sure the ones of you that traveled to the Chinese market knows the story, big bottles, flashy packaging, This is what really works in China. And then we have to approach completely in a different way. So going by the books is not the best solution. You have to be very flexible to approach Chinese market. And be ready to change continuously and be continuously flexible if you really want to be successful. The message across is, because I hear it, and we have our own frustrations in the all these years, you have to figure that we started a Chinese market back in two thousand eight. That was our first shipments to China. And between then and now, we have been through different frustrations. And, but I my hope is that we can't quit. You know, Murphy's low. I'm sure many of you have read Murphy's book, you know, you can't quit. You can't win. You can't lose. So this is pretty much what we're facing in China, but we can't quit. You know, Chinese to me, despite some of the numbers we have seen, is going to become effectively a big market for us. And I'm talking more now for Italian producer, but I think it's gonna be a big market for all of us, all producers. We need to be patients. We need to change our way. We approach China. We need to understand the culture. We need to have people on the ground. And and and we need to be we need to trust the market. I remember because I'm old enough some of the frustrations we had had in other markets. But the difference was, and I'm talking, especially for Italian producer, that in those markets, Everybody was very motivated. Everybody was believing in the markets, and many of us put a lot of efforts, a lot of investments into those markets, which eventually, after many years, they paid off. So with China, I don't see any difference. It's frustrating. It's difficult. You have culture of barriers. You have language barriers. And and all sorts of practical problems, logistics, you know, pricing, distribution is all there. But we can't quit. China is going to be, for me, a very promising market. And Italy, unfortunately, has only six percent market share? It's up to ten now, but up to ten. Up to ten. So but you have to consider that. Australian wines are gone. So Yeah. They're growing. The pie is much smaller. And, therefore, this is why some of the other players are taking advantage of the Australian. It's more probably Chile and other However, I I still think is a market that is worldwide to explore. So my my really recommendation is don't quit on the Chinese market. Don't be frustrated. I know it's frustration. I know it's a lot of investments. I know it's difficult. But don't quit because eventually it's gonna pays off. And to be honest, Italian wines has been successful everywhere. I see no reason why they shouldn't be successful in China as well. So I think we just need to work harder and we don't lose hope. So Alberto, never show these numbers again. Would you? Yeah. If if you have any questions, let's go to question time. Thank you. I don't know if you have the chance recently to look at into price category, if there is any how price category, different price category are, are moving because, like, for example, talking to online, which seems promising to many market. And our company, for example, invest in the in the online, but then we know that, most of the business is, I don't know, below fifty RMB or below eight RMB. But in a in a retail, how are the difference price Kategoi moving and until, which price, the the consumer is, is open to to afford a bottle of wine, of imported wine? Yeah. I think it really depends on what kind of retail. So, when you when you're looking at different avenues, you know, you what you're saying about e commerce is certainly right. Once your wine is priced above I will say a hundred, a hundred and fifty RMB, which is the equivalent of what, seventeen euro, nineteen euro, then your potential your potential interest is vastly inferior to what the majority of wine in that channel sells for. It's so on average, wines that are selling really well on that marketplace or e commerce marketplace are cheaper. And and by the way, you know, we have a very similar experience. You know, we have, invested quite heavily, not heavily, but I will say we invested time. In trying to build a more, more rational, e commerce presence, you know, through flagship stores and that sort of thing on JD, for example. But the results, I will say, are still are still quite not to the level that we would have hoped for. On traditional retail, it's really well, you know, the same wine can can cost, can can end up at very different shelf price according to the the venue, the location, the retail outlets, whether if it's a tier one or tier two city, but I will say that the main commercial opportunity for the wines that we are hoping to to push at this stage will be between two hundred RMB to three hundred and fifty, four hundred RMB. And, that's, you know, what most I will say, if you look at Italian wines, especially, what Italian wine connoisseurs are ready to pay for, that sort of the, the target. But I'm sorry that today, I didn't prepare a slide with the, with the, breakdown by segment, but that's certainly a very interesting question. Then, you know, if you just look at, the global picture, historically in China, wines that are It's it's a very polarized market. So, if you if you picture, your, your, let's say, if you divide wise by by price bracket, and then probably currently the market is is very large at the entry range. Although we think this is shrinking, according to the data that we that we showed on on the charts. And it's also very large at the top. So things such as Grand Cruc Laisse, rather than iconic wines from regions of the word such as, you know, barolo rather than Napa, rather than Margaret River, which are priced one thousand rand b and above or even one thousand five hundred or, you know, more than that. We see iconic brands doing really well. So, currently, for us, for our wine group, at the moment, what's really dominating the market is, the icon brands, the icon stars that we have in the group, And at the same time, we we have a we can see that there's an opportunity at the lower end, but we don't really tap into that. And I think for Italian brands, it's very difficult to tap into the sort of entry range market. For certainly for brands or for, you know, serious wine producers, that's difficult. If you're a bottling legacy on that it's a different matter, then you can't really work on the sort of, suggest a retail price point fifty RPM and two hundred, you know. But for a serious brand, that's that's an that's a difficult price proposition. If you look at Chinese wines themselves, Chinese real brands, you know, a good bottle of wine in China will cost you no less than a hundred and eighty r and b. And then if you wanna have some good stuff, you probably have to go up to two hundred and fifty three hundred and above. And that's when you start to get like a solid sort of quality. And I believe that's a sort of price point that a real wine connoisseur is ready to pay for for a daily wine. Welcome. Be aware when you approach the online people that you probably have experienced that yourself, but you have to be very careful. These double edged words, you know, sometimes online people, and it happens to us in China a couple of times. We're dumping price just to attract the treasure and, and, and, and still datas. And that as damage does enormously, because you can't imagine our traditional distributors, seen online. Those kind of prices was quite scary, and it was very hard to fix. So be careful when you talk with the online people. You were explaining in the presentation that patriotic consumption is also growing. Mhmm. We know that Chinese people are becoming more and more educated and focused on wines from Taiwan. Could we imagine, the future as, categorization of Taiwan, Chinese, and, still an increase of the patriotic consumption. Mhmm. I think, yeah, this is a trend, which is certainly something that that that we see. And, and I'm not an expert by any by any measure on on Chinese wines. But, you know, if you talk to people in that trade that are more familiar with, with with those sort of, items, you know, you do start to And you do start to see a really a sense of place coming through. And and, you even, probably we are not at the stage where we define they define themselves, you know, by crew. By individual sites and maybe some of them do. But at this stage, you know, some, some of the Chinese brands that have been investing heavily in their own facilities and vineyards are really trying to up their game. And I think this is going to be a trend to stay. So, probably not such a threat in the sense that, if you look at wine production in China, it's it's very hard to be financially sustainable still. So you do you do need big shoulders and and large investments, especially to build your distribution. So I don't really think that this is a menace threat in the short term, but maybe in the long term, who knows, you know, things can change. But, you know, if you look at OAV data on on Chinese vineyards, you see that the large Chinese players are actually divesting and are getting out of great production. So the mass market Chinese, let's say grape market for, for, for daily drinking wine production is not. So financially viable. But certainly Chinese brands who are positioned on the premium end of the scale will continue to do well and to and to attract more interest. Even outside of China, there's a growing there there's a very large community of overseas Chinese Daiaspora across Asia, who is quite quite once again. I wouldn't say nationalist, but, you know, they love China. And they they shot they like to show their, you know, sometimes, you know, icon wise or, you know, icon products of their, motherland. So I think this is a trend which is going to stay. And it's not only unwind. I think when we open the presentation talking about politics, And, you know, the narrative that the government in China is really pushing for is, you do feel that it's more nationalistic driven. There there is more of a sense of you do really need to instill confidence and perhaps the, awareness, you know, that, you know, your motherland, your, your people are the best in the world. And that's, you know, it's it's it's really more of a cultural, aspect that we could be discussing for hours and hours. And it's It's, certainly something which you, you must consider. Yeah. You have to consider that China on the paper is the fourth largest vineyard worldwide with more than half a million actors. However, most of the grapes are table grapes. Used for food, you know, table grapes. And you have to consider also that, probably is changing now, but at the entry level, a lot of wines was blended with bulk wines coming from Europe, Spain, Chili, a lot from Chile, Argentina, and so forth. So when you drink an entry level Chinese wines, maybe it's not really Chinese wines. There is a little bit of everything in it. So you have to be you have to play in a different ground, really. Please. I think, you know, I wanted to ask you a question about, how did the messy web production pack the market, but I think it already kind of expanded on that. It's a little bit now. It would be last questions. My big question would be, what's the impact of conservation wide fake wines or, you know, concentrated wines on the market for. Yeah. I think the impact of counterfeit wine is something that if you're, really position in, in in a very ultra luxury premium niche. And if you are, for example, a, GCC trader, and, or, you know, if your if your brand is really super well known, but there's only there's only a handful of those brands in China. You're looking at the premier group, let's say, for example, you're looking at, you know, some of the second growth. You're looking at, some icon wines from, from Australia for one specific brand. Then that still has some sort of impact. You know, it's it's not gone. It's gonna be there forever. I don't think that the commercial impact is is so important at this stage. I mean, we've seen you you've there's always going that factor is always gonna be there. But I think it's probably over covered and overplayed by international media, to some degree. I don't know if this answers your question. Yeah. I think for for average brands, for those that have some sort of success in China. It's not really that, it's not really a problem. It will take my take on this is, you know, what the day I will see my wines our wise, counterfeit in China. That's gonna be a sign that, I probably have done a very good job and our brands is so successful that, you know, people will start copying that. But what I have seen at, you know, talking about our experience. We we had our share in Verona, counter five ones, especially a Marona that probably as you know, is very popular in China. Yeah. And sometimes it's not even done in China. It's done in Italy by sometimes Chinese people, sometimes other people. It's hard to put a value or, a disruptions of the business on that. One, it was says that thirty percent of the wine and spirits around China was counterified. I don't believe in that numbers. I think it's too excessive, but unfortunately, you know, it only takes one scandal or, you know, let's say, article that is you could ruin, you could ruin your job for, you know, ten years trying to establish an app app ...ulations or a brand. So definitely it's something that is, to look after. Yeah. I think you have you have a very good point. Rather than the counterfeit line, you know, it's more about, I think, some disputable choices that some of the producers across some region have taken over the years. And, we have seen wines coming out of Italy mimicking names of appellation, mimicking names of famous producers, just with a different letter or, you know, with a different small logo, you know, the, dot on the eye missing. And this is our own doing. So this is not the Chinese doing this. You know, it's it's our our neighbors or you know, other wineries around around Italy or around, other, other countries that have been playing a foul game as far as I'm concerned. We have been fighting for years and spending a lot of money as a consultant that I've had to fight this. And I'm so impressed by the level of creativity in trying to mimic the names of amaranas or Repaso. I've seen pretty much everything and it's it's very hard to fight them, you know, because you have to go to court. You have to wait years before you have, you have, a feedback. So it's it's really hard to fight. We have another question, please. Yeah. What is the role of OCM funds in building a market for Italian wines in China? Thank you. Can can we stop the presentation here? No. Thank you for, for raising that point. It's, I'd say, it's a very articulate subject. I think, you know, it really depends on how that is managed for, for our job has been quite instrumental to to to make good use of those those funding. I think it could be a terrific tool and Avenue as long as you have your proper planning in place and you're doing real activity activation on the market, which is not always the case, you know, once again. I don't know, Andre, if you wanna add up anything to to to that point, but Again, we have seen, we have seen a lot of different, bad case scenario on OCM fundings. As a matter of fact, European community, and even the minister of agriculture in Italy has become and the region because of the old part of the OCM schemes anyway, and you had to report to all of them. You know, first of all, for us company to work on OCM is becoming increasingly more difficult and complicated and with a lot of bureaucracy. And secondly, I think, in the past, unfortunately, some of the funds were not spent in a positive way. Let's put it in. So and that's why now is is is becoming more and more difficult to work on OCM funds. We don't even know what the European community is gonna do with that, to be honest. There is a lot of discussions at the level of the agriculture commissions, whether to bring back the funds or part of the funds to support farmers rather than support market. Gets, you know. The question is on the table, so we need to understand where we're gonna go. But, yes, theoretically OCM is a great help and support for company, as long, you know, it's the money is going to be spent in a correct way. But, we have seen a little bit of everything there too. Yeah. So it's a mixed batch. Good morning. Last question. Well, it's a good question. So, my personal advice And then I come to a question is to, follow a lot the politics because in China politics is very important. For example, go Chow. People will like to drink something that respects their culture, China culture, until now has been done very little. So first of all, and then for example, KUC, you will see they will disappear because the government decided so. So the government counts very much. And then this also comes to logistic. Chita numbers, quarantine containers, container have to quarantine two weeks. So the logistic is very important. My question is how did a very famous winery like Sartore adopt to the market? Because you have to adapt to the market. You have to make products a Chinese drink. You don't have to bring whatever products you have. So adopt to the market. What did the certory very famous for that? Thanks. Well, the the first mistake we made because we had we had no experience at all on the Chinese market, and we rely mostly on our distributors then, let's say, importers. Which, by the way, was owned by biggest company in China, Costco, one of the largest, and by the way, owner of Greywold, number two winery, second largest winery, Greywold, I would say. So we thought We got it. You know, we are in bed with Costco. We are in bed with the owner of Great Wolf. They have a zillion salesman around in the market. They are in every supermarket. Bingo. You know? Forget about it. We we it was the most difficult exercise, we run because Kavka was consistently changing people. So we didn't have a point of reference. And when they placed the first order, They include also a couple of white wines, respectively, a pinot grigio and so are they. And we didn't know that Chinese market is what? Ninety five percent red wine? Okay. Let's say eighty percent, and you have sparkling wines and some And so we made a mistake in the mix. And to be honest, before we cleaned the inventory of the white wines, we had to wait three, four years. Something like that. You know? I think it's still there. Still there. It's still there. Still in the market. So first of all, we had to adapt the portfolio to what the Chinese way to drink, which is red wines, but not just any red wines. It's big wines, I'm a like, repastal like, a paciminto anyway kind of style. So we had to focus and change our portfolio in that directions. And then we came out with a couple wines, under the Apasimiento style, which is very successful in China. So we had to adapt. We had to adapt our packaging. You know, our packaging. Our standard packaging is too classic. Uh-huh. So we had to adapt that too. And then eventually being flexible in, in our model of distribution using different people in the different regions. But we had to revamp and rewind and all that. I think we can close here, Andrea, because we are going overboard. So we don't we don't want Stevy to come here and okay, sir. So you have my contacts here. If anybody wants to get in touch, we chat, LinkedIn, email, you know, feel free to to drop a line. Thank you so much for being with us today. Listen to the Italian wine podcast wherever you get your podcasts. We're on SoundCloud Apple Podcasts spotify, email ifm, and more. Don't forget to subscribe and rate the show. If you enjoy listening, please consider donating through Italian wine podcast dot com. Any amount helps cover equipment, production, and publication costs. Until next time.