Penfolds owner Treasury Wine Estates puts faith in direct wine sales

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Treasury Wine Estates has said it achieved significant annual sales growth in Greater China by selling wines directly to retailers via its own distribution network – a business model that is increasingly popular.

Australian wine producer Treasury Wine Estates (TWE) reported a 36% rise in sales in Greater China in its last financial year, to the end of June. It praised its new strategy of selling wines more directly to consumers and targeting the second and third-tier cities.

Amid the lingering shock of the Chinese government’s austerity measures, more and more foreign wine producers have started to form deals directly with mass online stores and other mass retail channels, so as to reach the general consumers more efficiently.

Amid a new marketing strategy in China in 2015, TWE has ‘increased sales and marketing capabilities, and upped our investment in consumer marketing significantly,’ said Robert Foye, TWE’s President and Managing Director of Asia, EMEA and Latin America.

The TWE has implemented a ‘more direct sales model’, which allows its TWE brands including Penfolds and Wolf Blass available for sale via TWE’s own retail and wholesale sales channels, Foye told DecanterChina.com.

As a part of that strategy, in June 2015, TWE sealed a direct distribution deal with one of China’s biggest online retailer, JD.com, for an undisclosed amount, as a part of the e-commerce giant’s recently launched ‘Australian Mall’ Platform.

The cooperation was ‘a strategic step in developing our presence in the e-commerce channel,’ said Foye.

The deal was followed by another direct distribution deal with supermarket chain Yonghui. The 60m RMB (£6m) ‘first order’ included TWE’s Penfolds and Wolf Blass brand, according to the supermarket group’s official statement.

‘The partnership with Yonghui supermarket chain enables a greater penetration of TWE wines across China,’ Foye told Decanterchina.com, ‘particularly into second and third tier cities, which are important markets with strong growth potential.’

The TWE group reported an AUD $77.6 million annual net profit globally in its last financial year, marking a significant leap from the AUD $100m loss in the previous year.

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