Alibaba turns to Napa Valley to quench China’s thirst for red wine

September 1, 2015 10:24 AM

(Bloomberg)—Chinese Internet giant Alibaba Group Holding Ltd. 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 Tuesday with Mondavi-owner Constellation Brands Inc.

Alibaba Chairman Jack Ma is fighting slowing sales growth and a struggling Chinese economy by importing popular brands such as Converse sneakers 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 U.S. 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 Center at the University of Adelaide in Australia.

Burgeoning demand

 Chinese wine consumption reached 417 million gallons (15.8 million hectoliters) last year, a 45% increase from 2000. The country more than doubled its acreage for vine planting in the same period, according to International Organization of Vine and Wine.

France’s labels were the No. 1 wines imported by China last year, accounting for 34% by volume, while sixth-ranked U.S. has less than a 5%, according to Chinese customs data. The value of U.S. wine exports to China fell 7.7% last year to $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 $15 to $20 a bottle—to China as its consumers seek middle-shelf options due to the economic slowdown.

Historically, the U.S. hasn’t 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.”

Seeking markets

The Alibaba deal opens a new frontier for Victor, New York-based Constellation Brands, which generated 89% of its $6 billion in sales of beer, wine and spirits in the U.S. in the year ending Feb. 28.

Chinese tourists have been gaining prominence in Napa Valley and now account for about one-third of the 200,000 visitors to Mondavi’s winery each year, said Philip Kingston, who runs Constellation’s international sales. In response, the winery in 2013 began offering tours in Mandarin and Cantonese, hoping those tourists go home with an appetite for Napa Valley wines.

Robert Mondavi has become an iconic California 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, the wine blogger, said.




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