Ruby Red Fine Wine has been successfully selling imported wines to the Chinese market since the end of 2005. This post captures insights from two of its founding partners Simon Zhou and Kylie Bisman. Simon is responsible for sales, purchasing and tastings (he was described to me by somebody else as a “wine walking encyclopedia”) and Kylie specializes in marketing and design.
1. Distribution Channels: Be consistent with your business model.
Ruby Red Fine Wines specializes in boutique wines, Burgundy and Bordeaux. Their sales split comes from three main channels: 40% distributors, 40% private customers, 20% restaurants.
“From the beginning, we made a conscious decision not to go to supermarkets. Several reasons led us to it. First, the wineries we buy from tend to be small (we specialize in high quality boutique production wineries) so they don’t produce the volumes a supermarket may need. Secondly, supermarkets are harder to do: entry fees, storage fees, charges for out of stock … the amount of capital required is much higher especially if you go to big chains”
2. Geographical Market Coverage: Be where your customers are!
Around 75% imported wine consumption comes from urban areas. And some sources estimate half of that consumption to come from Shanghai area itself. It is not strange so, that Ruby Red Fine Wines decided to set base in Shanghai. They also have a small office in Hangzhou and cover 40 other cities through distributors.
3. Sales Promotion: Different Strategies for Different Channels.
Kylie: “We do a lot of work for our distributors, Simon constantly travels visiting them, does training for them …”
Simon: “We have a team of account managers to look after distribution clients. We cannot treat China as one country. Each region is almost like a small country with very different local culture and needs. We work hard on understanding the needs of each distributor and help them develop their market. The key for us is to find solutions to help their growth.”
Private Consumer: Education! We’ve done thousands of tastings since we started! (my previous post about Ruby Red Fine Wine describes their keys to success promoting their business to consumers. You can read the article here).
“We do not have a shop… and we never meant to have one. We have the perfect spot (cellar) where wine is not too hot in summer and not too cold in winter. And we run a lot of our events there. It’s quite normal for people to come and find us on the weekend, come and have a drink, come for an event…”
“Restaurant is a difficult topic to generalize as we work a wide variety of them from large 5 star hotels to small cafes. Each of them has different clienteles and we cannot apply the same strategies. There are however some common promotional activity like volume discount, table cards and by the glass trail offer”
4. Criteria for Distributor & Restaurant Selection
Distributors: “In most cases, it is the other way around, we have been doing a lot of work on education and events, this really helped us with our reputation, and most of our distributors find us. We, of course, want to work with long term vision distributors that work to develop the market rather than try to make a quick buck.”
Restaurants: “We tend to work with restaurant that view wine is an integrated part of the dining experience. Since we have wines from all price ranges, we can work with wide range of restaurants”.
5. Ensuring you Get Paid in China (an issue which tends to come high in the worries of all entrepreneurs)
Distributors: “We are very careful. We deal with a lot of distributors and they make up the bulk of our income. If we don’t know them they don’t get any credit. And it takes a long time of working together before we extend credit to our distributors… Initially it is always payment upfront and then we send the wine. Once you get the relationship working and a bit of guanxi , you know who you are dealing with and you understand your chances of getting paid… We never got hit by a distributor, we were always careful… “
Private Customers: “Direct consumers pay upfront… that’s the best business. They come into our cellar and they pay, or we deliver and they pay the delivery guy… “
Restaurants: “This is probably where we are more likely to be hit. But I would say that is also the rule around the world. You are dealing with a restaurant and then they go out of business, and that’s the problem…. In general, we have been quite lucky but every few months we have a restaurant that just disappears… and we try very hard, we have 3 people in our accounts team and they are constantly chasing to get our money. “