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Gallo Targets China’s Thriving E-Commerce Channel

August 21, 2018

While U.S. wines could face headwinds in China’s rising imported wine market looking ahead due to increased tariffs, the trade tensions between China and the U.S. haven’t deterred E.&J. Gallo from continuing to invest in the region. Under a new three-year partnership with e-commerce giant Alibaba, E.&J. Gallo will look to boost online sales in China with a new flagship store on the Tmall platform starting next month.

Bill McMorran, vice president and general manager for Gallo’s Asia Pacific region, tells SND the deal is aimed at expanding the presence of premium labels like Apothic, Carnivor, Dark Horse, Orin Swift, J Vineyards, William Hill Estate, Edna Valley Vineyard, and La Marca in the Chinese market.

“Gallo brands are available in more than 10,000 retail stores in China, including traditional and modern trade,” McMorran notes. “With the rapid growth of e-commerce, this market remains a tremendous opportunity for Gallo. In working with Tmall to further expand our portfolio in this channel, we’re now able to deliver our products throughout China, both in cities and in rural areas.” McMorran adds that Gallo is also increasing its presence in brick-and-mortar chains like Hema and RT Mart.

Gallo isn’t the only company investing in China’s thriving e-commerce segment. With as much as 20% of all wine sales occurring online—most of them via mobile apps—deep-pocketed players are racing to get in front of the younger generation of consumers on platforms like Tmall and JD.com. “Brand awareness and competitive pricing is absolutely the key to success in e-commerce,” says Yoshi Shibuya, CEO of Suntory-owned importer ASC Fine Wines. “Therefore, well-known commercial brands with big marketing budgets have the advantage over artisan producers in this channel.” Shibuya notes that wines retailing from RMB50 and RMB100 ($7-$15 a 750-ml.) are currently the most appealing to Chinese consumers.

While e-commerce is expanding access to imported wine and spirits brands throughout the market, it’s also creating new challenges, such as intense price competition. “Online sales are booming, which leads to cutthroat pricing and squeezed margins,” says Eric Drew, CEO of Camus Yuanliu, the local subsidiary of France’s Camus Wines & Spirits. “Although pricing transparency has improved, it’s harder for brands to control pricing with so many different prices now visible online.”

On the other hand, consumers’ increasing exposure to Western-style wine and spirits through e-commerce channels—as well as media and overseas travel—is helping to make them more willing and confident to order them in restaurants, Shibuya notes, offering significant upside potential in the on-trade looking ahead.—Daniel Marsteller

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