Treasury Wine Estates CEO Sam Fischer has identified emerging demand for luxury whites as a growth engine for the company in China.

Fischer told attendees at TWE’s annual Investor Day earlier this month that the company’s luxury white wine portfolio—which includes Frank Family and DAOU Chardonnay, with the opportunity for Penfolds to grow its offerings through Yattarna and Bin 311—was well positioned to capitalise on the trend in China and across Asia.

“We’ve been up in China and nearly every distributor spoke to us about what’s happening with white wine there,” Fischer said. “So just amplifying what we do in white wine through the established portfolio that we’ve got within Penfolds is a huge opportunity.”

TWE Greater China Managing Director Jack Wu agreed that “everyone is talking about white [wine] from Penfolds”.

“If you think about a white play, at business lunches some are preferring lighter wine, so they want Penfolds white instead of a heavy red. But maybe at a dinner, they will prefer the red. This is how we see the different kind of demand coming up.”

New data from Liv-ex also reflects the evolving market for luxury white wine globally. Since 2010, the value of white wine traded on the exchange has soared by 650%, while red wine has dropped by 15%. 

China’s slow rebound from austerity

Fischer said China was also experiencing a gradual easing of austerity measures, particularly in relation to private banqueting and at-home consumption, which was improving market conditions. However, he admitted the market “remains challenged”.

“All of the actions and the initiatives that we’ve taken in China, the perspective that we’ve got on the growth opportunity in China, gives us unbelievable confidence that this will continue to be a growth engine for us in the long term,” he said. “Will the China market recover? I think so.”

Fischer said TWE was continuing to target baijiu distributors.

“The big opportunity that we see is really at that brand level that starts to interact with baijiu,” he said. “So while you look at the category of wine and you say, OK, well, that looks challenged or flat at best.

“But when you start to look at how Penfolds is interacting with Moutai and opening up the opportunity there, it reframes everything just because of the pure scale of baijiu in China. I mean it is enormous. So we think that’s a great opportunity for us, and we are targeting Baijiu distributors. We’re targeting baijiu channels and baijiu restaurants so that we’ve got a very visible presence in those huge opportunity areas.

“Penfolds is a luxury brand that sits proudly on the table next to all of the Chinese power brands. And the Chinese New Year execution that we had in China was just outstanding.

“We got feedback from the market that we had completely outperformed through all of the gifting programs that we had for that occasion, how we’ve done pop-ups and executed our campaign through the period meant that our China business continues to completely outperform the market.”

Wu said he had been with TWE for 12 years and watched the Penfolds brand “grow into a most powerful wine brand of scale in China”.

“The Penfolds brand and a very unique proposition for Chinese consumers. Its Chinese is Ben Fu, translated to chasing prosperity, a very positive meaning in Chinese culture together with strong color and wine quality,” he said.

“We are only at the beginning of our journey, and I see enormous future potential for Penfolds brand in China. Greater China remains one of the most important luxury beverage market in the world. There is a strong appreciation for heritage and status and a meaningful headroom for premium brands that can execute well. At the same time, consumers are selective. Channels are evolved quickly, and the cost of the poor execution is high.

“Our confidence in based on a very strong category position, the power of Penfolds and the route-to-market and execution model built over many years. In China, growth is available but only to those who can convert brand strength into disciplined execution. Our ambition is to shape the next era of the wine in Greater China. We aim to lead the luxury wine category and also expand wine into the new consumption occasions.

“We are well pleased to achieve this ambition with our core capabilities, including a deep understanding of our consumer, a leading portfolio of wine, which resonates strongly with the Chinese local consumers, strong and growing brand equity, a focused national and regional distributor platforms and our experienced local team.”

Wu said the opportunity for TWE and Penfolds extended beyond the luxury wine category to the baijiu consumer.

“Affluent consumers already participate in the premium alcohol occasion whose needs are evolving,” he said.

“Baijiu, as you know, remain dominant in China, but changing consumer behavior is creating an opportunity for luxury wine to take share over time, including through moderation, broader taste openness, balanced gender appeal and relevance to gifting and business occasions. This represents a great opportunity for luxury wine and Penfolds, in particular, to grow share within the alcohol market.”