Marketing an Australian wine to Hong Kong wine market - Essay Example

?Introduction Before drawing up the marketing plan it is essential to evaluate the external environment in which Brown Brothers proposes to introduceits wine products. The external environmental analysis of Hong Kong suggests that the market has high growth potential. Besides, Australian wine is considered clean and green and fits into the concept of wine contributing to wellness. Brown Brothers intends to focus on the young adults between 21 and 28 years but this segment is keener for other spirits. Thus, it remains a challenge to promote wine to this segment. However, the right marketing strategy can assist Brown Brothers in succeeding in its endeavors. Description of the chosen target market The target segment would be the youth that has completed tertiary education as education influences socialization as well as the choice in food and beverages. Hong Kong is one of the most densely populated areas in the world where full time education is mandatory between the ages of 6 and 15. More than 90% of the children complete upper secondary education and over 25.5% of the population have attended post-secondary education (USA.gov). This suggests that the Hong Kong population is well-educated. The Hong Kong economy is open and dynamic. Housing in Hong Kong is at a premium and hence even four generations at times live together under one roof (Moncure, n.d.). Moreover, Hong Kong is still a conservative society where paternalistic affiliation is given importance. Nevertheless, youth from higher income families are more likely to participate in higher cost activities outside the home, like going to theatres or listening to operas (HKFYG, 2010). Those from lower income families would prefer to enjoy their leisure activities at home. Thus the target segment for the marketing plan is the young adults from affluent families. As far as wine consumption is concerned Hong Kong is the most mature wine market in Asia. However, the older adults prefer to consume wine and not the young adults. Students in Hong Kong universities generally do not involve in alcohol against the European students where 88% of them tend to consume alcohol beverages. Only 1.4% of the Hong Kong students are regular alcohol consumers and they start consuming alcohol on an average at 15.6 years (Tse, 2011). The most popular alcoholic beverage was beer followed by table wine. Hong Kong students are influenced by their peers in consuming alcoholic beverages possibly because it is a collectivist society. Only those who have completed tertiary education consume wine, as found in a study by Dewald (2003). Higher the education level, the more likely they are to consume wine. Since the Hong Kong youth stays with their families, home consumption is minimal. Apart from the nationals, the expatriate population in Hong Kong is high. Hong Kong women so far have shown no preference for wine but that is because they do not have much idea about wines (Ong-Wood, 2011). Based on these characteristics of the Hong Kong youth, the marketing plan would be devised. Positioning strategy Lifestyle of the local population has changed due to which food retailing and catering market has also changed. There is an increased trend towards healthy, functional and organic food as the youth has become health-conscious (Austrade, 2010). Women are also turning to wine as a part of their health and beauty regime as they believe that it enhances their skin tone and digestion (HKTDC, 2010). Since Hong Kong is a collectivist society and since the youth stays with their families, wine has to be positioned as a wellness product. Wine in Hong Kong is generally consumed in social settings, in bars and restaurants (Parker, 2010). Health is now a global concern and Hong Kong consumers believe that consuming two glasses of wine is good for health. Australian wines have been receiving recognition among the traders and the consumers. So far French wines have been dominating the Hong Kong market and hence Australian company Brown Brothers has to bear this in mind. Competition prevails in the Hong Kong wine market but Brown Brothers should not position itself as just another wine exporter. Instead, they should highlight the originality and identity of Australian wine. The company should find typical characteristics of Australian wine that contribute to wellness and fitness and highlight them. They should find uniqueness that is not easily found in American or French wines that are usually available in Hong Kong. They can also focus on wine as a symbol of togetherness and a beverage that can be consumed with the family, since as of now wines are consumed at restaurants and bars. Being a collectivist society such a positioning should work well for the Australian wine company. The company should also focus on the young women who have very little knowledge of wines. Wine should hence also be positioned as a soft alcoholic beverage that adds identity and status to the personality of women. Product strategy Hong Kong consumers have a discerning taste for quality vintages (Media Release, 2010). French wines still dominate the Hong Kong market. However, New World wines are gaining popularity and considerable growth in consumption has been found (Li, 2011). Customer demands keep changing and hence the first essential requirement is that Brown Brothers should ensure the product for Hong Kong meets the needs of the target consumers. Monitoring consumer preference is essential because each product as a life cycle. Australia has a rich tapestry of distinctive regions, climates and styles, which suggests that Brown Brothers would be able to cater to the unique taste for wine as required by the Hong Kong consumers. Moreover, the Hong Kong consumer gives importance to the country of origin (COO) effect and since Australian wines are already well recognized in the Hong Kong market, this would not raise any issues. Wine is a product which is the result of several variables and changes in any one variable can significantly affect the product quality (Ballestrini & Gamble, 2006). These variables include the weather, the grape quality, the production process, the storage and the bottling. Since the wine market is yet underdeveloped in Hong Kong, the consumers to do not have the experience. Hence they tend to rely on the COO when they purchase wine for special occasions and when they could be subject to the judgment of others. Wine is gradually becoming a part of the lifestyle in Hong Kong and red wine is the most preferred wine. Women have wine at least once a week (Ong-Wood, 2011). The growing affluent middle class seeks western brands and hence it is essential for the company to promote the regional wine brands. People in Asia generally socialize around food and wine plays a secondary role. However, wine consumption is not confined to business lunches or dinners. People consume wine at social gatherings and also for celebrations. Consumers have become environmentally conscious and they now integrate considerations into their changing lifestyles. Products should not only satisfy their needs but consumers also want that the products should not affect the natural environment (Barber, 2010). Product differentiation has become essential due to intense competition in the wine industry. Since the target segment is young and educated, they are likely to be environmentally conscious and hence the focus on “green” packaging can make a difference. Hong Kong is a collectivist society and collectivists tend to be friendlier towards the environment. Wine packaging and design can engage a consumer and increase the chances of purchase. Packaging can provide a competitive advantage in the Hong Kong market place. The target segment is the young, educated consumers and this segment prefers New World wines and not the French wines preferred by the middle-aged consumers (Wine Market Profile, 2010). The youth prefers the New World wines either because they know the product or because it is fashionable to consume it. Consumers want to rely on well known brands. Therefore the product strategy for Brown Brothers should be to focus on red wine, with “green” packaging and promote it as a wellness product. Pricing strategy Price is defined as the sum of the values that the consumer derives after buying the product. Price is what the consumer pays in order to derive a benefit. Hence if the costs outweigh the benefits, the consumer may not buy the product. The consumer can be attracted if the perceived benefits are greater than the cost of the product. In terms of risk taking there are two contrasting implications of the pricing strategy. The first is that consumers may want to buy a product with higher pricing because of the reduced risk and guarantee of higher product quality. The second implication is that the consumer is exposed to higher risks when buying an expensive product. Higher price can become a barrier to product purchase. This is known as the “price-aversion behavior” in which the consumer would choose the lowest price band to minimize immediate costs (Tam & Elliott, 2011). Cost is a major factor when considering purchasing wine in Hong Kong (Ong-Wood, 2011). Abolition of tax has created a downward pressure in the wine market to keep prices low. The young consumers have low disposable income and hence the pricing should be kept low as they would be inclined to consume cheaper wines. However, the target segment is the educated consumer from the affluent section and hence keeping the price too low may have an adverse impact. Besides, too low a cost may not give it the differentiation. Since Brown Brothers is positioning itself as a wellness brand, it should also command unique pricing. It can demand premium pricing because of the brand equity. Consumers are willing to pay for environmentally friendly wine packaging. In fact, since wine consumption is symbolic of social status and identity, low pricing of wine by Brown Brothers may negatively impact its image. However, in the retail sector prices of wine vary based on the variety and even on the point of purchase. Initially, the pricing can be kept low in the introductory stage. Even discounts can be offered for purchases meant for celebrations or social gatherings. This may be essential in the initial stages because in general the Hong Kong consumer is price sensitive and keeping low competitive prices may give sufficient profit margins. However, once the brand is established, the discounts should be withdrawn and prices raised. Place Place denotes the way the product reaches the consumers. Today most brands have multi-channel strategy for distribution of their products. In Hong Kong women buy most of their wines in food shops and specialist retail stores (Ong-Wood, 2011), suggesting that wine consumption at home is picking up. Many hotels promote wine sales and also organize wine tasting events. In fact restaurants account for almost half of wine consumption in Hong Kong (Dewald, 2003). The restaurant and the hospitality sector consume more wine in terms of volume but less in value because the restaurants tend to pour cheaper wines as their house wine (Wine Market Profile, 2010). Fine dining and high-end restaurants offer premium brands of wine while casual dining sector offers cheaper brands. Wine retailing in Hong Kong is usually through supermarket chains and specialty wine stores. Hong Kong has 750 supermarket stores and 170 wine outlets (Wine Market Profile, 2010). The less experienced consumers prefer to shop at supermarkets and base their decisions on the price. The wine connoisseurs purchase from wine shops because of the variety and branded products. They also source their wines directly through importers at discounts. The distributors, including the largest supermarket chains, source their wine stocks from the importers. They may even import directly from the wineries once the brand is established. Market entry Hong Kong, because of the collectivist culture, seeks long-term relationship even in business. While Australian wine is recognized in Hong Kong, many suppliers are diverting new world wines to European regions leaving a gap in the Hong Kong market. Thus, before entering the Hong Kong market, Brown Brothers must ensure a long-term relationship with the distributor in Hong Kong. As the Australian producers are diverting wines to European markets, the French producers are re-gaining their lost market share (Lindgreen & Beverland, n.d.). Hence, this is an opportunity for Brown Brothers to make an entry with a long-term relationship. Market entry can take any form such as exports, through joint ventures, wholly-owned subsidiaries and through licensing. In the case of wine, it should be through exports. An established importer well-versed with the trade and with the local markets should be selected. No quota system exists for any exports to Hong Kong. However, import license are required for alcoholic beverages with an alcoholic strength above 30 percent but since grape wine carried alcohol less than 30%, no license is required to export wine from Australia to Hong Kong (Wine Market Profile, 2010). However, the exporter from Australia should note that decisions are made quickly in Hong Kong and firms risk losing opportunities if they do not respond immediately. To identify the right importer, Brown Brothers can participate in local trade shows and wines shows and have a one-on-one meeting with the potential importers. Promotion strategy Hong Kong is a premium market for Australian wine and this has been recognized by the wine makers in Australia. However, it is important to connect and communicate with the consumers. Through the right promotional strategy the aim should be to educate and influence the consumers. They should be provided with the right information and taught how to appreciate quality. Promotion can take the form of advertising, sales promotions, direct selling and public relations. Advertisements Country of origin of the product is important (Ong-Wood, 2011). Australian wine is recognized in Hong Kong and hence this factor needs to be highlighted in all promotions and advertisements. Monthly publications on wines such as Wine Now should be used for advertising and creating awareness. Wine is generally not sourced from dailies. Appropriate advertising and communication to the “green” consumers would have to be undertaken. Direct selling About half the women rely on recommendations by friends while some also look for recommendations of waiters (Ong-Wood, 2011). Peer recommendations too are very strong. They seldom use magazines or internet to decide on wine brands. They rely on the recommendation of others or try to find a link between the country of origin and the perceived quality (HKTDC, 2010). Thus, women and the youth should be targeted at social clubs and presentations given of the perceived benefits. Public Relations Participation in International Wine & Spirit fairs is the best way to create awareness and get exposure in the market. Participation in wine tourism and education would help the region develop as a hub for wine trade. Brown Brothers should actively participate in such ventures to derive the maximum mileage from such events. Wine appreciation courses are available in Hong Kong but Brown Brothers can further this strategy. This is because the Hong Kong consumer wants to make an impression on others about the knowledge and consumption of the product. Wine drinking plays a symbolic role in Hong Kong as it communicates the social status of the consumer (Pettigrew & Charters, 2010). The taste preference can be forsaken if the symbolic information contained in the product is readily available. Sales promotions The Hong Kong consumer always wants something extra thrown in with the product. In the initial stages it might be a good idea to provide two wine glasses with one bottle of wine. This would be beneficial for the new consumer who may not have wine glasses to consume it from. This could be restricted to sale of wine from the retrial and specialty wine stores. In any case the wine sold from retail stores and supermarkets is costlier. Conclusion Based on the research that Hong Kong is potential market for wine, Brown Brothers plans to target the youth between 21 and 28 years for selling its premium wine. This target segment is usually the educated class that has completed their tertiary education and hence has higher disposable incomes than other people in the same age group. They should enter the Hong Kong market through an importer that known the local market and the wine sector well. Once the brand is established and a market created, they can enter into direct export agreements with large consumers like the supermarket chain. The product positioning has to be as a health and wellness product as Hong Kong consumers believe that consuming two glasses of wine is good for health. Green packaging should be another point of product differentiation as consumers have become environmentally conscious of what they consume. They should also highlight the originality and identity of Australian wine. Pricing would have to be low initially until the consumers realize the benefit derived from the premium product. Participation in trade shows and wine and spirits fairs would give the company immediate exposure and create awareness among the consumers. With the right marketing mix, the company would be able to make a sound entry and establish itself in the Hong Kong market in six months. References Austrade. (Sept. 17, 2011). FOOD AND BEVERAGE TO HONG KONG. Retrieved from http://www.austrade.gov.au/Food-and-beverage-to-Hong-Kong/default.aspx Ballestrini, P. & Gamble, P. (2006). Country-of-origin effects on Chinese wine consumers. British Food Journal, vol. 108, no. 5, pp. 396-412 Barber, N. (2010). ‘‘Green’’ wine packaging: targeting environmental consumers. International Journal of Wine Business Research, vol. 22. no. 4, pp. 423-444 Dewald, B.W.A. (2003). Wine Consumption in Hong Kong. International Journal of Wine Marketing, vol. 15, no. 1, pp. 54-68 HKFYG. (2010). Youth Trends in Hong Kong 2002. Retrieved from http://yrc.hkfyg.org.hk/eng/trend02.html HKTDC. (Aug. 11, 2010). Wine Trade on Tap. Retrieved from http://www.hktdc.com/info/mi/a/hkthk/en/1X0710W4/1/Hong-Kong-Trader-Hong-Kong-Edition/Wine-Trade-On-Tap.htm Li, C. (2011). Hong Kong Imports of U.S. Wine Set New Record 2011. 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Asia Pacific Journal of Marketing and Logistics, vol. 22, no. 2, pp. 210-221 USA.gov (March 15, 2011). Background Note: Hong Kong. Retrieved from http://www.state.gov/r/pa/ei/bgn/2747.htm#people Tam, C. & Elliott, G. (2011). Branding and product evaluation across Chinese regions. Marketing Intelligence & Planning, vol. 29, no. 4, pp. 385-402 The Age. (2010). China the final frontier for Aussie wine. Retrieved from http://www.theage.com.au/entertainment/restaurants-and-bars/china-the-final-frontier-for-aussie-wine-20100801-1118f.html Tse, T.C. (2011). A Comparative Analysis of Alcohol Consumption Pattern Among Global University Students. International CHRIE Conference-Refereed Track. Paper 10. Retrieved from http://scholarworks.umass.edu/refereed/ICHRIE_2011/Saturday/10 Wine Market Profile. (2010). WINE IN HONG KONG AND MACAU. Market Profile November 2010. Retrieved from http://www.nzte.govt.nz/explore-export-markets/market-research-by-industry/Food-and-beverage/Documents/Wine-market-in-Hong-Kong-and-Macau-Nov2010.pdf Read More