An Interview with Grace Vineyard's Judy Chan - 14/12/2015

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I first met Judy Chan, President of China’s Grace Vineyard, last month at the Hong Kong International Wine & Spirits Fair. She was giving her invaluable insight at a conference chaired by Debra Meiburg MW on the China market and it struck me that much of what she was talking about was invaluable fodder for my Master of Wine studies.

Introducing myself after the event I took one of her cards and got in touch to ask if she would see me for a one on one interview. She very kindly agreed so a couple of Wednesdays ago I found myself sitting out on her balcony in Mid-Levels overlooking wonderful clear views of Hong Kong harbor and sipping on Tasya’s Reserve Chardonnay. Not a bad way to while away an afternoon I thought!  

Born and raised in Hong Kong, Judy went to Michigan college in the U.S. where she majored in organisational studies, women’s studies, and psychology, originally planning to work in an organisation such as the U.N. A nine month gap in between undergrad and grad school encouraged her to look for a job to keep her busy in the interim and she ended up going to an interview at Goldman Sachs. Totally unaware of the finance world and who Goldman even were she was offered a job in their HR department and stayed there until her father asked her to join him in the family business in 2002. She was just 24 years old. 

At the time she says she was unaware what her father even did. “All I knew was that he was a businessman”, she says. Her first day she imagined he’d ask her to look after operations or administration so it came as quite a shock when he asked her to take care of his winery. With zero wine experience, having never even tasted the stuff, Judy was pushed right into the deep end. “It was overwhelmingly difficult to begin with”, she says. “I had to run an operation I had no idea how to run!”

She had to deal with people much older than herself, many of whom she had nothing in common with. “I had no idea how to sell wine, no idea of the differences between Cabernet Sauvignon and Merlot, I didn’t know the pricing. Even the packaging was tough!” In addition, budgets were extremely tight as the winery was losing money each month.

So she travelled to Bordeaux in the hope of learning how a successful wine business should be run but found that the Bordelais were more interested in talking about how good their wines tasted, how well they paired with food, and about life in general, rather than anything related to business. “They must have thought I was an idiot talking about money all the time,” she says, “but I was desperate. I didn’t know what to do.”

Back in Hong Kong she faced similar difficulties, as at the time, people in the trade just simply didn’t believe that wine in China had a future and were very dismissive. Judy remembers they would talk about wine using confusing language and terms she couldn’t understand. Listening to her talk I was struck by how incredibly snobbish the wine industry, to an outsider, must often appear and I got a real sense of the grit and determination it must have taken her to carry on regardless, ignoring all the doubters, and blaze her own trail towards success.

But the success story which Grace Vineyard has become, rising to become the most prominent family owned winery in China, was also, Judy believes, to a certain extent, down to luck and fortuitous timing. She acknowledges that they were in the right place at the right time during a period of upward trend. There were apparently lots of things they did wrong along the way and yet they still managed to come out on top.

One of their initial mistakes was related to pricing. They appointed a local distributor to take on their distribution in Shanxi where the winery is located and partnered with Torres in Shanghai and Beijing to look after 5-star hotel and international restaurant business. For a while this worked but soon the two different pricing structures began to clash coming to a head when the wine being sold locally in Shanxi was actually at a higher price than that being sold in Shanghai.

This was apparently down to two things. The first being that local Chinese restaurants in Shanxi, the major channel to which the local distributor was selling, demanded a lot of kickbacks and listing fees which needed to be included in the price of the wine. The second was the distributor’s mentality. Why sell 10 bottles, for 10 times more effort at a cheaper price when you can sell 1 bottle at a high price and make the same profit?

Pricing transparency and understanding how local distributors and their clients think and work are clearly things wine producers need to carefully consider when selling their wines into China. Judy doesn’t believe that distributors can serve nationally. China is simply too big and each province so varied that it makes national distribution seem futile. Instead she sees local distribution as the way forward but advises producers to ask themselves what exactly it is that they want or expect out of China.  Is it sales volumes, is it brand recognition? As well as asking the most important question of all: why do Chinese consumers want to buy your wine in the first place? She strongly believes that successful communication of the brand story is at the heart of any long-term sales strategy in China. “Otherwise why will people buy you?” she asks.

Brand building and story telling are therefore at the heart of Grace Vineyard’s marketing strategy. They are happy with their current production size of 1.5 million bottles a year and rather than going broad in China in terms of sales strategy, Judy says she would prefer to penetrate certain targeted places with particular products. 40-50 year olds are their key market but through the development of new products such as their Angelina range of sparkling wines, they are trying to encourage younger consumers to discover wine. Working with mixologists to develop sparkling wine cocktails and selling the wines exclusively on-line, marketed via social media platforms such as WeChat, has proved highly successful in enticing a new category of non-wine drinkers. “You have to strike a chord on the emotional side,” says Judy, “then they think of parties, hanging out with their friends and suddenly this is the beverage they want to drink.”

One of the other aims of the Angelina project, Judy explains, was to allow the younger generation of sales reps working at Grace Vineyard to more fully interact with the product, giving them a range with which they could play around and more easily associate with, and whose development they could feel a part of. Just as she had to do, Judy believes in her staff taking ownership and responsibility, wanting them to feel as involved as possible. A rare attitude to have, I would hazard, amongst the majority of China’s companies today and something which I get the feeling makes Grace Vineyard stand that little bit above the rest.

A discussion on the China market couldn’t negate the highly topical issue of fake wine. According to Judy this will always be a problem but there are now more ways to deal with it. With their new vintage, Grace Vineyard will start attaching tags to bottles which can be easily scanned by a mobile phone, telling you information about the wine as well as its provenance. What I was most surprised to learn was that often wine is in fact being faked by the distributors themselves as they can make far better margins, selling 1 bottle of the real thing for every 10 of fake. Apparently this is all fairly standard practice and the authorities, although they will crack down to a certain extent if they get paid to do so, aren’t likely to stop fakery entirely as they can make easy profits from the proceedings. They will regulate things to some degree to ensure that there are not enough fakes on the market to do permanent damage to the brand, but otherwise, they will act accordingly, depending on which party is paying the bills. Grace Vineyards recommend customers buy only through stockists they recommend or through their online shop which guarantees delivery direct from the winery.

So what about the future of the China market and the future of Grace Vineyard? For Judy it’s all about converting the swathes of consumers who currently don’t drink wine, through developing products, like Angelina, that they can relate to on an emotional level and which don’t necessitate any prior wine knowledge. Currently a mere 6,000 bottles, their sparkling wine project is one they are looking to develop in the future, with significant volumes being produced by 2021. Improved product mix and market segmentation, pin pointing specific products to particular audiences and making things more targeted, are also key objectives. And then of course there’s the whisky project…but that’s another story altogether!

 

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