If you were to go to any wine shop that sells Penfolds, you will see a familiar sign that is going to be seen all across China when it comes to this brand. This sign will be something along the lines of “Buy 1 Get 1 Free”. This is meant to entice buyers into the shop and to purchase Penfolds wine, however, it spells out an entirely different problem that is facing the winery.
Penfolds, which is owned by Treasury Wine Estates, a company out of Australia. The idea is for this wine to be held on the luxury market, comparable to brands such as Louis Vuitton. But, for the past 3 years, the company has been trying to make a stake in the Chinese market. This latest strategy is one that is high risk, and does not seem to be paying off for the company.
China is considered to be the third largest exporter for Australian wine
However, despite the desire for Australian wine in China, Treasury Wine Estates is still having issues moving some of their higher end wines. What made the brand suddenly unable to sell much in China? There were a few contributing factors including the fact that Xi Jinping but a ban on excessive government banquets, the giving of gifts and extravagance which utilized these high end wines. The second issue is due to numerous shops throughout China having such an excess stock, they must get rid of the wine.
A distributor store in Shanghai stated:
“We have a stockpile that we need to get rid of quickly”
This stockpile has been going strong since 2013, and this is when all the discount offers began. The problem is that Treasury does not have the strong sale force they once had. Coupled with the supply overage and the demand of luxury wine lessening, it is uncertain whether the brand will be able to pull out of this slump.