ITALIAN WINES IN THAILAND?

THE REASONS OF AN EXPECTED FAILURE FOR ITALIAN WINES IN THAILAND

In his excellent article written in 2015 (https://www.mywinemarketing.com/2015/10/come-vendere-vino-allestero/) Fabio Italiano had already faced the export in a generic way: Selling abroad is impossible without adequate investment. Thailand is certainly one of the countries that deserves to be evaluated for export. There are thousands of Italian labels that could easily challenge the Thai market, including those of small producers. To date, the penetration of Italian wines is not suited to the first world producer; the problem lies in the method, let’s analyze the reasons why Italian wines in Thailand arfe running so slow.

TRADITIONAL SALES STRATEGIES DO NOT TAKE RESULTS IN THAILAND

The Friend with the right contacts – Many, maybe all, the producers have tried several times and in different countries to sell using the technique “I send you samples and a catalog and I wait for orders”. I don’t know what happened in the other countries, but here in Thailand the champions all drank them between “institutional” events, business matches and evenings in Italian restaurants (friends of friends). Orders, of course, did not arrive, with vague justifications “eh, you know, barriers, taxes, customs …”

The 100,000 emails never read – In Asia the mailing technique has no effect, especially in Thailand. Language barriers (Thais are unfamiliar with reading our alphabet) and their congenital aversion to emails make any distance relationship impossible. Try if you don’t believe it.

The Distributor – The Thai wine market is mostly in the hands of foreigners: the French manage French products, the Americans handle the American ones, Italians sell Italian wines in Thailand and so on. The only importers of Italian origin therefore remain as interlocutors.

Let’s see who is selling Italian wines in Thailand .

1. Three large importers specializing in food & wine (with turnover over 500 million Baht), one of which imports almost exclusively wines. The latter buys directly in Italy from producers with whom it has established relationships. The other two are large Italian groups that in recent years have taken over Thai companies with a portfolio of customers in the HoReCa and GDO sector. They then added low-quality, high-profit products, effectively cutting out small, excellent producers. Selling to them means to SELL.
2. Some small importers who have had other commercial activities in Thailand for years, and who are now established. They have low purchasing power (few capital) but some good contact. They cover limited geographical areas and make small quantities (on average a couple of containers a year of mixed products), also following the “best price”. They usually come to buy in Italy during the low season. Most of them have a short life, they generally go into financial (and personal) crisis after a couple of years if they can’t make the leap in quality.
3. Many adventurers eager to move to the land of smiles, in search of a source of income; generally they are not yet aware that business here is difficult for those who are not really rooted in society. They are the best suppliers of “free samples” for many unscrupulous expats, who promise to buy and then … Well, you already know the story: taxes, barriers, customs …

The Fairs: apparently the minimum result with maximum effort – Coming to “attend the fair” (the Thaifex of Bangkok is the most important of the Asian SE) without a prior work of collecting contacts, selection, and personalized invitations, is equivalent to going to Chicago hoping to randomly meet Barack Obama in the street. The scouting service can be requested to ICE or to the Chambers of Commerce, but the risk of this operation is to spend important capital to have contacts that, as mentioned, will taste your products, will be very courteous and will not answer you to emails . Not for lack of respect, but for local culture. Using this channel to sell Italian wines in Thailand gives you nearly zero opportunity of success.

RAISE MARGINALITY AND ENHANCE THE QUALITY OF ITALIAN WINE YOU CAN, YOU MUST!

Why then should Thailand be considered as a possible market wher to sell Italian wines in Thailand

Simple: because with the panorama described above (and which I will demonstrate with official figures) Italian wine is still at the beginning of its own Thai commercial history. Provided you change your approach.

Strategically, alas “. French and Americans have a lot to teach us. They have created local units, they have formed consortia, they have offices on site and embassies (commercial offices) that help them effectively and actively. We Italians remain individualists and pay the price. Proof of this are two IMPORTANT data (see table 1 and 2):

Table 1: market shares of importing countries in Thailand (Source: Royal Thai Custom)

1. the market shares of Italian wines do not reach 6%, compared to 42% in France and 9% in the USA. Note that these competitors of ours have no advantage in terms of duties and excise duties, just as Australia, New Zealand and Chile do.
2. The value per liter of the wines of each country: the USA wine is imported at an average price (declared at customs, ed) of 299 THB (8.5 EUR!), The French of 216 THB (6.2 EUR), the Italian of 84 THB (2.4 EUR). Considering that we are talking about the price that the importer declares, it means that Italian producers are selling the best wines in the world at a lower price than the potential one, unless I want to make them understand that in California they make a product quality three times higher than our own.

As you will notice in the table below, between 2017 and 2018 ALL the producing countries have raised the average price per liter, something that had not happened for years. Why?

Table 2: Average prices per liter declared in customs in 2017 and 2018 (Source: Royal Thai Custom)

It is all thanks to the Custom Act of 2017 (I bet that at the “institutional” meetings they didn’t tell you), which changed the amount of duties, reducing them, and calculating excise taxes, considered a “wine tax” of a total per liter. It goes without saying that economic products pay in proportion more excise than others, up to a certain level. We have identified the threshold at around EUR 7, therefore the range of products currently most convenient to import into Thailand is between EUR 4 and EUR 6.5 on a CIF basis. And we are selling for 2.4 EUR …

In summary, we Italians are selling little and badly in Thailand. But why should we ever worry about it?

WHY SHOULD WE BET ON ITALIAN WINES IN THAILAND?

Because it is the strongest emerging market of the Asian SE, with favorable economic indices, but above all with a medium-bourgeoisie with rapidly growing purchasing power.

Because it has the third consumption of alcoholic beverages in Asia after Korea and Vietnam, ahead of China and Japan.

Because it is a STABLE market, no matter what the “institutions” worried about a democracy that few people in Thailand are worried about. So much so that the “dictator” who ruled until 2019 thanks to the 2014 coup has now been elected with democratic and regular elections. In the meantime, in the Stable Italian Democracy we changed 5 governments and consequently government strategies and vision in the same period (with one election).

Because wine consumption (customs data, ad valorem) is constantly growing and has never been influenced by major negative events such as tsunamis, coups, riots and even a year of mourning for the death of the late King Bhumibol . Table 3 shows the values up to 2017. 2018 closed with a recod of 2.3 billion Baht, or + 30% thanks to the Custom Act of which we spoke earlier.

Table 3: wine imports in relation to major socio-political events in Thailand (Source: Royal Thai Custom)

Because Thailand is the hub of ASEAN (630 million consumers); once they enter here, the markets of the neighboring countries are opened, with which there are no trade barriers or duties.

Last, but not least, because the wine market in Thailand depends exclusively on imports. The very low local production is of a very bad level and has prohibitive costs (due to huge investments) and the characteristics of the soil, climate and pests, which make it very uncertain for the future.

If you have come this far you are probably wondering, “well, so what?”

A PROPOSAL TO SELL. IMMEDIATELY.

So here is the proposal: association with a Thai consortium (Italian Food Asia) selling Italian food products (preserved foods not locally produced and wines) that allows Italian producers, no matter what size, to enter the market directly with a minimum cost. Everything is included: registration in the FDA, legal and commercial customs assistance, warehousing, representative office (at your disposal for meetings, but only if you want to come and visit us!), Showrooms, sales networks, web promotion, local events. All can be financed by EU or local contributions (ask your Chambers of Commerce for export and internationalization calls).

Unity is strength and reduces costs. To learn more, just send an email to admin@italianfood.asia

Who we are? We are Italian Food Asia, a brand of Kha Group, a group of Thai companies with Italian management, which import and sell healthcare and food products. We too have joined forces, including in our group all the skills needed for the import and sales process: from the regulatory (registration in the FDA) to the marketing, to the sale on the HoReCa channel (400 customers already active and network of representatives), to the legal aspects.

Diego Sala

Pre market specialist in Kha Group Thailand