Digital Wine Ventures’ (ASX: DW8) WineDepot platform will be expanding its market within Australia and internationally, while noting it remained unaffected by China’s import tariffs on Australian wine.
As part of this, WineDepot will launch an “Insider Trading” wine club.
The new club will allow customers to purchase wine and other products via WineDepot’s marketplace at “preferential” prices through a direct-to-consumer model.
Club members, called insiders, will soon have access to additional benefits including invitations to private wine dinners, masterclasses and other events in due course, the company added.
Initially, the new club initiative will be extended to staff employed by suppliers and trade buyers using WineDepot’s marketplace. Longer-term, the company may welcome other parties to its club membership initiative.
Avoiding Chinese tariffs
In a statement to the market this morning, Digital Wine Ventures declared that it had “zero exposure” to the recent import tariffs imposed by the Chinese Government on Australian wine.
At the end of November this year, China imposed import duties on Australian wine – aggravating a gradually-worsening trade relationship.
So far in 2020, Chinese authorities have targeted various Australian imports including coal, sugar, barley, and lobsters amid a worsening diplomatic relationship.
Concerning wine, China imposed import tariffs of between 107-212%. The news has sent ripples through the Australian wine industry and has worried many local producers they may not be able to clear their stocks.
Digital Wine Ventures chief executive officer Dean Taylor explained that to mitigate the Chinese government’s decision, affected producers must clear excess inventory as soon as possible.
As a result, Mr Taylor forecast that the potential rapid clearance of Australian wine stocks would provide “further tailwinds” for Digital Wine Ventures and is likely to be “extremely beneficial” commercially.
“China currently imports about $1.2 billion of Australia wine each year. One of the key drivers of the growth of this market was the China-Australia Free Trade Agreement, which provided Australian producers a significant competitive advantage over other wine-producing nations through reduced taxes and duties,” Mr Taylor said.
“The tariffs now imposed will triple the price of some Australian wines, which undoubtedly have a significant impact on their competitiveness in that market. As a result, there’s going to be millions of litres of wine that will need to be sold in other markets.”
According to Mr Taylor, in tandem with the impacts of COVID-19 and the deeper shift to online buying, China’s decision is set to create a significant oversupply of inventory and provide “the perfect storm” for WineDepot to launch its direct-to-trade marketplace.
Expanding market coverage
WineDepot also plans to expand its addressable market by helping wineries sell their products through its marketplace, but also, enable to them to sell via a range of direct-to-consumer channels including online retailers and consumer marketplaces.
As part of this, WineDepot will operate on a “Costco-like” membership model that provides discounted pricing for larger purchases.
“Up until now, the focus of our Marketplace has been servicing trade buyers such as restaurants, bars, hotels, bottle shops and other licenced venues who often have very particular delivery requirements,” said Mr Taylor.
“However, we’ve recognised that the platform and fulfilment infrastructure that we have developed is also well suited to servicing corporates and businesses that purchase in larger volumes as well. Especially as our customer base now includes beer, cider and craft spirits producers as well.”
“We see the push into this segment as an excellent way to provide the producers that we are working with another way to help clear the expected oversupply of inventory stemming from the overnight collapse of the Chinese wine export market.”