Identifying priority markets and strategies
The Australian craft distillery sector has grown rapidly over the past decade from a dozen producers primarily making whisky to now over 350 distillers making a broad range of spirits. Victoria’s distillery sector alone has grown to 188 distilleries from none in just over fifteen years.
Sapere was commissioned by Agriculture Victoria to prepare a report for the Victorian distilling industry to identify a set of priority markets with demonstrated export potential for Victorian distilled products, including the development of market entry strategies for each market identified.
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Key domains for assessing markets
To identify prospective markets for Victorian distillery businesses, we collated information from a range of sources on a long list of markets to determine the advantages and disadvantages of each market as a potential export target for Victoria’s distillery sector.
Based on this analysis, we identified seven key domains which are important to consider for potential exporters.
Domain | Key factors |
---|---|
Demand and market size | What has been the sales and import trend for different types of spirits over the past 5-10 years (based on available data)? |
Consumer profile | Are consumer preferences in this market supportive of the spirit? |
Competition | What is the level of competition in the market? |
Regulatory and market access | Do current regulations support export growth for the spirit? |
Trade promotion | Are there existing trade promotion activities that could be leveraged? |
Market structure | How simple or complex are the distribution channels for spirits in the market? |
Ease of doing business | Are there cultural or market factors that impact ease of doing business in the market? |
Other | Are there any other factors that could support/hinder exports into this market? |
Classifying prospective markets
Given the structure of the spirits market and the current size and scale of Victorian distillers, how prospective a market may be for an exporter will heavily depend on factors such as how well their spirit’s niche fits a market’s preferences as well as any relationships and connections they may have in market. Based on this, markets can broadly be classified into two types:
- Markets that appear to have positive market conditions for potential first-time exporters to consider
- More complicated or longer-term markets may be more challenging for exporters, but with the potential for larger returns.
Type of export markets | Markets of this type analysed in this report | Other markets that could be classified as this type |
---|---|---|
Markets for first-time exporters | Singapore, Taiwan, China | New Zealand, Hong Kong, Malaysia |
Markets for more mature exporters to consider | India, United States of America | United Kingdom, UAE |
Considerations for prospective exporters
In addition to identifying priority markets, Sapere also identified some important considerations for prospective exporters across the key phases of the export process.
Export Phase | Considerations |
---|---|
Choosing an export market | • Readiness for export – achieve success at home before committing to overseas expansion. This builds your reputation and helps create brand ambassadors of Australians abroad who can recommend your product • Time and resources are required to successfully export – be prepared to be in the market for at least 3-5 years • Local business culture and customs – it may be necessary to adapt your style of doing business to forge relationships in a new market. |
Determining product-market fit | • Recognise diversity in markets – some second-tier cities may have more suitable distribution channels or competitive landscapes • Develop a unique value proposition to differentiate your product from the competition (whether through pricing, quality, marketing, design or other unique selling point) • Target a particular product set to a defined consumer segment, tailored and responsive to their tastes • Know your final price inclusive of tariffs, taxes and freight – and where that places you in the market and your competitors. |
Defining trade structures and distribution | • Find a suitable import partner with knowledge of your product category, access to distribution channels and ability to assist with compliance requirements • Consider the different merits of different distribution channels: •Bars and restaurants – growing your brand through established taste-makers, who become ambassadors for your brand •Retail – more feasible with existing market presence, easier to pitch to retailers once you have hospitality experience •Travel retail – important channel in major transit hubs such as Singapore and Hong Kong. Tends to favour premium products. |
Customs, clearances, operationalising in-market | • Customs and clearance processes can vary heavily by jurisdiction; lead times can be opaque, with complex requirements • Consider dedicating resources and possibly hiring, training and basing staff in-market to service and manage importers and distributors in the market. |
Long-term brand building | • A marketing budget is critical – expect to spend between 15-20% of your net sales revenue matched by your importer/distributor – and potentially higher in the first few years to establish your brand • Merchandising, events, competitions are all options to establish your brand in market • Importers and distributors are not brand builders – ensure you are prepared to spend time in market focused on brand-building • Consider opportunities to innovate within market – packaging innovations, releases with seasonal events, limited edition launches. |
A summary version of the report is available here: Summary Report
Our team included:
- David Graham
- William Li
- Chris Graham
- Anna Schuck
- Dr Jamie O’Hare
- Professor Kym Anderson