Distribution China and Hong Kong
According to 4 () distribution channels are still the key factor to success. One has to distinguish between on-trade (restaurants, clubs, pubs) and off-trade channels (supermarkets, internet, wine shops). Since the Chinese show a slight preference for on-trade channels, especially concerning exclusive products such as wine, E&J Gallo Rosé concentrates on them (). According to Hollensen (), Gallo Rosé as high quality product distributes selective. Therefore a range of intermediaries has to be chosen carefully. Mid to high price restaurants which offer Western food and international pubs and lounges build a trading base. Once the wine is established, cooperation with high class Chinese establishments could be considered. However, a presence in high segment supermarkets will be obligatory to make the product accessible. 9 () stresses the rise of other off-trade channels, such as specialty wine stores and online wine-sites. The former is particularly important for new Chinese wine drinkers. The latter will be a part of Gallo’s distribution chain as soon as it reaches a higher market share.
As outlined by 13 (), the Chinese distribution system is improving slowly. To set up in Hong Kong and coastal areas of China is relatively easy, as the infrastructure is excellent (). Direct exports with the support of an executive office are sufficient. Whereas further expansion will conflict with trade barriers and local protectionism. Areas have to be treated separately and high transaction costs are necessary to build own distribution channels. However, the advantages of higher reliance and lower control costs are obvious. Import taxes in China a lowered according to WTO agreements (9), but still 14% (10) plus value-added and consumption tax. Whereas Honk Kong tries to create a wine trading hub with the exemption of import taxes since 2008