The Truffle & Wine Co. - Case Study
When people think of one of the world’s most desirable and rarest culinary gems, truffles, they generally don’t think of Australia, let alone the small forestry town of Manjimup, 300 kilometres south of Perth. The town is home to the most successful truffle farm in the Southern Hemisphere – The Truffle & Wine Co. – a significant contributor to the young Western Australian truffle industry’s growth. The state accounts for 85 per cent of Australia’s entire truffle output with its 2016 exports estimated to be worth up to $8 million.
Establishing itself as the world’s largest single producer of Tuber Melanosporum (black Perigold truffles), The Truffle & Wine Co. exports to more than 40 countries. Its produce is used by some of the world’s best restaurants and endorsed by leading international chefs, including the first Australian chef to achieve two Michelin stars, Shane Osborn. The truffle farm (known as a truffière) not only produces truffles from its 40 kilometres of truffle trees but also multi-award winning wine from 12 hectares of grapevines.
The journey, from a humble beginning of friends investing in a dream of establishing a truffière in 1997, to unearthing the first truffle in July 2003 and moving to the forefront of the global truffle industry, has not been without its challenges. However, The Truffle & Wine Co. team has approached these with a distinct philosophy encompassing patience, trust and flexibility – all of which were needed when setting up in Hong Kong.
“Research we conducted in 2010 highlighted that less than two per cent of the world’s top chefs knew about Australian truffles. Today, Australian truffles are prized by international chefs, due to the counter season to the Northern Hemisphere,” says Alf Salter, Chairman of The Truffle & Wine Co.
Hong Kong is The Truffle & Wine Co.’s fifth-largest market overall and second in Asia after Japan. “Currently, we supply 60 per cent of all of Hong Kong’s imported Australian truffles with one of our clients being the three Michelin-starred restaurant Lung King Heen at the Four Seasons Hotel,” says Salter. However, he stresses that such success was not instantaneous. “We have been in Hong Kong for more than six years but only had a strong presence there in the past three years.”
Key learnings
- Never assume – be open and not afraid to fail: Being willing to withdraw temporarily after entering the market was critical to The Truffle & Wine Co.’s long-term success in Hong Kong.
- Nurture the ultimate competitive advantage – a strong relationship with your distributor: The importance of your distributor to both your sales and your brand cannot be underestimated. Ensure you develop a relationship founded on trust, communication and collaboration.
- Develop your clients’ understanding and knowledge of your premium product: Hong Kong is an easy market to export to, with great opportunities strengthened by the market’s hunger for high-quality Australian food, but you still need to focus on building your clients’ experience with your product.
- Preserve your brand with unique initiatives and develop global partnerships: The Truffle & Wine Co. established an ‘Ambassador’ program to harness the validation of leading chefs and build their brand internationally.
- Success is an ongoing journey – seek out new avenues: Recognising the increasing competition in the international truffle market, The Truffle & Wine Co. is pursuing new opportunities including entering the European truffle season and engaging in research and development.
Don't make assumptions - be open to opportunities and also to failture
A fear of failure is often one of the biggest concerns for businesses entering a new market. What happens if you choose the wrong local business partner or distributor? For The Truffle and Wine Co., acknowledging that they didn’t get it right first time was key to their success in Hong Kong.
“Don’t be afraid to take your time in finding the right partner and withdraw from the market for a while if you have to,” says Salter. “Initially, when we entered the Hong Kong market, we didn’t have the right partner and tried out a couple before we found our current one.”
Over the first two years the company’s Vice President of Marketing regularly travelled to Hong Kong to conduct research and seek out the right distributor for the company’s premium Australian truffles. “It’s important not to get overly excited and blindsided by the large potential of a market. Keep your eyes wide open. You have to continue working at all the key points of the commercial relationship,” Salter says. “Ensure your plans are flexible and free to be adapted when first establishing yourself in a market, then as you move forward and become settled you can shift towards more formalised strategies.”
This adaptability was particularly important when seeking a new Hong Kong distributor. “We always seek out up and coming distributors, steering away from large companies. This enables us to frame the relationship from the beginning to be mutually rewarding where we help grow their business and share our own marketing and international experience,” says Salter. “It’s vital to understand the way they work, who are their most important clients and how they will develop your brand in-market.”
The Truffle and Wine Co. team, including Salter, spend a lot of time meeting with distributors, watching how they do business and speaking to their clients. “We don’t start off with a strict contract with a new distributor as that way if we find they aren’t a correct fit, we can end the partnership. They will demand it upfront – but hold off on offering exclusivity until you’re sure you have the right distributor.”
Nurture the ultimate competitive advantage - a strong relationship with your distributor
The importance of building rapport with your distributor – even during a trial period – and maintaining and growing the relationship cannot be underestimated. In Hong Kong, where competition can be intense and market trends evolve fast, an excellent distributor loyal to you is one of the best competitive advantages an Australian business can have.
"We have been working with our current Hong Kong partner for three years and he is doing a great job in the market and building the company’s ‘story’ and brand. We work very closely together and share costs,” explains Salter. “Distributors in Asia want to see you and know you, understand who you are and have strong trust with you – you need to regularly communicate with them, go to Hong Kong and build client relationships with them. You also have to be willing to invest in your partner and support them.”
The team visits Hong Kong at least three or four times a year and communicates with the company’s Hong Kong distributor every week. “Don’t make the mistake of assuming the local partner will sell or prioritise your product – they often have several products and distribution relationships. Look for the leverage point. You have to build that relationship, demonstrate to them how you can help their business be a success and convince them why their focus needs to be on your product and clients. Transparency is critical,” he says.
“From day one, I asked our Hong Kong distributor what were his goals, who were his biggest competitors and which restaurants were his dream to sell the product to. We then went to those restaurants straight away, before existing clients, and within two weeks had a deal with his ‘ultimate’ client.
“This demonstrated our commitment to the distributor’s business success. We support him through organising launch events and media coverage in Hong Kong. I also include him in all meetings and discussions related to Hong Kong, and I’m constantly discussing his goals and seeking out new ways to invest in the relationship.”
Such support has helped The Truffle & Wine Co. overcome challenges including false claims by competing distributors that they sold the truffière’s exclusive product. “We’ve been able to build such a strong brand and reputation with our partner in Hong Kong that now everyone knows that if you’re buying a The Truffle & Wine Co. product, there is only one distributor you can get it from,” Salter says. Furthermore, The Truffle & Wine Co. ensure they control branding, marketing and product training to support this strong market position.
“We’re very involved with our Hong Kong clients, working with them on integrating truffles into their way of cooking and on their menus.”
Develop your clients' understanding and knowledge of your premium product
It’s important not to make assumptions when it comes to developing your client base in Hong Kong. Many people wrongly dismiss Hong Kong as a substantial market for premium food and beverages. “The greatest advantage of the Hong Kong market is its internationalisation and large presence of leading expat chefs,” says Salter. “It has a heightened food culture, with a passionate appetite for high-quality imported food presenting a great opportunity for Australian agribusiness.” Importing 95 per cent of its food, Hong Kong is a free port (with no tariffs) and a re-export hub for mainland China, Macau and many of its Asian neighbours.
However, Salter says it is important to recognise Hong Kong’s Chinese heritage, especially when it comes to restaurants, cooking and food. “Again – never assume. Your client may not know your product or know how to cook with it,” he explains. “We’re very involved with our Hong Kong clients, working with them on integrating truffles into their way of cooking and on their menus.”
This education and support is particularly important due to the cost of wasting such a premium product. Additionally, if the product is used incorrectly, it could not only negatively impact The Truffle & Wine Co.’s brand, but also the Australian truffle industry, and the chef’s and restaurant’s reputation.
“You need to be delicate and ensure you don’t tell a chef how to cook, but rather collaborate and share knowledge and experience through extensive product training,” says Salter. “Such care and attention has the long-term benefits of building rapport and securing a stronger relationship with your client, making them feel more connected to your product and brand.”
Preserve your brand with unique initiatives and develop global partnerships
Recognising the advantages of strong relationships with leading chefs in-market, the Truffle & Wine Co. has an exclusive international Ambassador program. “Our Ambassador program is very relationship-based and is different for each chef,” explains Salter. “We find a chef we want to work with, meet and get to know them and their business, understanding what they are looking for in a partnership.
“They [chefs] are not product salesmen and we don’t engage in traditional endorsement agreements. We become as important to the restaurant as they are to us, with us and our distributors working very hard to promote the restaurant, holding various media events and attracting more diners.
“We have two Ambassadors in Hong Kong. One is Perth-born Chef Shane Osborn whom we previously knew in London and approached as soon as he opened his restaurant Arcane in Hong Kong.
“Our other Ambassador is the biggest user of truffles in Hong Kong – Chef Umberto Bombana heads the only Italian restaurant outside of Italy to be awarded three Michelin stars.” Bombana introduced the world’s most expensive food product – the white truffle – to Hong Kong menus, making his endorsement a highly valued advantage over competitor truffle suppliers.
With several leading chefs taking part in the Ambassador program globally, it helps develop and maintain the The Truffle & Wine Co. brand in Hong Kong and the region, while building an esteemed reputation around the world. “Our Ambassadors host and attend events where they demonstrate to other chefs in the region how they use our product and the benefits for their restaurant business,” Salter explains. “We find this perhaps the most invaluable marketing approach due to the respect and value chefs place on peer endorsements. For example, recently we had a top Korean chef attend an event in Hong Kong – he could see firsthand the quality of the product and how it could work in his restaurant as it has done so in some of the best restaurants in the world. Such a personal interaction assisted us to further grow our business in Korea.”
Success is an ongoing journey - seek out other avenues
As the international truffle market becomes increasingly competitive with Australian and other countries’ truffières’ trees maturing, The Truffle & Wine Co. is actively pursuing new opportunities. However, expanding a premium truffle business is a delicate process. Quality cannot be compromised and the supply relies significantly on uncontrollable weather conditions and a short season.
“In 2015, demand substantially outweighed supply. While such demand can result in higher truffle prices, careful consideration is required when expanding into new markets as the priority needs to be supplying your existing clientele base,” says Salter. “Keeping this in mind, we are planting an additional 3,000 trees and are focusing on further expanding into the truffle product industry.”
Supporting these efforts is The Truffle & Wine Co.’s active engagement in research and development. They employ a full-time scientist, and participate in global and Australian partnerships. These centre on knowledge sharing and developing a better understanding of the conditions most suitable for successful truffle production. The company is also currently in discussions with other Australian truffières about the possibility of consolidating and selling products together.
Seeking new opportunities in the Hong Kong market is another focus of The Truffle & Wine Co. In 2014 they successfully trialed importing truffles from Europe to the territory, offering an impressive year-round supply of premium truffles to their Hong Kong client base. Now a permanent service, The Truffle & Wine Co. hope to acquire a strong market share of European truffle sales in Hong Kong and replicate this in other markets in the region.
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