How Gliding Eagle works

When we discussed the WineDirect case last week, we heard Joe talk about how his company was tapping the burgeoning China market by providing DTC shipments through Gliding Eagle.  Given the growing interest of Chinese consumers on Napa Valley wines and their strong buying power, it is definitely a market no one wants to miss.  But as Joe has explained, shipping wine to China involves complicated customs procedures that usually take a long time to complete, WineDirect therefore partners with Gliding Eagle which not just takes care of the paperwork, but also goes one step further to ensure the authenticity of the wines it ships to give consumer the added confidence, one thing that matters a lot to Chinese consumers.

I have visited Gliding Eagle's website and a few other websites to understand more about the company and its mode of operation.  The company was founded in California in 2010.  Its value proposition is to link up "premium American brands with Chinese consumers" through its DTC model built upon a complete traceability feature.  It seeks to ensure channel transparency and product authenticity.

At the moment, the company primarily handles premium wines and natural consumer products.  In the case of wine, the collaboration with WineDirect began in December 10, 2015.  Once an order (to China) is received, wine will be distributed to Gliding Eagle's warehouse.  The orders will be packed into shock-proof shipping boxes then "consolidated into full pallets".  Customs declaration is done on pallet basis and only one importation fee is charged for the entire pallet.  This significantly simplifies the procedures.

To address counterfeiting concerns, each bottle shipped is applied an authenticity label with a 12-digit  tracking number of QR code for online validation by the end consumer when he/she receives the bottles.

Next the pallets are shipped to Gliding Eagle's custom clearing brokers in Hong Kong by FedEx.  Here Gliding Eagle and the broker will handle all customs paperwork, and arrange for delivery either in Hong Kong or for onward delivery to China.

In this respect, I can see that Gliding Eagle and its customs broker have taken advantage of Hong Kong's recent policy change adopted since February 2008, whereby all import duties for wine were eliminated (i.e. zero-tariff to Hong Kong).  To further enhance Hong Kong's role to become a regional wine trading and distribution hub in Asia, the Hong Kong Government rolled out with the Customs of Mainland China facilitation measures for wines imported from Hong Kong in June 2010 (the year Gliding Eagle was established), which allowed pre-valuation of wine and shortened the time required for handling wine imports at major Chinese ports.

As a result, the delivery time from the U.S. to Hong Kong would take about 3 days and about 12 to 14 days to other part of China, as explained by the figure below.

Source: https://www.gliding-eagle.com/us/wine

Although this model seems to have worked well in recent years after Hong Kong's policy change mentioned above, and we have also seen massive increase in re-export of U.S. wine from Hong Kong to China (i.e. the model adopted by Gliding Eagle) - in 2014, the total re-export value was about US$190M (YoY growth of 86.9%) and the same figure in 2015 was US$516M (YoY growth of 171.6%), but since the 2nd half of 2016 we have seen some slowing down in the growth rate.  As a matter of fact, the YoY figure decreased by 47.8%, 35.8% and 32.6% for September, October and November 2016 respectively.  The recent slowing down of the Chinese economy could have been a reason for that decline but suppliers like WineDirect and intermediaries like Gliding Eagle may wish to find out more what this really means for them and their businesses, and how they should respond properly, if they also detect a similar trend in their numbers.  


Sources of information: 
Wine Hong Kong http://www.wine.gov.hk/en/statistics.html
Gliding Eagle https://www.gliding-eagle.com/us/wine
"Napa Valley's Vin65, Gliding Eagle seek to ease China wine direct-to-consumer shipments"
http://www.northbaybusinessjournal.com/northbay/napacounty/4906226-181/easy-china-wine-direct-shipping?artslide=0