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AT THE RECENT Australia Day tastings in London, Andreas Clark, CEO of generic body Wine Australia, announced its exports of wine jumped 14% to AUS$2.1bn in 2015, the highest growth in value since October 2007.
Clark also reported that Australian wine exports had grown in each of the country’s top 15 export markets in the year to December 31, 2015. The largest leap was China, Australia’s third-largest market, with a jump of 66% to $370m.
The US, Australia’s number one export market, was up 4% to $443m. The UK grew by just 0.2% to $376m. After China, Canada posted growth of 7% to $193m then came Hong Kong with 22% growth to $132m.
The Wine Australia Export Report December 2015 showed the value of exports increased at each price point, the largest being with wine FOB (free-on-board) value of more than $10 per litre. Sales of these wines grew by 35% to a record $480m and make up 23% of the value of Australia’s wine exports.
The report says bottled wine has been the key driver of export growth. Bottled exports increased by 17% to $1.6bn and the average value increased by 7% to $5.20 per litre.
SIGNIFICANT MARKER
It all seems extremely positive for Brand Australia, except for one significant market – the UK. Although its largest market by volume only managed tiny value growth, Australia still rules the roost with 22% share of the total UK market – but it is stuck in the £4-£6 price point. Around £5.20 for a bottle of Aussie wine is rubbish for a country that has pioneered the marketing of wine and moved it, in a general way, from the rich and the middle class in non-traditional wine consuming markets to a mainstream drink.
Research from wine group Accolade, which owns Australia’s and the UK’s most popular brand, Hardys, shows that Aussie wines are not only languishing at entry-level price points but the chances of getting more SKUs for more premium quality wines are diminishing as the multiple retailers consolidate and reduce their wine offerings, particularly for premium wines.
Prior to ADT’s opening, Accolade Wines, in conjunction with Wine Australia, presented an overview of the category in the UK. Accolade category development director Jane Robertson outlined the dire situation Australia faces in the UK.
Robertson said with Australia being the overall number one country, it has been used by the major multiple retailers to drive footfall, via deep discounting and half-price offers. The result was that consumers were used to getting Australian wine cheaper, invariably on offer.
To add insult to injury, Australia is poorly represented in the on-trade. This is partly explained by the nationality or theme of the majority of places to eat out. Probably worldwide, they are: French, Italian, Spanish, Chinese, Indian or vaguely American themed. Can you name an Australian restaurant?
ICON WINES
Rob Harrison, Accolade’s general manager, sales UK, added a word of warning: “We are in a good place but are we fit for the future? I am not sure we are where we want to be,” he said.
He sees the recent change in price promotions, the move away from deep discounts bogofs, half price deals, have largely gone and then range rationalisation along with the relative absence of on-trade listings as the major challenges for Brand Australia.
While the UK market seemed a bit doom and gloom in the Accolade/Wine Australia presentation at ADT, there was a mixture of realism and optimism out on the floor among exhibitors.
Negociants’ managing director Simon Thorpe MW echoed Harrison’s remarks. “I think the challenge remains the same as over the past three or four years. For the long-term health and sanity of the category, we need to move to more premium levels.
“The marketplace has become difficult. The recent moves of the supermarkets means less opportunity for premium. Their ranges have consolidated and there are fewer wines above £10 in large distribution,” he said.
“The challenge for the industry is to find distribution opportunities. The challenge is to ‘premiumise’. We have become a victim of our own success. We should do more on the gastronomic levels, not just wine by itself. More premium wine is drunk with food.
“We have a void in the middle. We do have icon wines. The well off and collectors appreciate that Australia does make world-class wines.
“We have to keep it fresh and find new things to look at. Australia has masses of great wines. We have to innovate to keep that strong,” said Thorpe.
Australian Vintage’s Julian Dyer MW agrees: “We have plenty of reasons to be optimistic. Australia is still the ‘big gorilla’. We are still growing. Australian Vintage has McGuigan, which is a top-four global Australian wine brand.
“There is a lot of pressure on price. We are expecting a normal vintage so demand and supply is relatively in balance. The on-trade does vex us but there aren’t a lot of Australian restaurants and most sommeliers are not Australian.
“The direction we want to go is quality and regionality. The trend is own-label and core brands,” says Dyer.
Adrian Atkinson is market manager, UK & Europe for Wakefield, which is owned by the Taylor family in Clare Valley. He was formerly with Pernod Ricard Wines UK looking after one of Australia’s major global wine brands, Jacob’s Creek.
He says: “I think we can see some green shoots appearing.” He points out that the value of the Australian dollar has dropped against the US dollar a that has made a huge difference to Australia’s competitiveness. He adds: “Any move to premium and regionality is perfect for Taylors.”
Chris Hancock, deputy executive chairman of Robert Oatley Vineyards, says: “The Australian wine industry is in an exciting period of transition. While it had suffered a downturn in perception and reputation, there are significant signs of a fight back on the quality front.
"Key players around the world are recognising our strengths of quality and diversity. Australia is placing much more emphasis on these aspects in place of being a volume supplier to the world. At Robert Oatley Vineyards we have always considered quality as paramount and believe that Australian wine is deservedly standing proud next to the finest wines in the world.”
Well said that man, although not everyone, particularly in the Old World, might agree.
Wine Australia CEO Andreas Clark told Drinks International at ADT that Australian wine shipped in bulk makes up 56% of total volume, with the ratio for exports to the UK being 84%. He suggested that may shift back as the weakening Australian dollar due to the faltering Chinese economy means bottling/packaging may switch back to Australia.
Kingsland Drinks is the UK’s leading packer and its buyer for Australian wine, Paul Braydon, tells DI: “A considerable shift in the rate of exchange would obviously reduce the cost benefit of bulk shipping and UK bottling. Kingsland Drinks has been bulk shipping from Australia for many years. When I started at Kingsland in 2010, the ROX (rate of exchange) against the US dollar was $1.70 and it was still cost effective then, and we’re at $2.04 now. There are also huge environmental and logistical benefits with UK bottling, so it’s not purely down to a dollars-and-cents argument.”
Switching to Australia worldwide, asked why China has posted such a significant growth, Clark says it was down purely to the Chinese discovering wine and starting the journey. He says: “The room (at a recent tasting in China) was full of young people, keen to know about wine. It is all part of the westernisation of the Chinese.
“Australia has a good reputation as a country in China. The Chinese see it as clean and green with fresh fruit and vegetables, dairy and seafood. We are seen as credible and reliable.”
He says Treasury Wine Estates, with its Penfolds brand and its iconic Grange, had posted significant growth. With the absence of any market research information, Clark believes the challenge is to find out where the wine is going and who is drinking it.
He describes the US market as “like geurilla warfare”, with Australia up against the traditional European wine-producing countries which have “big budgets with subsidies from Brussels”.
Guillaume Deglise, CEO of Vinexpo, commenting on IWSR research commissioned by Vinexpo to promote its forthcoming Hong Kong and Tokyo trade exhibitions, says: “There is a lot of potential for Australian wine in China. Before it was France only for premium products, but Penfolds is everywhere (in China). But people (in China) are looking for new brands from new regions. There is definitely potential.” Earlier Deglise had commented that, with the clampdown on extravagant gift giving and consumption, an importer in Beijing had commented to him that Bordeaux wines were now ‘passé’ among Chinese.
SUITE OF ACTIVITIES
Nevertheless, for the US and UK in particular, Wine Australia has what Clark describes as a “suite of activities”, such as tastings, masterclasses and food and wine matching, to raise awareness and emphase single varietal wines and regionality.
Wine Australia UK & European regional manager Laura Jewell MW says she and colleague Emma Symington MW are going to work with agencies and importers to conduct tastings with sommeliers and restaurateurs in an effort to get more Australian wine on to wine lists.
For the likes of Harrison et al, the wines of Chile, New Zealand and Italy have, to some extent, stolen Australia’s clothes by appealing to mainstream consumers with Sauvignon Blanc, Pinot Grigio and Prosecco.
It is all about easy-to-understand grape varieties, fruity (sweet), easy-to-drink wines led, in the main, by familiar brands. These values have been fundamental to Australia’s success – and still are.
Meanwhile at the premium end, the wines of Bordeaux, Burgundy, the Rhône, Chianti and Rioja hold sway, while in the mainstream there are the likes of Mendoza Malbec from Argentina, Marlborough Sauvignon Blanc from New Zealand and Cabernet from Chile.
So what has happened to Barossa Valley Shiraz and Coonawarra Cabernet?
On the one hand, brands such as Accolade’s Hardys continue to lead the market as it executes its Australian and English Cricket team sponsorships. But on the other hand, own-label wines in the UK have added to a big jump in performance and currently account for 63% of the total UK wine market. The average price point for Australia has moved backwards from £5.26 in 2014 to £5.20 in 2015.
The challengers have also managed to get more for their wines while Australian wine lovers in the UK are getting older and appear willing to pay more for their favourites.
POSITIVE NOTE
On a more positive note, Jancis Robinson MW in her Financial Times column recently said she commended top Australian Chardonnays to a Burgundian winemaker as an alternative to white burgundy. Apparently he was shocked.
She says: “Such progress towards finesse has been made by Australia’s best Chardonnay practitioners recently that I am now looking for serious alternatives to fine white burgundy in the cooler reaches of Australia.
“If you are familiar with the finest Meursaults, Montrachets and Chablis, you may think I have taken leave of my senses.
“But as a wild generalisation, at the moment I am finding more life, interest and certainly value in the best of the new generation of Australian Chardonnays than I am in the great bulk of white burgundies, which tend to cost at least as much.”
Robinson concludes: “All in all, Australian wine is unrecognisable compared with how it was a decade ago. I do hope some of those exciting new Chardonnays make it to the home of Chardonnay, Puligny-Montrachet.”
Accolade Wines’ Robert Harrison, sums up: “To increase the opportunity for consumers to trade up, we need to ensure we have the right portfolio available.
“We should all be focused on filling this gap, by extending our premium Australian portfolios of single varietal, regional wines, to drive consumers to trade up. Our William Hardy range has had good success and includes a Shiraz from Langhorne Creek, and Chardonnay from Limestone Coast.”
Wine Australia’s Clark concludes: “We believe Australia has been overlooked and is under rated. We need a sharper focus on premium wines.”
Accolade’s Robertson, in pointing out how far Australia has come, showed a comedy sketch from the 1970s extolling Aussie wines as something to get drunk by and not much else.
The last thing Australian winemakers want is to go back to ‘Château Chunder’.
