Australian wine on trade-up mission
Australia has long been head and shoulders above the other wine producing countries in UK volume and value sales, but sales have finally started to dip slightly. The only top 10 countries of origin in growth – New Zealand, Argentina and Chile – all have a higher average bottle price than Australia, so it is arguably time for the industry to come together to drive value into the Australia category to preserve its long-term health.
“The goal for us and Australia overall is to persuade people to trade up to areas where there is more profit, but also more interest and diversity,” says Simon Thorpe MW, managing director at Negociants. “There is very little profit through the supply chain at the UK average price point.”
He points to growing interest in China for Australian wines, which is pushing up grape prices, while the exchange rate is also putting a strain on the category. The only way to thrive going forwards, he argues, is to encourage consumers to look at £8-£10 in supermarkets and £12-£15 in independents.
“The amount of Australian wine sold at higher price points compared to Rioja or French classic regions, and some in New Zealand, shows there is work to be done,” says Thorpe. “There is a strong sentiment among buyers that it’s a worthwhile objective, and there is recognition of the great wine produced by the Australian industry at higher price points.”
His colleagues in the trade are in agreement. “Premiumisation” is still the buzzword for the Australia category and Julian Dyer, UK general manager at Australian Vintage, says: “One aspect of premiumisation is around consumer interest, and the other aspect is for the future of the wine industry. We have got to sell wine above £5. Not just me, but our customers.
“Everybody needs to sell wine above £5, because no one makes any money at those price points.
“We need to work with our customers to give clarity around the retail fixture so it’s easier to understand the hierarchies.
“We in the wine trade are terrible at signposting reasons to buy quality products. You just have to look at the success of premium spirits and beer to see that if you give the signposts and communication consumers do want that improved beverage experience.
“We talk about lightweight glass and freight and efficiencies, but we don’t talk enough about craft and quality in a complex category. We are starting to see signs of that among our customers.
“Take the recent Sainsbury’s range review – it took out 40% of wines below £6. Wow.
“We have launched Founders Reserve. The rrp is £10 a bottle and we have had to increase our allocation and make three times more in the past year because we can’t keep up with the sales coming through.”
Lisa Tovey, senior brand manager at Jacob’s Creek supplier Pernod Ricard, says: “The average price per bottle in the category is continuing to decline. This is clearly not sustainable for producers and we believe there is a big opportunity to drive value back into the Australian category. We continue to maintain our long-term value strategy, with a higher than average price of £5.81, ahead of the Australian average of £5.15.
“We feel there is a real need to attract new drinkers to help drive value back into the Australian wine category. We need to provide innovation such as Jacob’s Creek Double Barrel Matured to help add excitement back for wine drinkers and engage with them within three feet of the wine fixture. The quality of wines Australia has to offer needs to be highlighted to help get shoppers to go on that journey, starting with in-store engagement.
“Premium wines have a huge role to play for retailers and it’s great to see so many embracing this trend and investing in their offerings. If premium wine is not available you are closing the door to potential sales when consumers are more likely to trade up.
“We would urge retailers to have confidence around premium. Your range does need to include premium wines in order to reach the broadest demographic of shoppers and to drive value into the category.”
Thorpe is encouraged by soaring sales of the fine wines in Negociants’ portfolio. “We have never sold as much wine to the really fine wine scene in London as we do at the moment,” he says. “That’s an indication that people enjoy and trust Australian wine at those very elevated prices. That’s a really positive sign. If people are spending £30-£100, the logic would suggest that would trickle down, having access to those customers on their weekday shop as well as their special shop.”
Katarina Luciakova, brand manager for Robert Oatley at Hatch Mansfield, is convinced Australia will rally. “Although there has been a dip in Australian wine figures, we don’t see this as a long-term trend,” she says. “The country and its wines are still number one by volume and value in the off-trade and enjoy a strong consumer following.
“That said, further consumer education and awareness should always be at the forefront of any region’s strategy. The Wines of Australia UK team does a great job on this front, hosting educational masterclasses to educate opinion-makers and buyers who will influence consumers.”
Adrian Atkinson, European market manager at Wakefield Wines, agrees, adding: “Markets are cyclical. I’m really positive for the UK. Perhaps the premium opportunity is being dampened slightly by Brexit and recent consolidation of ranges, but if one delves deeper into the export stats one sees the continued growth of higher value wines in the UK, but offset by sharp declines in the lower priced bulk wine exports.
“In 2016 bottled wine exports to the UK increased by 6% while bulk exports declined by 14%. This is mirrored in prices of wine exported. Wine under $5 per litre declined by 10%, driving the overall declines we are seeing. Exports of wine above $5 per litre grew by 23% and over $10 per litre by 25%.
“We’ve got to remember we are entering a period when consumers are being enticed into Australia for the first time. A generation of consumers may have turned their back on Australia as it was what their parents drank, but my sense is they are now looking at Australia in the same way as a group of younger consumers have looked at Argentina.
“I urge the trade to think in the same way and think of refreshing the Australian offering to reflect the desire for these consumers to discover their Australia, not just what their parents were discovering in the 1990s and 2000s. Perhaps it’s time for a further refresh of what the consumer is being offered by most of the larger retailers.”
Dynamic and diverse
OLN asked suppliers if they believe UK consumers have a strong enough awareness of how dynamic, diverse and interesting Australian wine is, and Luciakova says: “As the number one wine category, it is clear the British public has confidence in Australian wine. Together with easy-to-understand labelling and use of familiar varieties, it is often a safe choice for consumers. That said, the safe choice might not exactly represent the dynamism and innovation that is happening across the region, such as improving quality of the wines, use of unusual varieties or development of lesser-known regions.”
Laura Jewell MW, UK director at Wine Australia, is keen to highlight the strong growth in exports to the UK of unusual varieties. Touriga Nacional is up 575%, Fiano is up 273%, Vermentino 185% and Sangiovese sales have grown 396% in the past year, according to government export figures. At the recent Australia Day tasting Negociants was pouring an Assyrtiko and North South Wines was showing off a Durif.
“Australia, although long-established on the UK market, is a region of continual innovation and in recent years we have seen the emergence of European varieties such as Fiano, Vermentino, Grenache, Tempranillo and Touriga that are sure to catch the imagination of wine drinkers in the UK,” says Luciakova. “Also, we shouldn’t forget about high quality, premium Australian wines, with fantastic ageing potential that put this region firmly on the map among the usual hall of fame of age-worthy producers.”
Atkinson urges the trade not to get too carried away with weird and wonderful varieties. “I’m a great believer in simplicity of message, which is not the same as dumbing down,” he says. “The growth of categories such as Spain through Rioja, Argentina through Malbec, New Zealand through Sauvignon Blanc and Italy through Prosecco is something to take note of.
“I’m yet to be convinced of the need to go chasing the off-Broadway varieties just yet. In my 25 years being involved in the industry, Australia has never had a better offering of Shiraz, Chardonnay and Cabernet than it does now. We should focus on these. For me Australian Chardonnay or Cabernet are the vinyl of wine. I won’t say what is the CD. These varieties are growing and consumers love them – we just need to give them a collective push. The crop of 2014s, 2015s and 2016s are stunners.”
Thorpe of Negociants adds: “The Artisans of Australia tasting had a big impact on the trade’s perception. It showed how many interesting things and characters there are in Australia and that are available in the UK market. That’s something we need to continue to push, pinpointing regions and classic styles that are world-class examples of grape varieties. There is definite appeal to those things.
“There’s a move to show all this diversity and the funky stuff. But there is also a lot of wine that is not necessarily funky that is particularly good value. There is all this pressure but also all this opportunity. That’s the greatness of Australia.”
Independent merchants are not really covered by firms such as Nielsen and IRI, so it is difficult to get a handle on their sales breakdown. But the polls conducted by OLN and the large number of interviews we conduct with indies shows that, for some, Australia is a huge category, while for others it barely registers.
Suppliers have noticed this trend too and are trying to chip away at this sector in a bid to boost sales.
“Australia under-trades in the independent retail sector and there are certain retailers that do extremely well with Australian wine at a premium level and others that don’t,” says Simon Thorpe MW at Negociants. “It’s an interesting position because the type of consumer who shops at independent retailers generally has the motivation and interest to bother to go rather than do it as part of their weekly shop at the supermarket.
“If Australia is popular in one retailer and not another it’s probably due to the attitude of the retailer. Our challenge is to persuade the retailers under-trading in Australia to love and cherish it.”
When asked how he might do that, he says: “There is no short cut. It’s about winemaker visits, tastings, it’s about banging away. Australia is a long way to go. We can’t just take people there on a long weekend. We have to bring Australia to them. It’s about finding something that engages those retailers enough to persuade them to stock it. It’s about asking people to be ambitious in the wines they sell and supporting that bravery by having winemakers visit and engage with their customers.”
McGuigan Wines is targeting UK independents with wines showcasing regionality, distinctiveness and personality after winning IWSC Winemaker of the Year for a record fourth year running.
Chief executive Neil McGuigan says: “We need to focus on the independents. We used to have two people selling to UK independents. Now we have five. We should have 25, but we are working our way through that, because independents and on-trade is something we can really focus on.
“When we win those trophies, people around the world listen. They are serious awards. The opportunity to sell more expensive wines with more personality in independents and the on-trade has never been greater.”
“We need to take that opportunity and drive it and give them premium, super-premium and iconic wines, and we will be seen as a wine country that can deliver. We don’t have enough high-quality, low-volume wines in the UK market yet, and we need to do that through focusing on engagement with the consumer.”