Keeping Oz wine on top

22 January, 2010

How can Australia stay number one? OLN and Australian Vintage invited some of the trade’s biggest names to discuss its future.

With the Australian trade tasting less than two weeks away, OLN teamed up with the name behind award-winning brand McGuigan, Australian Vintage, to host a round table on the future of Australian wine. Ten industry experts came together to discuss the direction Australian wine should take in the UK.

Rosie Davenport, OLN: How do consumers perceive Australian wine?

Paul Schaafsma, Australian Vintage: I think what Australia has always tried to do is deliver what customers want – if you go back and ask why we became relevant and so big so quickly, it’s because we delivered quality, consistency, flavour and trust.

Dan Jago, Tesco: If you went up to someone in a Tesco and asked them what Australian wine meant to them they would say Jacob’s Creek.

Jamie Hutchinson, the Sampler: We sell on regionality, personality and value for money but not on a price-point basis. A lot of consumers of fine wine – which is a small part of the market – are moving away from Australia because they say it’s lacking in personality and elegance.

I think there may be a return to that elegance, and a large number of producers who produce great wines in Australia, but the marketing message has made selling it at the top end more difficult rather than easier.

Buttery Chardonnays aren’t what you usually find now and a 14% big Cabernet Shiraz isn’t something my customers want to taste or buy. It’s about how Australia can provide something that is different to other wines.

Neil Bruce, Waverley TBS: There are some fairly mixed messages going out to consumers. I think the perception of brand Australia is a pretty muddled one.

RD: What are the main challenges for the Australian category?

PS: Australia has gone through a torrid time with oversupply and drought, and now the exchange rate, but given its size and infrastructure, we can’t ignore the commercial wine side of the business.

The wine community in Australia is always talking about up selling. It has this perception there’s a larger audience that will spend more. We know people are spending between £4-£8 – let’s get them excited in an offering that’s going to keep them interested in Australia.

We have to look at things such as lightweighting glass to reduce packaging weight.

Christopher Carson, GIV: You don’t build on dodgy foundations. The simple fact is there are so many problems in Australia relating to overproduction and problems with water – which is going to get extremely expensive and in short supply – and that’s going to knock the industry.

You need to get some of the stuff back at base sorted out and start uniting the industry. It’s sadly fragmented. The whole of Australia needs to be content – the volume, mid-range and the premium bit. I see more time being spent on regionality and actually walking away from the fundamental problem. This issue of over-­production isn’t being addressed – the amount of extra juice sitting there, which will still be there after the next vintage, will mean problems in Australia for another two or three years.

PS: There has been some significant rationalisation in terms of growers walking away – we’ve been talking to them over the past couple of years about the fact we couldn’t take all their wines. Other large companies have also been talking to growers and we will see a significant reduction in vineyards. I think we’ll be looking at pulling apart wineries and reducing the amount of facilities. If we leave them, people will come in, buy them for nothing, come into the industry and undercut. The cycle would continue.

DJ: If the Australian wine industry believes by restricting availability it’ll be able to get its prices up, they’ve got another thing coming. You can’t sell anything unless you’ve established a consumer need and a reason why they should pay for it. This is the challenge: how do we make Australia great, so when prices do go up consumers are confident to stay with it.

CC: There used to be a steering group for the Australian Wine Bureau in London that not only had the larger companies on it, but medium-sized and smaller ones. It was a very balanced approach and it recognised that the big engine-room producers are going to be the ones which can turn the ship. The big players can change trends. Maybe you’re not getting the really senior people coming along you might want, and it’s very difficult to get that strong influence to relay back to Australia.

Some of those values got lost and now we are seeing the small wine companies having much more influence on the way Wine Australia is directed. The paymasters are the big boys.

The hand on the tiller of the UK, Ireland and European marketing strategy has got to be much more of a UK hand, not an Australian hand. The Australian hand is oriented far too much on production issues and not about the consumer.

Lisa McGovern, Wine Australia: Apart from Australian Vintage all the major players are members of Wine Australia. Those companies are fully supportive of the mainstream and fine-wine programme activities.

I’ve been in the job for nine months and I feel I have galvanised things. Paul Schaafsma and I are still talking about moving forward and I’d like him to feel there is relevance in the Wine Australia programme for his brands.

Australia in 2010 isn’t the Australia it was in 2000. I wouldn’t have taken the

job if I didn’t think there was a fantastic opportunity for the category but it has to do so for everyone and that’s a challenge.

I’m not interested in supporting price-driven promotions because that’s the role of the brand owners in my opinion.

Angela Mount, industry consultant: My frustration over the years at Somerfield was there were budgets available for generic promotions, such as Australia Month one year, but by the next the strategy changed. All that money was invested in either the independents or flying sommeliers to X,Y and Z.

My question is how much of those funds are going back into mainstream retail, the main gatekeeper to the large proportion of consumers buying Australian wine. That’s the only way we can get that brand message across – by directly doing something in the mainstream environment.

DJ: As a large commercial organisation we have a responsibility to meet profit targets. We require the best bidder to come forward and if Australia doesn’t do it, someone else will.

We’re not philanthropists. Our job is to deliver what the consumer needs at the best possible price.

RD: Is the regionality campaign the right generic message?

JH: I think it’s very difficult to spread the message of regionality cost-effectively across the small number of people who are going to be interested – it’s more a case of a hand sale or individual promotion. My concern is if you take a step back into marketing Australia as a whole you may well fix some problems with the commercial [branded] side, but you may damage the premium side.

NB: Sadly, regionality in an Australian context is a bit like South African bio­diversity – I think it’s flogging a bit of a dead horse. I cared passionately about regionality when the shoots were starting to emerge but then they got squished and flattened by the mass amount of discounting happening after the good years.

LMc: I think you can use regionality as a tool to communicate how styles are evolving. It doesn’t mean we stand up and talk about 62 geographical indicators. It provides a platform so you can say: “Look at Chardonnay and how it performs in Adelaide Hills, in Margaret River.” Fine- wine consumers are interested to know the difference between those so they can make a confident decision about the wine they like.

Allan Cheesman, industry consultant: I don’t think you should turn away from regionality in Australia. Chile has done it with Leyda, San Antonio, Casablanca, Bío-Bío and South Africa is beginning to do it with Darling and Elgin. It’s another point of difference to stop the New World from being homogenised.

DJ: Once consumers have moved to a level where they are prepared to spend between £8-£15 a bottle they are going to find out a bit more about it themselves, be more discerning and selective. They’re going to know that if something is £4 or £5 in a supermarket it’s unlikely it’ll be something they are looking for if they have a high disposable income to spend on wine.

JH: Originally the message for Australia was you could get richer, well-made wine at a price point you couldn’t get anywhere else. The problem is you can get that from a large number of other places, so how do you change the message so it’s going to enable both the commercial and premium sectors to continue?

RD: What other approaches could work?

LMc: Currently there is an initiative called the Wine Restructuring agenda, which is a collaborative initiative between the winemakers federation, the AWB and grape growers. That’s a series of seminars that are going to take place this month in Australia addressing the issue of oversupply. It’s going to clearly put the extent of the problem on the table and advise growers and winemakers they need very robust business plans and long-term strategies of what they are doing with their production to stay in business.

PS: I would love to put my hand up for an Australian promotion going through Tesco or any of the supermarkets that co-ordinated a group of like-minded suppliers. It would be interesting for the large companies which sell in the commercial £4-£8 price band to work together under some common banner.

The generic body can’t keep the boutique winegrowers and the larger companies happy because you’re talking to a different audience. There’s enough camaraderie in the wine industry in Australia for people to work together.

It would be interesting to have a generic campaign in the off-trade focusing on the stylistic evolution and wine being fun.

Laura Jewell, Spar: You’ve got the group of families that got together [under Australia’s First Families of wine banner, including McWilliams, Brown Brothers and D’Arenberg]. That’s a slightly different level but it’s competitive collaboration. It’ll be interesting to see what comes out of that – they’ve only just started.

You could get that on a bigger scale. If you look at New Zealand and see what it is doing in terms of overproduction on scale, winegrowers are working together to try and contain overproduction for 2010 in order to protect some of the pricing.

AC: What we shouldn’t lose sight of is that Australia has a £1.1 billion turnover in the off-trade. Considering where it came from and where it sat in the 1980s and 1990s, it’s not doing too badly. The wine market is 140 million boxes, so there’s 60-odd million cases that aren’t covered by the multiples. The direct business and independent sector are growing tremendously and there are some good operations around the country and very good symbol and convenience formats.

I’m not sure how Wine Australia looks at those but there is a tremendous bread basket out there and the average bottle prices give good opportunities outside the multiples.

AM: What works are shelf barkers recommending wines – it could be Joe Bloggs, consumers don’t actually care who it’s by, as long as it has won a medal and someone in authority has written about it. That’s what is going to sell it. It’s that point of focus in a huge, often confusing, range.

DJ: I don’t think Australia is in any way broken, it’s in rude health. Brand Australia is slightly monocentric on a [premium] target that is a little bit too high up the tree.




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