UK on-trade key to Aussie premium push

The UK on-trade is key to helping Australia reposition its wines at higher price points, a vital step in securing the category’s long-term future in this market, believes McWilliam’s export director.

McWilliams’ Tumbarumba Chardonnay from its Appellation Series

Speaking to the drinks business at the London Wine Fair last week, Mark Hely, McWilliam’s export director, said a lot of Australian winemakers had “given up” on the UK market, believing it to be “too tough”.

“The US market is alive and happening because the currency is back in balance, so they are looking at different opportunities and developing other markets,” said Hely. “But we kept looking at it and saying the UK is still the largest market for Australian wine. So there has to be a base to jump off.”

Over the past two years, the company has invested AUS$10m in overhauling its range to reposition itself in the UK and premiumise its offer, placing the UK on-trade at its heart of its strategy. This, it believes, is key to help raise Australian wines out of the sub £6 price point and change consumer perceptions of its offer.

“If you want to be premium you have to have premium channels, which is hard work,” said Hely. “It’s about having a lot of small retailers, so you have to work with regional wholesalers and on-trade restaurants and bars, because that’s where there’s an appreciation for the quality of the wine. But you can’t get 2,000 distribution channels overnight.”

His comments follow those of Rob Harrison, general manager for Accolade in the UK and Ireland, at the Australia Day Tasting in London, who said that while Australia as a category was doing very well in the UK, there was a lack of growth at more premium price points in the UK which meant it was not ”fit for the future”.

Overall, Australian exports increased by 14% in value to AU$2.1 billion in 2015, its highest value increase since October 2007. The average value of Australian wine increased by 7% to $5.20 a litre, its highest value since 2003. In the UK sales increased 0.2% to $376 million, however crucially this growth has been almost exclusively at the lower end of the market. In comparison, total sales of Australian wine have grown at both the lower and higher end of the market, with sales of wine in the $10 and above category growing by 35% – the largest increase within any price segment.

So while consumers appear to be generally trading up and spending more on Australian wine in other markets, the UK is not following suit. Deep discounting by supermarkets has been widely blamed for compounding Australia’s image as a low-priced wine producer, preventing it from achieving significant growth above £5.

“[Supermarkets] want to stack it high, watch it fly and take more margin,” said Hely. “When you speak to the on-premise guys, these are the guys that you get traction from, who are looking for an Aussie wine that’s not in the supermarket. These guys are looking for something that they can recommend to a diner. For me, the on-trade is key to re-establishing Australian brands – in the restaurants and the bars. That market, for me, is still a very attractive and very large in the UK”.

For McWilliams, this has meant refining its offer for the UK on-trade and independent sector, repackaging wines with updated labels and splitting its range by distribution channel.

Mc Williams has invested AUS$10m in the campaign, which will reach completion in June of next year

“Our focus is on the small independents and on-trade,” said Hely. “It’s not to say that we aren’t talking to the multis, but we separate our offer by channel. That’s a strength of the domestic market in Australia that we can bring to the UK. We have an offer for a multi that won’t go into the on trade and visa versa. Stylistically they could have the same price point or style, but they are never going to compete with each other.”

Last year the producer launched a new range of wines called Expressions under its Evans & Tate brand, which were targeted at  ‘millennials’. Centred on communicating the wine’s style and flavour profile, the range featured wines named “Butterball Chardonnay” and “Smooth Operator Cabernet Merlot”. Also launched last year was the group’s Appellation Series, which includes a Tumbarumba Chardonnay, Canberra Syrah and Hilltops Shiraz, and seeks to showcase the cooler climate, higher altitude wine regions within Australia’s New South Wales.