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Upmarket Downunder
“standfirst”>Despite the discount-led strategies of many Australian wines at the lower end of the market, it would seem that consumers are favourably re-evaluating the country’s premium wines, says Chris Orr
It’s boring but predictably true that Australia has enjoyed yet another positive first six months in 2005. Shipments of wine to UK shores rose 18.7% by volume compared to just 6.5% in the US, a country normally cited as the “next big thing” for Aussie winemakers.
In value terms, however, the exports told a slightly different story. They rose only 14%, suggesting that Australia is losing some ground in the value stakes in order to boost volumes. Looking at the split in the volume of wines shipped, the suspicion is confirmed by a 37% boost in the amount of wines shipped below $2.50, and 12% and 13% rises in the $2.50-$4.99 and $5.00-$7.49, respectively, all of which equates to a significant rise in wines retailing under £6 shipped to the UK from Australia. However, the category between $7.50 and $9.99 rose by an impressive 29% and the above $10 rose by 15% in total volume terms. Leaving the obvious question: how is Australia doing in the premium sector in the UK?
As is often the case, how much wine you ship is not always the same as how much wine you sell in any given country. In the case of Australia, however, while the rise in percentage value and volume of wine sold is significantly smaller in actual sales terms, at least they do reflect in part the ratio between volume sales and value sales for the country. The total market volume share, MAT to July 9 2005 was up from 20.4% to 21.2%, a rise of 3.92%. However, in value terms, as with shipments, it was less impressive. Value rose by just 0.3% during the same period. In each case, however, Australia did significantly better than France, who saw their share in both volume and value slip yet further and placing it firmly in the second place position that just a couple of years ago seemed nothing more than a blip on the radar.
Looking at the ACNielsen statistics for MAT figures to late March of 2005 (the latest compiled by end of August) for price bands sold in the major multiples, it’s easy to see where Australia is experiencing strong growth in the UK. Some 90% of the total wine sold in supermarkets is sold under £5. Australia over the past year has seen a 47% rise in the total volumes sold under £3, with a 1% fall in wines sold between £3-£4 and a 6% rise in wines sold between £4 and £5. However, importantly, the country has seen a 26% rise in prices in the £5-£6 bracket during the same period, 8% in the £6-£7 bracket and 27% rise in the £7-£8 bracket. Its sales in the £10-plus bracket – an admittedly tiny part of the major multiples offering – was some 68% improved on 2004.
Swings and roundabouts
Such rises in the multiple retailer sector are, unfortunately, offset by corresponding reductions in sales in the multiple specialists. Figures for the same period show that Australia lost 27% in volume terms from the £5-£6 bracket, 16% in the £6-£7 sector, and 17% in the £7-£8 sector. However, it saw massive growth in both the £3-£4 and under-£3 sectors, rising 68% and 82% respectively.
Fortunately, a good performance in the independents and the multiples has led to premium Australian wine coming out on top at the end of the day. “Figures for the end of June show the £6-£7 sector up 5.8% overall, and the £7-£8 sector up 8.6% overall,” says Lewis Jones, marketing director for D&D Wines, which looks after Capel Vale and Bethany wines at the premium end of the Australian spectrum. “I think when you look at the market overall it’s quite crowded, but despite the consolidation that is going on with Australian companies, there is still room for other players when it comes to the premium and ultrapremium sector. As a whole Australia is still seeing market share growth, but it’s also registering some impressive growth at the premium end. What’s most interesting is that France is seeing decline in those very areas – the premium wine sectors – that it has always been strongest in, so we are very confident that there is growth available in the market over the next 12 to 18 months.”
“Overall the sector is doing very well,” agrees Dan Jago, joint managing director of Bibendum Wines, “though the ‘elder bretheren’ of main brands are finding it very difficult to achieve penetration without promotion. I think authoritative boutique producers do, however, have a real resonance with fine-wine purchasers.”
Jago continues, “Our biggest challenge, however, is to create the perception with the consumer that premium Australian wines are on a par with ‘traditional fine wines’”. But isn’t that something the retailers should be doing as much as the agents and suppliers? “Not at all. It isn’t the responsibility of the retailers. It’s their responsibility to provide what the consumer wants. It is the responsibility of all premium Australian producers to convince the public to move upscale and to resist the temptation to discount aggressively.”
“In an ideal world, I think we’d really like to be seeing doubledigit growth when it comes to the premium price brackets in the UK,” admits Paul Henry of Wine Australia. “But that’s not to say that we’re disappointed with the performance so far. I think it’s really in the interests of both the producers and the gatekeepers, ie the major multiples and multiple specialists, to work together on projecting a premium image for Australia and convincing the consumer that it’s worth spending the increase moneywise on premium Australian wines.
“I think if you look at the time scale, we’re beginning to see those people who were first switched on to Australian wines a decade or 15 years ago maturing in their appreciation of wine, and some are ready to move on to the next level. It’s our job at Wine Australia, along with producers, suppliers and retailers to make sure that there is a reasonable incentive to do so. But I think we have to face facts which is that the premium category won’t be built by small and medium producers alone. It’s only really going to happen if the big brands can actually crack it.
“I believe it’s also worth noting,” adds Henry, “that there is good ground being made in the on-trade where we have been focusing a lot of the efforts in terms of getting sommeliers and on-trade owners to give more credit and pay more attention to premium Aus wines and perhaps reevaluate them in terms of the more traditional Old World wines.”
”I think there is a lot more opportunity for experimentation in the on-trade with Aus wines at the premium level,” says Jago. “There’s recognition of the opportunity for Australia to bridge the gap between inexpensive wines and more traditional fine wine regions.” “Customers are certainly more willing to spend more in the ontrade environment,” says Andy Brown, UK general manager for Lion Nathan, owners of Petaluma and St Halletts. “And although traditional areas still dominate, Australia is starting to change the perceptions of its wines as simple gluggers.“
“It’s hard to track the on-trade market in sales terms, especially at the premium end of the market. However, our sales figures for premium Australian wines are showing good growth,” says Fiona Juby, fine wine manager for Fosters Group Limited Fine Wine Estates. “One of the main challenges remains getting buyers/sommeliers to give us space on the wine lists,” she continues. “Educating on-trade staff to be able to persuade consumers to switch from Old World to New World is essential as consumer knowledge is still fairly limited on New World wines. I don’t believe a wine list gives a consumer as many quality cues/information as being able to pick up a bottle off the shelf in the off-trade and study it.”
“Our feeling is that premium brand Australia is pretty well placed in both the on-trade and the off-trade,” is the comment from Brett Fleming, general manager for Yering Station, Mount Langi Ghiran and Parker Estate in the UK. “You have to look in part to the initiatives from Wine Australia for that, especially in the on-trade. But in the off-trade, premium wines are beginning to take off for Australia for a range of reasons. When you look at what the major retailers are doing it’s plain to see that quite a few are reducing their range significantly. Yet when you look at the Australian section within supermarkets or multiple specialists, for example, it’s not this section that’s shrinking. If anything it’s actually growing – and at all price levels. I look at some of the listings we’ve had for Yering and Mount Langi lately and they are all across a range of premium price points. I think we’re finally beginning to see the benefits, as an industry, of all the hard work that goes on outside the big brands and the discounting-led strategies that dominated the lower end of the market.”
Economies of price?
“We do find growth a little slower in the UK than in other markets,” says Rupert Deal, European export manager for Torbreck (based in the UK), “but that’s probably because the UK is more price conscious and it’s an increasingly competitive field. However, we do note that things are slowly changing. I think whereas a few years ago buyers, either ontrade or off-trade, were more likely to go for European or Old World countries at the higher price bracket, they are now opting for New World, and more often than not, Australia. It doesn’t mean it’s easy to sell premium wine in the UK. Not at all. But the UK customer is becoming much more receptive to premium Australian wine.”
“We’re certainly very positive about the market,” agrees Helen McGinn, PR and marketing manager for McGuigan Wines. “I think a good example of how things are going is our McGuigan Gold range. We launched it last year at £5.99 and it’s had such a good reception that we are planning to launch a McGuigan Gold Reserve label. We wouldn’t be doing that if we didn’t have confidence that the market is there for it.“
“But it is incredibly competitive,” warns Joël Langa, sales director for Great Western Wines, which handles Glaetzer wines in the UK. “And I think it will get even more so in the coming years. You have to remember that while Australia makes some great premium wines they are up against an increasingly sophisticated array of wines. You just have to look at some of the wines coming out of Italy in the mid-premium price range, to see how stiff the competition really is.”
Another word of caution comes from Paul Henry. “It’s crucial for brands and producers looking at the UK market to also pay attention to the fact that selling premium wine in the UK isn’t instantly more profitable than selling at the lower price points. Yes, your selling price is higher and your margin may be the same – but your costs of selling, marketing and promoting that wine can often be considerably higher. It looks a very attractive part of the market – particularly in it’s current growth phase. But to take advantage of the premium sector, you have to make sure you have all the economics right from production through to putting it in the customers hands – and that’s more difficult than it sounds.”