Quality as well as Quantity: The Export Challenge facing Australia’s Winemakers

A small family wine business driven by an energetic and creative second generation has developed Australia’s biggest wine brand, the leading imported brand in the US and the fastest-growing imported wine in US history. Yellow Tail was the first major export brand that unashamedly wore its origins on its sleeve, it was the first ‘Australiana’ wine label and the first successful attempt to customise Australian wine for the sweeter, softer preferences of the American palate.

John Casella, whose family owns Yellow Tail, expects to sell around eight million cases of Yellow Tail into the US this year. The latest AC Nielsen figures show current sales of more than three million cases at an average price of US$6.55 per 750 ml bottle, roughly as much as its next four Australian competitors -Lindemans, Black Swan a US brand owned by E & J Gallo, Rosemount and Jacob’s Creek – together. Since the brand’s introduction to the US in 2002, Yellow Tail Shiraz has become the country’s biggest-selling red wine in 750ml bottles.

In the wake of Yellow Tail has followed a series of imitator ‘wildlife’ labels. With just over a quarter of its sales, Black Swan has come closest to matching Yellow Tail’s success. McGuigan Simeon’s Crocodile Rock, The Hardy Wine Company’s Four Emus and Southcorp’s Little Penguin are amongst the best known of the others.

If Yellow Tail were the rule for wine exports and not the exception, there would be no glut of wine in Australia. Sadly, it’s unlikely that the freakish series of incidents that led to this phenomenon will ever be emulated.

About to reach the billion-dollar mark for Australian wine imports, the UK is still this country’s largest export market. Having increased nearly threefold in the past 10 years, from $376 million in 1994, it purchased 39 of our exported wine by volume in 2004/2005. Driven by the ‘popular premium’ brands of Jacob’s Creek, Lindemans and the family of Hardy Wine Company brands including ‘Stamp’, ‘VR’, ‘Crest’ and Nottage Hill, Australian wine exports to the UK are still increasing by more than 16 by volume each year.

By comparison, the value of wine exports to the US has remained virtually static over the last twelve months, at just over A$907 million. While the volume of sales increased over the past year by 8.9, the value per litre of exports to the US declined by 7.5. This reflects both the downward trend in the US wine market and the dominant share in the export mix of popular premium brands like Yellow Tail, Jacob’s Creek, Lindemans and Rosemount.

To a degree, however, Australia has become victim of its own success. The sheer scale of our international brands and our presence as the fourth largest wine exporter has created an impression that we account much more wine than the mere 4 of global production that we actually make. Jonathan Scott, chief executive of the Australian Wine Export Council, says that ‘Australia is well known in the UK for its entry level wine, but we’re keen to encourage people to trade up to our better labels’, he says. So does Tasmanian winemaker Andrew Pirie, who says we should talk up our quality more than our quantity. At present, Australia owns 22 of the on-premise hotels, pubs, clubs and restaurants UK market, but only 10 of the off-market retailers, especially supermarkets which represents 20 of sales volume, 44 of value, remains slower to change and is still dominated by France. Australia’s challenge is to retain the former and increase the latter.

‘The French have shown that it’s possible to be a leader with icon and prestige wine yet still sell large volumes of lesser and frankly ordinary wine as well’, says Jonathan Scott. ‘It’s up to us to give our leading wines equivalent prominence. The more we do, the irony is that the more we will also support the lower market wines that will always make up the bulk of our exports.’ The UK supermarkets – which control the lion’s share of the off-premise trade – regularly alternate between different brands for discounted offers. ‘This causes customers only to buy wines on discount, erodes brand loyalty and encourages consumer promiscuity,’ he says. In this environment, Australian wine is vulnerable to attack from similarly discounted wines from places like South Africa and Chile.

David Woods, chief executive and Managing Director of one of Australia’s largest exporters, The Hardy Wine Company, is less pessimistic. He says that despite the discounting, Australia is still trading well above the average bottle sale in the UK. According to the AC Nielsen data, the average bottle sold in the UK fetches Please login to post comment