A few current climatic conditions: the dollar is as high as a kite, Foster’s Group and Constellation Brands are in tears over the rate of tax on imported wine in the UK, the threat looms of a volumetric tax replacing the current system based on value, making cask wine economically unviable, thus introducing another 200 million litres of modest wine to the stockpile.
In addition it now seems there will be a push by our two beloved supermarket bullies, Coles and Woolworths, to move into wine production.
Overproduction is a problem, no doubt about that, driven by the massive success of Australian wines in overseas markets from the mid-eighties until the last few years, when we’ve seen the dollar strengthen and other new markets have demonstrated their skill in making good wine at basement prices.
Other problems with our wine industry lie in large part with those four companies named above, throw in maybe Australian Vintage (McGuigan), Casella Wines (Yellowtail) and Pernod Ricard Pacific (Jacob’s Creek).
These businesses between them dominate the market, both domestically and internationally, to an extraordinary extent.
Let’s take “The Big 5” producers (as I shall call them) first. They’re having a tough time producing wine for the average market price in the UK, with 55% of the cost of a £4.32 (retail) bottle of wine going to the government, as stated by Peter Jackson, MD of Foster’s Europe.
''Doing what they are doing may be expedient but it is decimating our industry. We are on our knees. We are not asking for a bailout, just a break.'' These words from Troy Christensen, President of the European and Australian wing of Constellation Brands.
There is little need to feel sorry for them when looking at the wider picture.
What Mr. Jackson has not stated is that those figures only count at that particular price point. For a bottle that retails at £8.00 (like Penfolds Koonunga Hill, for example), that percentage shrinks to 36% and by the time Penfolds Bin 389 hits the British consumer at £20 a bottle it has shrunk again to a 24% tax component.
It seems quite evident that Australian producers are not able to compete with the likes of Chile for quality at this price point and all they are really doing is tainting the British palate with poor Australian wine by even trying.
But that does not mean they are not trying - far from it. British supermarket giants Tesco and Sainsburys currently have 126 Australian red wines listed on their websites between them. Of these, no less than 82 (65%) are produced by one of “The Big 5”. That’s not a volume or sales statistic; that’s shelf space. 65% of the shelf lines are made by 0.2% of the producers, leaving 35% of shelf space for 99.8% of producers.
Australian Vintage (McGuigan) have 22 different red wines listed on the Tesco website alone, mainly Tesco’s own brands or labels created for export.
Doesn’t seem particularly fair on everyone else, does it? Tesco and Sainsburys are at fault here too for not looking around very hard.
Why should we feel sorry for these producers when they’re tarnishing Australia’s reputation with ordinary plonk and flooding overseas shelves with it? If it’s not feasible, don’t do it. Leave that section of the market to Chile, who can make better wine at that price point.
Why should we feel sorry for them when they can afford to let that bottle of Bin389 go to a good British home for £20 (AUD$32), when Penfolds have just priced the new release in Australia at AUD$65, more than 100% more for selling it at home! Strip away GST, retail mark up and WET from that and Foster’s would get ... just over AUD$32!
(Perhaps as Australian consumers we should be feeling sorry for ourselves by this point!)
If we put the shoe on the other foot and see what the imported competition is like back home in Australia for them in the AUD$7-10 range? It’s almost non-existent. The rate of import duty into Australia sees to that. Perhaps the odd Marlborough sauvignon blanc but that’s about it.
Since Australia’s retail market is so dominated by Coles and Woolworths, who have made a reputation for strangling the life and brand integrity out of wine producers, “The Big 5” once again stand tall, with their ability to price cut and loss-lead.
Now Coles and Woolies are thinking of pushing their own brands, which surely would help nobody (although I’d be fascinated to know who will make these wines for the supermarkets. You’d need a pretty big winery, I’m sure. They could call Tesco or Sainsburys for advice...).
Sympathetic to the plight of their would-be suppliers, a spokesman for Coles said, “Everyone knows the problems in the wine industry are caused by weather and overproduction, not by sales of private label wines.”
"This is just a political agenda to use supermarkets as scapegoats for other problems that the winemakers' federation doesn't want to face up to."
Woolworth’s chief Michael Luscombe offered the ailing wine industry these words of reassurance, ''Don't point the finger at the retailer, you need to search your own backyard to understand why you made the decisions with the knowledge that you should have had.''
''The big issue for the wine industry is significant overproduction,'' He also blamed ''not terribly prudent investment.”
Surely the government will be keeping an eye out for a major industry like the wine industry? Consumer Affairs Minister Craig Emerson said, "I endorse the stocking of lower-price, own-brand products because they often represent a better deal for the consumer.”
The 2010 vintage is widely being talked about as a great one, but most of the real gems won’t be getting very much of a push or very much shelf space in most instances. The greed and rationalisation of the big boys will see to that.
The “Aussie battler” is not getting much support at present.
I have deliberately opened here with a pretty negative article, highlighting just a few of the hurdles that the Australian wine industry faces due to its domination by a few large companies and also some of the disparities, such as the price of Penfolds Bin 389 (which actually really infuriates me!!).
My name is Matthew Thomas and I have spent 15 years in the wine and beverage industry. I founded Winehelp.com.au, offering Personal Sommelier Services, partly to try to bring together the keen consumer and some of the wines that do not make the headlines or dominate the shelves.
There are hundreds, even thousands, of great wines being made by our smaller producers (and don’t get me wrong, the bigger ones make some good wine too - again, Penfolds Bin 389!), in an ever-increasing number of styles and from an ever-increasing number of grape varieties. I have had the privilege to be able to seek these wines out for some years now and am delighted that I will be continuing to do so.
If I can introduce you to one wine that gets you excited that you didn’t know about before, I will be thrilled and please do let me know! I would like to emphasise that I am not a retailer and I do not sell wine, nor am I employed to do so.
Welcome to my blog.
No comments:
Post a Comment