Wednesday, November 23, 2005

Wine Industry Outlook Conference to Stress the Need for a New Model for Australian Wine
The 2005 Wine Industry Outlook Conference in Adelaide, South Australia will examine Creating The Competitive Advantage. The conference, to be held on Thursday November 24th, has set itself a lofty task.
It is timely for the Australian wine industry to examine its strategy for continued success. How competitive is the Australian wine industry across each price point in international markets? Are we in danger of being 'pigeon-holed' as makers of cheerful, consistent well priced wines at commercial prices only, or is this argument simply a smokescreen that ignores the success of Australian wine across all price points.

In any event, how can Australia expand its offering to capitalise on its broad consumer appeal but also offer opportunities for consumers to confidently trade up to super premium, ultra premium and icon wines. Since its inception in 1994 the Wine Industry Outlook Conference has set the agenda for winery executives, winemakers, marketers, strategists, stockbrokers, analysts and investors. The 2005 Outlook Conference will not only provide an invaluable update on industry supply and demand trends but change the way you think about your company as we look to the future.

The program will include eight talks. Two of the more interesting presentations are:
Noted winemaker Brian Croser’s talk, titled Wines of Distinction, will argue that Australia's premium wine producers must aspire higher, aim for greatness and use our natural advantages of ancient soils and varying microclimates to make the most distinguished, complex and sought after wines on earth.

Jamie Odell, Managing Director, Foster's Wine Estates, will discuss A Portfolio Approach: The Australian wine category has continued to grow well but value is trailing volume growth in key international markets. Developing the premium price point space for Australian wines is essential. Our whole portfolio will benefit if we are able to achieve valid recognition for our premium wines.

Croser has held his point of view for some time. Clearly the argument is to produce wines that will compete with the best from the rest of the world; which usually means Europe, especially France, and the USA. There is a significant problem in competing with Old World wines, and that is their ability to mature over decades. This is not the case for Australia. Very few top level Australian wines, especially those with the greatest popularity outside Australia, have been around for a decade or more. More importantly who defines the wines as great? Currently Robert Parker, Jr. holds sway over the fortunes of the greatest of the great – Bordeaux. He is an avowed Francophile and so is highly unlikely to ever place Australia above France.

Fortunately Parker is known for his love of Australian Shiraz, especially from South Australia. He does review more and more Australian wines every year but he is very consistent in rating less that 10% (usually around 6%) of the recommended wines as extraordinary (96 or more points). Fortunately over 40% of the recommended wines usually fall into the outstanding (90-95 more points) category. But Parker recommends less that 30-35% of the wines he tastes.

Given the above, one has to ask what Odell means by “valid recognition of our premium wines”. Does he want greater numbers of wine to be rated highly, or is their something else? There is an argument that wine critics, like Parker, appreciate a certain style of Australia wine. That style, called by some “sunshine-in-a-bottle”, by others “fruit bomb”, may have generated an unwelcome caricature of Australian wine, but it does not have to be a permanent negative. The real key to opening the markets necessary to expand the sales of “great” Australian wine is to educate the wine drinker. Those seeking the immediate gratification of sunshine-in-a-bottle need to be shown the delight that comes from letting the sun set, so that the wine can sleep, cast off its immaturity and awaken with the complexity that comes with age. And Australian wine makers need to have those wines available for the consumer to appreciate. A costly endeavor? Yes, but education of the masses is necessary if the market for expensive wine is to be grown

And this brings me to my final point. What definitions are being used to correlate price with quality? In the USA the range of wine levels and price points is approximately as follows: Value wines are those $3 and under, Standard wines (Everyday wines) are those priced between $3-$7 per 750ml, Premium wines are between $7-$15, Super-Premium wines are between $15-$25, Ultra-Premium wines are over $25. The recently released data from Constellation Wines USA Project Genome (sic) defined premium wine as wine costing $5 or more. Significantly 12% of the 3,500+ consumers questioned were defined as Enthusiasts, but 49% were not enthusiastic enough to have purchased a bottle for more that $15 in the past six months! This is one reason why [yellow tail] now sells a million cases a month in the USA. The average wine drinker does not see the value in spending money on “great” wine. They want to be able to drop by their local wine store or supermarket and pick up a bottle of pleasant wine that they can drink with dinner that night. Educating these folks to spend $50 on a bottle of wine that they will be advised to cellar for ten or more years is not going to be easy!

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