Saturday, September 20, 2008

The Devaluing of Australian Shiraz in the US

A winemaker makes a wine, sells it to an exporter/importer who sells it on to a distributor who then sells it to a retailer who then offers you the wine at a competitive price. Or so the theory goes. But in reality many things influence the competitive pricing of wine. One of these is the inability to sell the wine for its recommended retail price, a not uncommon event in the USA with Aussie Shiraz these days. Another is when an importer/exporter is revising their portfolio. Combine the two and you get a fire sale.

Such seems to be the case with wines under The Grateful Palate umbrella. The Grateful Palate has recently reduced its portfolio to about 25 producers from a high of 70 a few years ago. Its not clear whether producers have been dropped or have left Grateful Palate but the result has been deep discounts on Australian wines. Take, for example the deals I was offered today. McLean’s Farm 2002 Shiraz (Barossa Valley) which sells retail (according to Wine Searcher) for $23.99 to $29.99USD, but offered to me for $8.99. Or the 2004 Gibson Old Vine Collection Barossa Valley Shiraz, $99.99USD retail on Wine Searcher, but I was able to purchase it for $44.99. The most recent vintage sells for $96AUD mail order from Gibson’s.

Some say that Australian wines in the US need to drop their prices to more reasonable levels after the big increases that have followed with the extravagance of high Parker points. This may be true, but there is another story that may be building behind this and it is that importers/exporters, distributors, and retailers are seeing significant losses in profits with the selling of Australian wines. When you lose money you tend not to want to expose yourself to the same position again. And so when a major importer/exporter has a fire sale on Aussie wines the question that needs to be answered is who would want to build a portfolio of Australian wines when they see others having problems selling the wines unless they have dramatic reductions in prices?

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