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Taking the next step

Published:  23 July, 2008

With the annual trade tastings approaching, we gathered the key UK players in the Australian wine industry to discuss where the category is going

Where does Australia stand now, from a wine perspective?

Brett Fleming: I think Australia is perfectly poised to exploit the regional message that Wine Australia has been championing for some time. It's whether or not we get the tools to deliver it to the consumer; that's the real question. I don't think the issue is whether we have the wines; the wines have always been there.

Andy Brown: I think that there are a lot of challenges for the wine industry as a whole, not just for Australia: the whole consolidation thing on the supply side and at the retail end; fewer and fewer places for your product to be sold, which has led to those new avenues, such as the rise of the independent merchant. We're in a strong position; we've got most of the bases covered. We are as able as an industry to play in the big-volume end, but we also have some fantastic boutique wineries.

Peter Jackson: For me, Australia is very much the growth engine of the wine category. It's absolutely critical that we maintain that. It's all about keeping Australia compelling and relevant, and continually evolving. And that's why Australia's been so successful - it's been at the forefront of a lot of innovation. It's been good at working in partnership with retailers, and it's good at consumer research, and listening to the consumer.

Kirsten Moore: I think that we're very fortunate because we have such awareness of the industry in which we're based, and a team of people that are very cohesive and collaborative. As far as our position in the UK, it's definitely one of strength. But I do think we need to be changing the perception, and changing that perception is easier if we're all coming from the same place and if we're all working together to achieve that. We are in a favourable position but there are certain issues that need to be addressed.

Matt Wilkin: Well, we've laid off the alcohol a bit; we've brought in more acidity; we're not picking so late, and we're making brighter and fresher wines that can get you beyond one glass. But I would like to make a big cry out to a lot of wine producers to stop trying to create the perfect buffet - by having a Riesling, a Sauvignon Blanc, a Semillon, a Chardonnay, a Cabernet. Why do that?

Kirsten, has your perception changed now compared with when you started at Wine Australia one year ago?

KM: I'm starting to know my name now, so that's a start! I don't think it has, really. When I started, there was a huge learning curve because there was a lot of change going in the industry. There have been a lot of issues with drought, frost and so on, which is new to everybody, so my perception hasn't really changed. I still believe strongly in what we do and what we can do. Fortunately, we produce quality wine at every price point.

On to that old chestnut, regionality

MW: I've been banging on about regionality for years. I don't think people understand the difference between a Shiraz from the McLaren Vale and the Barossa. But I still think you've got to know the difference between a Franklin River Riesling to a Clare to an Adelaide Hills, or wherever.

BF: I think the consumer is receptive to it, but I'm not sure the gatekeepers are, and it's the sommeliers we've got to get on board about this regional message. You go to a top restaurant in London, and you won't just have Burgundy. You'll have regions within Burgundy, and then all the regions in Bordeaux, too. And then you have either 'The New World', or, if you're lucky, Australia and the rest, but Australia is not sub-divided into region-specific wines.

MW: And I honestly don't believe that the punter has any more of an idea about what those broken-down differences in Burgundy mean than if you threw in a breakdown of Barossa, Hunter or whatever. But people ask for advice on Burgundy.

BF: The danger we've got for Australian producers is the people who discovered Australia back in 1985 or 1988; they were 20-plus [years old], something like that, and they're now in their 40s with disposable incomes, and we're in danger of losing those consumers to the likes of France or California or regions where the message has got across that premium does equal quality. And because Australia's message has been driven through the off-trade so successfully with big-branded, well-made wines, where's the message of premium Australia coming from? The opportunity is there, but the danger is that Australia doesn't grasp it.

AB: I think there is a growing association between a particular region and a particular variety: so Sainsbury's has its Taste the Difference range, and it has a Barossa Shiraz, an Adelaide Hills Chardonnay and a Coonawarra Cabernet. It's historically done it with the Old World regions, and there's always been a Sainsbury's Chablis, for example; but now they're applying that to New World areas. And Australia, because of the size of the category, has more space to do a number of different ones. Marks & Spencer started to develop regional wines as well, and the regionality angle is the differentiator, whereas before it was probably a name they created.

PJ: I think it's fair to say we've got a lot of work to do. The average Australian consumer can name only three regions, and they tend to be based on tourist destinations, such as the Hunter. We should also remember that Australia has been based on sustainable quality through multi-regional sourcing, which is one of the great benefits. Regionality, I think, will come. Consumers want to be educated, but I think it's going to take quite a long time.

KM: We need to acknowledge that these things take time, and that most people don't have a clue where South Australia is, let alone the Barossa Valley or McLaren Vale. However, I do think that understanding will develop with time.

With regard to the on-trade, Paul Henry [Kirsten Moore's predecessor, now working for Wine Australia in Adelaide] said he would like Australia's on-trade performance in the UK to match its off-trade performance in three years

KM: Is he coming back over?!

AB: No, he's just going to do a lot of drinking when he's over here!

MW: It's a great goal, but whether it's achieveable, I'm not sure. It's all about getting exposure, getting it to the dinner table, and not just the table at home. What is the difference at the moment?

PJ: Well if you look at the off-trade, 26% of all wine sold in is Australian; whereas 50% of the on-trade is French, and Australia is around 17%, I think.

BF: One of the issues the on-trade has to face is the margins they want for their wines. You would sell more wine if there was less mark-up. One of Australia's great strengths is offering terrific value for money, so if we have an approach where we reduce the margins the on-trade are taking to make it more accessible to the consumer, we could then find ourselves in hot water by encouraging excessive drinking, so it's a tricky balance. But I think that the margins they have are just obscene.

MW: But it's not their fault, actually.

BF: Well, whose fault is it?

MW: The overheads are massive when you set up a serious restaurant.

BF: But I look after the whole of Europe and the mark-ups aren't the same in any other country.

KM: If you're spending 20 quid on a bottle of wine in a restaurant, I think that we deliver very much more at that price point, but it's still not people's number-one choice. People are still defaulting to France, Italy, and Spain, and defaulting to Pinot Grigio, Sancerre, Chablis, essentially 'brand' names that are recognised and understood in that drinking environment.

PJ: For me, it's all about convincing the gatekeepers. Look how big the Australian section tends to be in the average wine list in the on-trade; it's very small. I think we haven't been able to convince the gatekeepers that the consumers actually do want brands. Champagne has done extremely well - people are prepared to pay different prices in the on- and the off-trade. Soft drinks do it; beer does it. And it should be the same for branded wine.

AB: It's a big challenge in terms of a) the consumer point of view, because there is all this research which says that if people are looking for a treat, they move away from Australia, and b) it's about getting the right share of the list. When you go into the supermarket, the market share is 26% and we've probably got around 26% of the shelf space. But on a wine list, a lot of that 17% share is probably coming from a couple of house wines, a Shiraz and a Chardonnay.

How do you see sales being affected by the oversupply, the frost and now the drought situation?

BF: At the moment, we are running out of fruit. We are scouring the country looking for it. Frosts have been severe, and Coonawarra and the Limestone Coast were massively affected. In some cases, I'm hearing 80%, 90%, 100% affected.

PJ: Oversupply is not good for any industry; it impacts on prices and margins negatively. The drought in the next vintage will bring things into balance. In terms of the vintage after that, it's too early to say; but what we do need is some substantial rainfall, otherwise we will have another short vintage the year after. In terms of frost, it's really impacted on top-end varietals, relatively niche varietals, and we will have some shortages there. It's hit Pinot and Sauvignon Blanc, but it's not going to have a major impact on the industry.

AB: This kind of thing does affect other countries. France has to deal with it most years. If you take Coonawarra, for example, with Petaluma, we're still on the 2001 vintage, moving onto 2002, and therefore what's happening in 2007 is something that we can manage.

KM: With water levels being so low, it will have an impact on 2008 as well. The industry outlook is a 20% reduction in yields this year and then year on year.

PJ: The whole industry needs to shift from volume to value - that's absolutely critical. It's all about getting consumers to pay that extra pound. So much of the product is VAT and excise duty; it's all about getting people to trade up, get out of their comfort zone and find out what real premium Australia is all about. That gets people into regionality, new innovations, and gets them into new varietals and all the things we can offer.

And what are your views on closures?

PJ: For us, there is no better closure than the screwcap. I think everyone accepts that. There's nothing wrong with a good-quality cork, but we are using screwcap more and more, and we're not seeing any resistance to it. Even in the on-trade, where a lot of the sommeliers weren't very keen, you now see them rolling the bottles down their arm to open them, which is good to see!

Grange has been trialled for some time in screwcap, hasn't it?

PJ: Well, we've done some trials, but our first super-premium venture into screwcap is going to be Yattarna. We're going to release Yattarna in May under screwcap, with the 2003 vintage.

AB: Most of the wineries in our group are moving the majority of their lines to screwcap. Petaluma, being the most traditional, is more cautious; but its Riesling is bottled under screwcap, and the Chardonnay and Viognier will be. It's important we don't stand still and just say that screwcap is the answer. We believe it's the best available closure at the moment, but one of the things that Australia is good at is not resting on its laurels.

MW: From a sommelier's point of view, there is not a problem. In the past, it was customer-led, so sommeliers were more fearful of the response they would get from their customers. The cork marketing board was very quick off the mark, very clever and very convincing. But look at the perfume industry - it stopped using cork a very long time ago.

BF: Screwcaps are the only way forward. Imagine how frustrating it is for the winemaker to deliver to the consumers and then some other prick's ruined it for you because of the closure. It's just not acceptable. If you're going to buy a chicken, and one in every 15 is going to give you salmonella, it's not acceptable. So why shouldn't people accept that a cork can not give just TCA, but all those other problems like random oxidation and bottle variation. I used to deal in fine wine - you'd open up a case of Yquem, 20 years old, and they're all different colours! Why? It's because of the cork.

We were sent a couple of Aussie wines last month that were 16% abv. Are alcohol levels an issue for the consumer?

BF: I read an article by Andrew Jefford recently, and one of the points he made was that Australia has tried to make leaner, tighter wines, and they were worse than wines with more alcohol. It's very easy to spot 15.5% or 16% on a wine label, because it stands out very prominently; but in terms of wine quality - the way it's structured and the way it drinks - if it is in balance, then I don't see what the fuss is about.

KM: We, as an industry, have to be aware that this is a very important issue and it will continue to be.

AB: There is already a barrier, which is the duty, i.e. not going above 15% or the value of the wine goes down, but I'm not sure that the answer is to make falsely low-alcohol wines.

PJ: It's all about occasionality. There are times when you want something a little lower in alcohol, and there are certain consumers with a slightly healthier lifestyle who are after that.

BF: At the moment, alcohol is a trendy subject. Five years ago, no one talked about it. So in five years' time, are people going to be talking about ascorbic acid? It's a storm in a teacup.