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Australian Vintage pulls back from bulk to focus on branded wine in UK

Published:  18 February, 2015

Australian Vintage is pulling back from bulk wine sales in the UK to focus on its core branded range as prices sink.

Posting its global half year results for the six months to December 31, 2014, the company saw net profits after tax increase from AU$4 million to AU$4.4 million, with total revenues up 16% to AU$121.7 million.

Sales of the McGuigan, Tempus Two and Nepenthe brands grew 19% in the same period the group sold its Yaldara winery for AU$15.5 million, realising an after-tax profit of AU$6.2 million.

But Australian Vintage president Neil McGuigan sounded a note of caution, saying: "The continued growth of our three key brands is very encouraging. However due to the higher cost of our 2014 vintage and some large bulk wine sale, the improved sales did not directly translate into improved margin dollars."

UK/Europe sales grew 20% on the previous period as McGuigan sales jumped 28%. Despite favourable exchange rates, contribution from this segment "declined by AU$0.9 million due mainly to the higher cost of the 2014 vintage and some large non-recurring bulk wine sales", the results state.

Julian Dyer, general manager of Australian Vintage UK/Europe, told "We've had a strong year in terms of branded wine sales - in particular with the McGuigan brand - so that's a key focus for us.

"We had some good successes with brand share this year - we're now the fifth biggest global wine brand in the UK market and over Christmas we moved into fourth position."

He said the group was looking to gain additional listings in wholesale and cash & carry channels, alongside its core off-trade customers.

"It's been a solid year of growth and we've got to keep our feet on the ground, but we've got every reason to believe this will continue through the next year."

But he admitted that 2014 vintage pricing had caused problems. "Australian wine is not giveaway cheap. It was a smaller vintage and we had major frost problems in one of our biggest vineyards. "

Dyer added that "selling bulk wine in this market remains challenging at this juncture". "It's very difficult making money from bulk. We will continue to provide it to our loyal customers, but our priority has to be building our branded range. That remains our core strategy."

He said bulk sales "won't remain as important a part of our portfolio as in previous years".

As for the upcoming harvest, Dyer said it looks like a "normal vintage", adding that "it's all coming at once - both reds and whites". "The quality is on the A-ball and we expect a decent crop in both quality and volume. It will allow us to trade normally and grow our sales next year."