Regionality not the solution'

Published: 23 July, 2008

Focusing on regionality alone is not going to solve Australia's problems in the UK market. That was the stark message taken away from a seminar conducted at last week's Australia Day tastings in London, where a series of influential trade figures debated the subject: Australia - Brand Champion or Pantomime Villain?'
With a panel comprising everyone from producers and brand owners to retailers and the press, definite conclusions were, unsurprisingly, thin on the ground. But one subject on which everyone did agree was that Australia has some serious problems in the UK market.

The most obvious is its inability to break its regular consumers through the 7.99 price point and on into areas where margins are higher. Despite work by Wine Australia to address this very problem, according to Brian Howard, director of Business Development at Wine Intelligence, Australia still peaks too early', with more than 80% of its drinkers crammed into the 4-7.99 band, and a drop-off thereafter so steep that it makes the Mariana Trench look like Bondi Beach.

There's a lack of confidence among regular Australian consumers about what sort of wine is appropriate for formal occasions,' he said. The cues we need to see to move [the consumer] upmarket are just not there.'

The result of this failure was acknowledged by Paul Henry, general manager of the generic body Wine Australia. Australia is stalling in the blocks when it comes to making itself aspirational,' he said candidly. It's a Monday-to-Wednesday wine, but too many people migrate away from Friday onwards, especially in an on-trade context.'

Of particular concern to the panel was the fact that this bottleneck at the mid-price level was a relatively recent phenomenon and that, not all that long ago, what Wine Intelligence called Oz loyalists' were perfectly prepared to follow the wines up through the price points. But six years of heavy price promotion has changed consumers' perceptions of the country.

Ten years ago there was no disconnection between the mainstream and the premium drinker,' said Mike Paul, MD

of Western Wines. Australia is missing out on a huge opportunity; you only make money over 5.'

And while Australia was seen by Sainsbury's Julian Dyer as cashing in on price purchasing', its success here was holding back its chances of snaring indulgence purchasers'.

If you had 20,000 to spend on a car, would you buy a Skoda or a BMW?' he asked.

The painful analogies didn't end there, with Mike Paul sending a chill down every spine in the room when he mentioned that Australia could head the same way as Germany - another country that once had an enviable reputation but promoted itself to death on the back of a wine glut.

Dyer, however, pointed out that simply stacking shelves with pricier Australian wine would not solve the problem, and the parcels of higher-quality Aussie wines he had taken on to sell through the Sainsbury's website and wine club had largely been untouched. The quality of the wines wasn't an issue, but the ability of the consumers to engage with them was.

The quality and diversity of Australian wine has never been better, but the consumer isn't buying into it,' said Paul.

It is this problem of reconnecting the premium end with the mass of cheap wines that the regionality approach was meant to solve. But as a strategy it aroused misgivings, reservations and even some hostility from assembled listeners; and it certainly wasn't seen as a silver bullet for the country's ills.

First of all, there was an acknowledgment that opinion-formers had to buy into the idea for it to work, but many have lost interest in big-brand-dominated Australia, making it a hard strategy to push.

Second, there were question marks over whether the push for regionality was, in any case, doing more than just paying lip service to the appellation idea.

The point about regionality is to charge more money, so it has to be backed up by quality,' said Mike Paul, who suggested that, logically, this ought to mean restrictions on yields and grape varieties. The Australians present, however, rejected such regulation out of hand.

So, was regionality part of the solution, all of the solution, or irrelevant?

Brian Howard made the point that in Wine Intelligence's focus groups one Australian name kept coming up as worthy of formal occasions: Penfolds.

It doesn't need regions or anything else,' he said. It just has a good reputation. Regionality on its own is not the solution - though it may be part of the toolkit.'

Perhaps, but the slow-burn nature of its fix, relying as it does on a growing consumer awareness and a major shift in perception, may, in any case, render it a pyrrhic solution.

Regionality is the way to go,' said one winery owner in the audience. But there are wineries going broke today'

No one had an answer to that.

The panel

Zar Brooks,

Zonte's Footstep

James Lousada,

FGL Wine Estates

Paul Henry,

general manager,

Wine Australia

Mike Paul,

MD, Western Wines