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Profile on Paul Henry of the AWBC: 'Henry bosses the Aussies' - by Tony Keys

The difficulties included moving his young family to Australia and settling into a new environment. The major challenges include working for an organisation that some feel is becoming moribund.

Having ridden on the back of the success of rapid Australian wine sales both domestically and internationally for over a decade, it appears the AWBC is not adapting to the changing wine environment as required. Understandably, the internal politics of the AWBC is not a subject Henry is prepared to discuss.

Not that the AWBC is rotten to the core; far from it. There are many great talents employed within; however, there is a need for it to rethink its philosophy and direction. Although this is not within Henry's job specification, his arrival has been noted by observers, as indeed will be his progress - success or failure. For now Henry's role is to present Australian wine to the world and convince trade, media and consumers of its numerous facets.

The structure of the Australian wine industry is complex - roughly 85% of production is controlled by fewer than 20 producers, with the remainder in the hands of around 2,000 smaller operators. The question is, are the needs of one faction the requirements of the other? Before Henry steps offshore promoting unity and waving the banner, he has to assure the small guys' that the big guys' are not pulling his strings while at the same time reassuring the big guys' that all the money they contribute is not being spent on the aspirations of wineries that produce less than 1,000 cases of poor quality, over-priced wine.

As wine sales grew through the 1990s, more grapes were planted to meet forecast' growth. Some of this increased planting was inspired by tax write-off investment schemes; the majority was simply jumping on the bandwagon. This led to a surplus of wine and a wake-up call to producers. With the realisation that wine in storage was getting out of proportion to sales, the big guys' rethought their strategy - getting bulk wine-producing vineyards off the books, not renewing (sometimes even reneging on) grape supply contracts and buying on the spot market. Making what they could sell rather than what they estimated they might sell. The result has pushed a fair chunk of the financial risk down the supply chain to the growers.

Many of the small guys' were growers and producers; unable to sell their grapes, many turned them into wine. They now face the reality of how to sell the finished product. As the domestic market is well supplied and fiercely contested, increased export and new markets are extremely important - making Henry's job not only high profile but also the one under scrutiny.

Overseas, the two big markets are the UK and the US. The UK has its needle stuck in the groove of deep discounting and there is an assumption by some media and retailers that Australian wine has become the 21st century's equivalent of Liebfraumilch - a view not supported by Henry: Absolutely not. If I believed that extreme discounting was driven solely by popular Australian brands it would fundamentally restrict our ability to command higher prices from now on. The ills being faced by us as an industry are not exclusive to Australian wine,' he says.

Challenged further by the fact that there is concern among many people (mostly outside big brand production) that the reputation of Australian wine in the UK is being damaged, Henry admits to having concern' that people think Australian wine is only capable of working at the lower price points: I feel as an industry we have spoken too much about value and not enough about quality. I think we have been complicit in creating a retail environment where the idea of adding value is about giving something for nothing rather than giving something more people are prepared to pay for,' he says, pointing out that many people see Australia as instigating deep discounting whereas the reality is that Australia has just taken advantage of it'.

Henry is as capable as any in the AWBC of talking the talk - speaking for ages and saying nothing. What separates him from others is knowing and understanding that being under scrutiny requires action and he needs to be seen to be doing something much more constructive than lip flapping.

Australian brands are an established part of the UK and US retail scene, and for the most part non-serious' wine consumers love them. Within the industry, the argument is rarely about the quality of the Australian/South African/Chilean brands, but are these wines being sold at a price that generates profit for all concerned?

Henry wants to see a wider range of Australian wines at different price points on shelves and in the consumers' consciousness. If we don't improve the mix we will become inextricability linked with accessibility and convenient value, which has relevance, but I believe we also have a role to play with aspiration, inspiration and quality,' he says.

In the past 20 years the UK retail landscape has changed dramatically. Although with close to 25% of the market Australian wine is well established, Henry feels the role of the Wine Australia UK office is as important as ever. However, the dynamics have changed from establishment to protection, guiding and growing.

Henry says the UK office is the most expensive of the global offices to run but needs the least financial support from central funds as membership fees meet most of the costs. Surprisingly the fee a winery pays has reduced from 1,500 to 900, making it more acceptable for the smaller winery. But do the big companies need Wine Australia in the UK now? Or do they join the campaign as a token? We need them and they need us; sometimes they need our authoritative voice to get their brand proposal over - perhaps because their brand proposition is less welcome in certain quarters or to get the story across to the media. I would find it horrifying and patronising if companies just joined us because they thought they ought rather then needed to,' Henry says.

Do the big guys pull the strings? No', is Henry's simple answer, but he is as accountable to them as to any other winery that pays fees and he knows the feeling among the smaller players is that he complies with big company wishes. He points out that in the UK funds have been diverted to on-trade and that can hardly be of benefit to some of the big company brands that do most of their business via the supermarkets.

A persuasive argument often presented to smaller wineries trying to crack the UK market is to aim for sales via the on-trade. But how much business is really to be had out of this sector and how many wineries can it support? Around 10,000-12,000 outlets is Henry's estimate if the big distributors such as Constellation and Waverly, etc., are taken out. The next tier down distributors might have 1,200 -1,500 customers each, but the question remains - how many wineries can any distributor list?

Programme members have grown in the past four years; no one joins a programme that's not working. The growing number of small wine exporters joining in categories 1-3 (exporting 5,000 cases or below) is an encouraging sign that the maturing UK market is still interested in what is small and boutique from Australia,' he says.

In a market as diverse as the UK, it is debatable if gaining overall market percentage share works in the long term. It appears the UK has as much Australian wine as it needs, from Penfolds Grange down to Woppy Wombat NV special on offer in the Cash & Carry at 12 a six-pack. Maybe moving from 25 to 30% of market share will bring short-term growth, but destruction in the longer term a l Germany in the 1970/80s.

Therefore part of Henry's job is getting the thought process of buyers better aligned to what is available from Australia across the full spectrum - wines that will really enhance portfolios. If they require three Shirazes, must they go with three that have great similarities from the Barossa Valley? Why not have one each from the Barossa Valley, Hunter Valley and Grampians in Victoria? Why can't UK buyers look at Australia the same way they do France?

With the understanding only the English can have about the relationship with France, Henry's answer was that it only seems to come about after several centuries trading and a hundred years of war. He did concede that getting buyers and hence consumers to better understand Australian regions was an area that needed greater work.

Henry may be recognised in and fully understanding of the UK market, but he now has other offices to oversee in Europe, the US, Canada and Japan, along with a budget of millions. Asked if it is sufficient: It's good, but like all budgets, 30% more would be better,' he says.

The problem of lower-value Australian wines dominating, as in the UK, is also to be found in other markets. The US FOB price per litre of A$4.27 (August) is still greater than the UK price of A$3.55, but has declined 9.9% over the past year. The Canadian market, reporting a 10.6% increase in volume, is showing an 11.9% decrease in FOB value, although that is still a very healthy A$4.90 per litre.

Working off a small base, but a market that Henry finds interesting, is Singapore. August MAT volume was up 26.5% and value was at A$7.22 a litre. Henry points out that it's not necessarily what gets consumed in Singapore but that the country is also being used as a distribution point for the region. South Korea is another market he is impressed by, where the interest, knowledge and consumption is growing rapidly', he says.

The biannual Wine Australia show (in Australia) has been running since 1996. Unfortunately it lost its direction and there was doubt that the 2006 event would be staged - it became a make or break. The show went well and further changes are planed for 2008; this could involve moving location from Sydney and bringing in more overseas buyers and media. Henry is very enthusiastic about the possibilities, but at such an early stage nothing is confirmed. However, it is worth keeping an eye on its development.

Talk of shows brought the annual London Australia Day Tasting into the spotlight - has it run its time? I've asked myself that,' says Henry, explaining: it's important for several reasons. Being in January it's first out of the blocks and the right time to catch all buyers. Attendance this year was 1,100 in two days and it's attracting more people each year. The thing about holding it in London is getting 80% of those who matter to attend - it's not something that can be done in the US.' Having defended London he did say more regional activity was planned for 2007.

Despite the laid-back' manner there is both impatience and compliance inherent in many Australians; they will take problems such as being delayed or wine going missing in their stride, but often find it hard to understand why everyone on the planet is not totally in love with Australian wine. They're compliant because Australia is an over-governed country and their upbringing lends them to fitting into the system.

Henry has two paths he can choose to follow: become a bureaucrat, talk gibberish and sprout stats, or he can get stuck in, move the furniture around and try different directions. I think he is on the second path and, given time and support, will achieve a great deal.

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