Barrels of Penfolds, bottles of Aldi malt & WET

Roll out the barrel

It was a good move by Treasury Wine Estates (TWE) to announce the release for sale of special barrels of Penfolds wine just before Vinexpo. From July 1 consumers can buy a barrel for $198,000. They then form a bond with the brand, choosing how they want the wine bottled, and can visit Magill Estate and be treated royally. No doubt this will be profitable as a wine sale, but the publicity generated will be huge, with the bragging rights among rich customers enormous. In a way it’s elitist and pompous, but, heck, if the money is there, take it.  

Another good move is Aldi’s latest whisky release. Causing the biggest stir in the media is the Glen Marnoch 18-year-old Highland single malt, selling for $70 a bottle. This seems to have induced some snobbery, with people saying it’s too cheap to be good.

I’m no whisky expert but it’s good enough for me: orange marmalade nose, soft and gentle on entry and a smooth journey across the palate with warm, ripe, plum-influenced flavours released on the journey. It lacks the depth of some 18-year whiskies but it’s damn good value.

Also released, but not getting the media attention, is the Glen Marnoch Islay Blended Whisky, which picked up a Spirits Business Global Scotch Whisky Masters 2015 Gold Medal. It has the classic Islay smoky/peat nose. It’s a touch tart on entry but the flavours win out, especially if it’s taken with a little water to tame the 40 per cent alcohol. For $45 it’s a bargain, as is the Glen Orrin 5yo Blended Malt, which can be found in stores for $35.

The third of this year’s release is the Glen Marnoch ‘Bourbon Cask’ Speyside Single Malt. As with some bourbons, the sweet vanilla American oak is on the nose, but in the mouth it’s a beauty. The flavours stretch across the palate and once again can be approached better with a small addition of good water. At $40 it’s a bargain.

Concerned confusion

There are a lot of wine folk in Australia who are not only concerned but confused about the wine equalisation tax (WET) situation. In truth it is in limbo. Without a government it can be in no other situation.

Not that everyone is idle. The Winemakers’ Federation of Australia (WFA) is holding talks with state and regional wine associations and winemakers around the country. But it appears the WFA is not able to pour soothing balm far and wide. In fact, little of worth has been heard from the WFA since budget night.

Meanwhile, social media is rife with chatter about what might or might not be. William Downie, the noted Victoria-based pinot noir maker, put out a fictional story via Instagram (full story) He ends:

“Make no mistake, the current WET reforms are about big companies protecting market share with the supermarkets. The loss of the next generation of Australian wine is just collateral damage.”

The fiction is simply that: fiction. His conclusion shows that he is not only concerned, as he should be, but also confused. Following Downie’s post the string of comments continues in the usual way of backslapping and the predictable bashing of the devil’s duo of supermarkets. One says:

“The big issue is the supermarket domination, it’s a disgrace. Instead of thousands of retailers that we could engage with and sell to, there are two big ones who basically make their own booze anyway.”

I do not question the supermarkets’ dominance, or the fact they make their own wine, but I do question if there would be thousands of retailers otherwise. It’s fantasy, and if young winemakers are going to survive they will have to learn to deal with what is, not what they fantasize what should be. This is a time of need. The WFA has a duty to step up and keep the industry informed. TKR spoke with Tony Battaglene acting CEO of WFA he said the survey requesting industry input had been distributed far and wide and were now being collated. The WFA board will meet next week to discuss what the next move will be.

Monkey business

As some of you have said, the 100th Monkey is all about a group of Riverland winemakers/growers who want to show there is more to the region than bland brand going out under the non-existent South Eastern Australia GI. More news will be forthcoming and I look forward to reporting it.

Drink well this coming week.

Tony

7 thoughts on “Barrels of Penfolds, bottles of Aldi malt & WET”

  1. The Drinks Association maintains regular data on national licensing numbers and banner group size. Australian alcoholic beverage consumers have a significant array of shopping options with over 58,666 licences trading across the country that allow for the sale of wine to the public.
    As a proportion of overall liquor licence numbers the two large retailers hold 2,312 licences between them representing just 3.94% of all liquor licences.

    There are 9,314 licences that are strictly defined as providing for packaged off-premise trade, of which the licences held by the two large retailers represent 24.8%. However, the competitive market for packaged liquor is not restricted to just those who hold a packaged liquor licence. A truly accurate figure would need to incorporate ‘general’ hotel licenses (Eg: Bottlemart on –premise, PubMart, Hotel drive-through’s) and club licences (Eg: ClubHost, Club Mart, Club Partners) that maintain a packaged liquor offering, as well as holders of a producers licence that allow for “cellar door” and mail/internet order sales. This would further dilute the representation of the two main retailers as a percentage of the overall competitive “packaged liquor” landscape.

    It obviously a lot harder for wineries (or their choice of distributors) to form relationships with so many retailers, but they do exist and it can be done.

  2. Just a quick comment on the response from Andrew. In Queensland a general licence entitles the holder to have an off-premise outlet at the location of the licence, as well as the usual bar/bistro opportunities (usually a Dans or 1st Choice liquor barn) and up to 3 satellite outlets (detached bottle-shops). So in Queensland there are 4 off-premise opportunities under the one “head licence” as well as on-premise. So just counting licences is not a true reflection of the situation, at least not in Queensland.

  3. And if Andrew quoted share of total wine sales as opposed to share if kucences, how would the representative share stack up. While I think it is facile to maintain that the ‘big retailer duopoly’ is the ONLY pronlem , let’s not split hairs over what is undeniably a disproportionate and dangerously unhealthy majority share.

    As for Bill’s vision allegedly being naive, he has successfully built his own label – and others – across a diverse range of retailers for over a decade, including big box specialists. I back both his perspective and his experience.

    ph

    1. Hi Paul,
      Happy to disclose total wine share. The WFA commissioned an “Expert Report” that estimated the “combined groups of Coles (Liquorland, 1st Choice, Vintage Cellars) and Woolworths (BWS, Dan Murphy’s) liquor businesses distribute and sold up to 77% of all wine sold off premise up from circa 60% in 2007. This translates to about 70% of all domestic sales, on and off-premise”.

      Now I won’t for a second deny that between the two large retailers, we do overindex wine share against licence numbers. And according to WFA analysis, we must be doing exceptionally well at it to be able to represent 70% of all domestic Australian wine sales from just 3.94% of all on and off premise licences.

      Cheers,

      Andrew

  4. I am a firm believer that the WET has distorted the market.
    Rorts and hearsay aside, had we applied the Rebate to exports only, we would have a sustained and thriving export market, competing favourably against the subsidised markets of EU.

  5. I agree with Mark – there is no doubt that the WET rebate has distorted the market.

    I can offer a lot of experience on this subject. As a former Board member of the WFA, I was party to talks with the Government when it was introduced.

    We argued for the rebate of the tax in particular as it applied to small businesses.
    The objective was to boost margins, thus improving profitability of the wine sector – especially in regional areas.
    What we did not count on was the oversupply of grapes – which led to schemes to direct the rebate back to many grapegrowers.

    The wine industry surplus, coupled with the WET rebate, enabled the supermarkets who were (previously) reliable business partners to become the industry’s biggest competitors.

    Yes, the WET rebate fuelled that.

    I remember Peter Costello, who did not support the rebate, saying (after Cabinet had approved it) – “You can bet the industry will give the rebate away in margin”. He was right.

    What was designed to give (in particular, small winemakers) a boost in margin became a tool for meeting competition in the glutted marketplace.

    We argued for fairness to all in the industry – so large and small were eligible for the capped rebate – and it didn’t matter what your model was – as long as you were a “producer”.

    We did not foresee that the rebate could be applied to “traders” with no skin in the game. We could not have predicted the rorting – which did happen.

    The ATO has cleaned much of that up.

    You can’t double dip any more, and if you have a scheme designed to do that, the ATO will get you.
    The NZ problem was always going to be there – because of CER. There’s nothing anybody could do about that.

    So where to from here? The Government must have been listening to Mark – because now the rebate cap is going to be reduced, to be replaced with funding for marketing through AGWA.

    As long as the glut remains we will all be taking lower prices, so the rebate remains very important to all, (especially the small) players.

    I am sure that the intention of tightening eligibility is to take out the rebate on bulk wine sales – which will remove eligibility from the traders – but affect the margins of those wineries that use their capacity to make a bit extra to sell in bulk.

    It doesn’t matter how they restructure it, there have to be some losers. The consultation process has to ensure that – whatever the meaning of “real” is – the “real” winemakers aren’t the losers.

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