Halliday, supermarkets, Casella & good MIS

Old is new again

Yesterday was the day, the day of release for the annual Halliday bible. Today (August 4) is the day a flood of emails arrive from winners of awards or wineries that have achieved or kept their five-star ratings.

As well as chasing wine hacks, wineries will be chasing their agents to make sure they tell their customers how highly Mr Halliday rates them. Therefore the store, chain or eating establishment should start stocking their wine, or order an extra pallet   or two, as lines of customers will be forming to buy the recommended products.

As for the awards, some old friends have been recognised.

Winery of the year has gone to Hunter Valley-based Mount Pleasant, established in the 1920s by Maurice O’Shea. McWilliam’s became a partner in 1932 and full owner in 1942. From then it was known, and by many still is, as McWilliam’s Mount Pleasant. The McWilliam’s has since been dropped from the name, with the aim of making Mount Pleasant stand independently. Mount Pleasant deserves to be recognised in the same league as Penfolds’ top wines and Henschke. That is, it deserves global recognition.

Wine of the year has gone to Best’s Thomson Family Great Western Shiraz 2014. Another long-established producer.

Larry Cherubino Wines has been named best value winery. It’s not old in the sense of the two above,  but Larry Cherubino Wines was winery of the year in 2011, so Larry is an old hand at Halliday awards.

Youngsters by comparison are winemaker of the year Sarah Crowe9 Yarra Yering), and the best new winery, McLaren Vale-based Bondar Wines.

Congratulations to all winners, along with those picked among the 10 best new wineries, 10 best value or 10 dark horses.

Own brands hardly brand new

One of the great whinges of the Australian wine industry concerns supermarket own labels. TKR can understand the industry’s complaints, but only up to a point. The incompetence of some producers cannot be blamed on the supermarkets.3 Home brand

Besides, own labels have been around for centuries. When Sainsbury’s stores looked like the one in this picture (late 19th to early 20th century) they were selling non-branded produce out of chests, barrels and jars. They also had own label produce, as the other photographs show.

Clever producers learn how to work with supermarkets, those that can’t get a foot in the door cry unfair.

Extending the olive branch, supermarkets are revealing more about their own label offerings.

Aldi has released a duo of wines under the Merestone label: a Tumbarumba chardonnay and Hilltops shiraz. TKR reviews will be published next week. The price, at $12, represents great value.

In a recent brochure the back story of the wines was revealed. They were made by Jason Brown (Moppity Vineyards). It’s Aldi’s label but there is no mystery about where the wines come 1 home brandfrom and who made them.

At the recent Outlook conference Chris Baddock, general manager of Pinnacle Drinks, gave a presentation titled “The future of retail-owned brands and exclusive brands”. 

Pinnacle is a fully owned subsidiary of Woolworths Liquor Group. The company supplies beer, spirits and wine to BWS, Dan Murphy’s, Cellarmasters, Progressive NZ and Summergate China through owned manufacturing facilities, owned brands and exclusive brands.

The first question is: why do supermarkets have own brands? The answer from the presentation:

“Retailers pursue owned or exclusive brand strategies for a range of reasons. Primarily, the retailer sees REB [retailer-exclusive brands] as an opportunity to create customer loyalty by differentiating their range from competitors and protecting margins from the intense, price-driven competitive activity on major brands.” 

The presentation appeared open (I wasn’t there to see it) and the notes look informative. According to Baddock, there are 85,666 licences in Australia, split between:

  • Off-premise 9314 (16 per cent)2 Home brand
  • On-premise 76,352 (84 per cent)

Woolworths accounts for 3.9 per cent of all licences but a whacking 24.8 per cent of off-premise.

Not having seen the presentation or the Q&A that would have followed, I missed the nuances, so cannot comment fully. But points Baddock made through a slide headed “Myth busters” contained the following:

  • Pinnacle does not have penetration KPIs (key performance indicator)*
  • Website and back labels communicate ownership
  • Two thirds of Pinnacle brands owned by partners
  • Less than 10 per cent of SKUs on our shelves are owned
  • We crush <0.6 per cent of Australia’s total crush
  • We buy in bulk <3.5 per cent of Australia’s total make
  • We own 73 retail wine brands <0.2 per cent of all established SKUs in Australia

*TKR asked for clarification on this point. The answer:

“This means that Pinnacle does not have nor sets a percentage of SKUs within BWS or Dan’s that it tries to achieve or is rewarded for achieving. Equally, EDG [Endeavour Drinks Group] does not set a level of penetration that BWS and Dan’s must range Pinnacle products. The success or failure of Pinnacle brands live and die on the customer’s purchase decision (like other brands), not on whether we have a set Pinnacle percentage we are seeking to range.”

A statement worth noting and one TKR believes is true:

“A brand is no longer what we tell consumers, it’s what they tell us. And if customers are telling us they want exclusive label, then exclusive label belongs on the shelf as much as branded products do”.  

Pass go, collect a vineyard

John Casella is securing his supply of grapes. Maybe he sees the previous undersupply returning in the future. Maybe TKR is wrong and Australia does need a crop of 1.8 to 2 million tonnes.

It could be Casella doesn’t want grape growers dictating prices, and prefers to control his own destiny.

The latest news is that Casella has handed over about $12 million for the 903-hectare (608ha planted) Dunvar vineyard in the Riverina. The seller was Belvino Investments, majority owned by Hong Kong-listed CK Life Sciences. Financial services group Challenger holds a minority stake.

Belvino has also sold its Del Rios 1048-hectare (896ha planted) vineyard at Swan Hill in northern Victoria, to GoFarm Australia for a reported $22-$25 million. These sales reduce Belvino’s holdings from 7124 to 5173 hectares.

Also reported as sold, to Kingston Estate Wines this past week, was the New Residence Vineyard, a 252-hectare holding with 233 hectares planted, 36.4 per cent red and 63.6 per cent white varietals.

It appears the fashion for sale and leaseback of vineyards has passed. With family companies buying large tracts of vineyards it’s also looking as if the reliance on buying grapes on contract or the spot market may also be waning.

Mike Stone, executive officer, Murray Valley Winegrowers, has put out a media release saying producers are active in securing grapes from the 2017 vintage. The downside is that price is not part of the discussion.

Stone: “If agreeing this far in advance to sell grapes in 2017, growers deserve to know what they’ll be paid, particularly as most of the cost of producing wine grapes is incurred between now and harvest. As too often is the case, growers risk being stuck with prices that fall short of covering costs.”

Hits and MISes

Just as the ire of the wine industry is so often aimed at supermarkets these days, in the past it has been aimed at managed investment schemes (MIS). Some of the anger was justified, but not all. MIS overcharged for set-up, took unreasonable management fees, or crashed, losing their investors millions.

But a strong advocate for the good guys has been Ron Collins, executive director of Blaxland Wines, which has 600 hectares of owned vines, originally an MIS, and manages several other hundreds of hectares.

Collins has pulled up TKR several times over the years when he thinks we have wandered off the path of truth.

Blaxland has been growing grapes since the 1990s, but only moved into production within the past decade. From production to wine shows.

Collins: “A few years ago we decided to enter wines in shows, initially as a defence mechanism against the grape buyer staff members who were trying to degrade our fruit. It has now blossomed into a real business of selling bottled wine and the grape buyers are starting to understand that our grapes are not ‘D’ or less.”

This year the Blaxland-produced 2014 Tanunda Hill Barossa Valley Shiraz picked up platinum, best in show, at the Decanter World Wine Awards. It was something to be proud of but was it a one-off?

No is the answer, as the company has just picked up two golds at the Melbourne International Wine Competition. The last words go to Collins:

“It shows that we MIS spivs can ever so slowly move into the mainstream. I have just received my copy of the latest Decanter that highlights the awards. I had no concept of how important this award is and the quality of local wines we were up against.”

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