USA distributors, aged wine, flat bubbles

Aged is new

One of the most interesting aspects of Australian wine in China is watching the Chinese discover things that some people take for granted. Old can be new in the land of the dragon.

Last week I wrote:

The recent Aged Wines masterclasses held in Beijing, Guangzhou and Shanghai this past week, organised by Wine Australia, look to have been a great success. It’s a simple but worthwhile format: a current wine is shown alongside one at least 10 years old.

A reader commented: “It would be informative to learn what the feedback from the tasters was.”

Wine Australia is still collating feedback, but according to Wine Australia CEO Andreas Clark the masterclasses were well received and sentiment was overwhelmingly positive. He sent the following:

Jin Yang, certified Australian wine educator: “The presenter, Fongyee Walker MW, presented a very interesting class. The back vintage semillon is very impressive to me. It is the first time for me to drink an aged semillon and it’s unbelievable!”

Louise Leung, Everwise Wines: “The wine from Chateau Tanunda is a totally different style compared with other Barossa wines I have tasted before. More elegant but less fruity. Impressive!”

James Dai, certified Australian wine educator: “The aged Australian wines are not so frequently seen in the China market. This has been a rare chance to do an interesting comparison of the new and back vintage of the wines at the masterclass, which beautifully illustrated the ageing ability of Australian wine.”

Li Meiyu, founder of DrinkArts and wine director of Park Hyatt Beijing: “The wines at the Barossa masterclass not only showcased premium quality, but also reflected the characteristics of the place they come from. Very impressive!”

A good response. The story also induced robust comment among the oldie gang a lose network of mainly industry/trade/academic old-timers who share e-mail chatter, some of whom believe old wine is not always well thought of nowadays. A generation, maybe two, has become used to drinking younger, fruit-forward styles. They are not attracted to the drier, deep savoury, slightly dusty characters that old wines often demonstrate.

Food for thought

A post on Vinex on 7 March offered food for thought.

The post lays out the situation of wineries and distributors in the US.

The danger for both domestic and imported wines is clearly demonstrated in two simple statistics

  • In 1995 there were 3000 alcohol distributors in the US, with about 1800 wineries.
  • Today 675 distributors service nearly 10,000 US domestic wineries, and a lot of imported wine.

This is further compounded by 60 per cent of all US wine distribution in the hands of four distributors.

Due to distributor consolidation the advice for American wineries is to work harder on building direct-to-consumer sales. Where this leaves Australian wineries not represented by the big four is unclear.

Laws governing direct-to-consumer sales are relaxing, with about 80 per cent of American states now allowing them.

If lucky, an Australian family producer may find representation with a smaller but more focused distributor, such as Pacific Highway Wines & Spirits. The company is owned by the Australian Oatley family and the Giessen family of New Zealand. Its portfolio features brands from Australia, New Zealand, South Africa, France, Chile and Spain as well as domestic brands from Oregon and California.

Naturally, the Australian offerings are headed by the Oatley and Wild Oats brands, but the company also represents the Adelaide Hills winery The Lane.

Australian bubbles falling flat

There are many good and a few great Australian sparkling wines. But Australia does not sparkle when it comes to exports.

The latest export report to end of December 2016 shows total sparkling wine exports were down 11 per cent in volume (8.06 million litres) and 6 per cent in value ($45.89 million).

Most disappointing was the UK market, down 41 per cent in volume (1.01 million litres) and 43 per cent in value ($4.1 million).

Disappointing because the latest UK Wine and Spirit Trade Association report shows that in the three months leading up to Christmas 40 million bottles (up 12 per cent) of sparkling wine was sold via retail worth £270 million ($434 million).

The on-trade sold 5 million bottles worth £127 million. The report continues: The combined on and off trade sales of sparkling wine was over 45 million bottles, up 54 per cent in five years, when during the same period in 2012 sales reached short of 21 million bottles.”

Compare that with Australian sparkling wine exports five years ago, which stood at 4.3 million litres worth $15 million. Australian sparkling is declining in a growing market.

Prosecco from Italy is partly responsible, but Australia can’t put all the blame there, or indeed on the higher duty rates that sparkling and champagne wines incur, as these apply to all, including English sparkling. Duty on an average-priced bottle of sparkling wine is £2.67, which is 28 per cent higher than on still wine.

Family finances

New Zealand-listed Foley Family Wines has posted a loss of NZ$323,000 ($296,140) for the six months to the end of December 2016. A media report says this was due to falling wine sales following the Kaikoura earthquake. Yet the difference in sales was $891,000. It seems a large loss on that reduction of sales. A quick run through the accounts shows:

Sales and marketing expenses were down, as were administration and governance expenses. But there was a non-recurring expense of NZ$989,000, explained as “earthquake related expenses”.

At this stage of the accounts there is still a NZ$778,000 profit recorded but then an interest expense of NZ$580,000 is explained as “Loan interest and other costs of finance paid”.

Further on is the explanation: “Interest was paid/payable to Foley Family Wines Holdings, New Zealand Limited the parent of the Foley Family Wines Limited under the convertible note. Interest paid/payable for the period was $357,000 for the Group.”  

From the right hand to the left?

Profit is still running at NZ$204,000 when other losses come into play, including NZ$623,000 for realised reversal of (gain)/loss on harvested grapes.

Deduct the various losses but add an income tax gain of NZ$126,000 and the loss is NZ$323,000.

The year-end should make interesting reading will there be a full explanation of, “earthquake related expenses?”

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