The discussion about Australian wine representation on American wine lists continued over the past week. To recap, I thought a top-notch New York restaurant’s Australian selection was not good. US-based Australian wine expert Chuck Hayward said it was better than most. Sergio Carlei from Carlei Wines in the Yarra Valley disagreed with Chuck and got stuck in. Chuck, in turn, bit back, defending his opinion. Gordon Little, New York-based importer of Australian wines, offered his view on what’s happening with Australian wines in the US. Terry Chellappah, Robert Hill-Smith and Peter Nixon have had their say. It’s all good stuff and if you want to understand the US market this not a bad place to start, so go here and scroll down to the comments.
Bagging the big end
Another good exchange has been sparked by a Facebook post by Dan Traucki, who has a rant about Pernod Ricard flogging Morris Wines. Traucki also gets stuck into Treasury Wine Estates and the big end of town in general. To read the full script and the various comments go here. Meanwhile, here’s a short extract:
“I think that the Australian wine industry’s ‘big-end of town’ has an appalling and pathetic track record over the last couple of decades.
“So given that the wines [Morris] are excellent, why can’t Pernod Ricard make the place pay for itself in its ever increasing demand for profit? Well, the most obvious answer is that its marketing and sales people can’t do their jobs properly. They can’t sell around 2000 cases (at a guess) of sensational durif to the whole world? Or is it that they just can’t be bothered? Either way we will suffer because of this incompetence or laziness.
“Consider Accolade that used to be Hardy’s and separately Berri Renmano, then became BRL Hardy’s then Constellation and now Accolade. If one were able to source accurate data, I would wager that this combination sells less wine, and has less market share than the two original companies did before they became this sorry mess…”
Australia’s export credit agency, the Export Finance and Insurance Corporation (EFIC), has put out a short report by economist Fred Gibson on how the dollar affects Australian wine exports. It has a cautious opening:
“Statistically, a lower Australian dollar (AUD) seems to boost all wine export volumes. But export volumes of cheaper wines experience greater benefits than do premium ones. These findings suggest that export revenue for wines priced less than $5 per litre, 89 per cent of Australia’s export volume, rely on a weaker AUD to lower their foreign price and thereby boost their competiveness.”
The dollar is down 20 per cent since its peak in July 2011 and wine export volumes have risen 8 per cent since bottoming in 2013.
“To assess the relative importance of these two influences, EFIC has modelled the volume of wine exports in Australia’s top six markets – which account for 80 per cent of export volumes – against real per capita incomes in these export markets and the real bilateral exchange rate. Then we are able to isolate the impact of a weaker AUD on the competiveness of Australian wine exports.”
The good news, or good forecast:
“Our results suggest that a 10 per cent depreciation of the AUD against the currencies of our top six wine markets – UK, US, China, Canada, Hong Kong and New Zealand – would lift aggregate wine export volumes by 15 per cent over the next five years.”
The not-so-good news: the bottom sector of exports, $2.50 or less per litre, benefits the most from a weak dollar, and the report predicts volume in this sector will rise more than 20 per cent over the next five years.
This raises the question: would it really benefit Australian wine for this sector to grow that much? TKR hopes this growth does not come about, as it would increase the perception around the globe that Australian wine is bland brand.
The report points out:
“Modelling shows AUD depreciation is a clear positive for export volumes. But average wine export prices in AUD over the last 25 years appear to have changed very little – a trend mirrored in the price of both bulk and bottled wine (99 per cent of exports). Furthermore, movements in the exchange rate have had very little correlation with movements in AUD denominated wine prices. This would suggest that a lower exchange rate lifts export volumes, but has a limited effect on prices.”
TKR is still for a smaller but more profitable industry. The export report to end of June is out. Read our take on it in Australian Wine News.
Another one for James
Congratulations to James Halliday, the winner of the inaugural Cullen Award for Excellence. I haven’t checked, but I think James has won every award going. All deserved, as he has done a lot for the industry.
The Cullen award, to quote the release, is for
“recognising outstanding effort made by an individual, group or organisation to promote or improve wine or winemaking practices in Western Australia, whether they reside in WA, Australia or internationally. The award is dedicated to honouring the legacy of Diana Madeline and Kevin John Cullen, who together founded Cullen Wines in 1971 and believed in the potential the fledgling area had to produce world class wines.”
Awards and thanks to all TKR readers. Reward yourselves with good wine, food and love this coming week.