Wine Australia, fact or fantasy? USA rosey

Fact or fantasy

Wine Australia (WA) claims research on Australian shiraz terroir will lead to higher prices and recognition. Is this fact or fantasy? Obviously WA believes it to be fact. Others, such as TKR, think it fantasy.

The media release announcing that $5.3 million is to be spent on understanding and refining the expression of Australian shiraz terroir was under WA deputy chairman Brian Croser’s name.

Croser thinks the research will lead to higher prices, but what about others on the WA board? Chairman Brian Walsh, a man for whom TKR holds the greatest respect, is also a believer.

Here’s Walsh in an interview with Milton Wordley this month:

“Our starting point is a belief that we make some of the finest wines in the world from distinct terroirs, grown and made by gifted people, supported by great research and a robust regulatory system.

“We are very comfortable using the word terroir because it has international resonance.

“People say it’s a French word and it doesn’t mean anything.

“The French have gifted many great words to the global lexicon and terroir is internationally recognized in the wine sector, if a little mysterious. We hope to put some solid science behind the understanding of what terroir means to our wines, while not destroying the mystique.

“The rest of the world don’t see enough of our great wines, so our reputation tends to centre on our equally strong and important branded and commodity wines.

“To get all wine (and grape) prices up, we need to elevate the global perception of Australian fine wine and bring the whole of our grape and wine community along for the ride.

“Simple really…”

It’s not at all simple. It’s incredibly complex. Yes, Australia makes some of the finest wine etc. No argument about that or the use of the word terroir. I think the world is drifting towards a common language, based on English but with other words thrown in. Within the next 100 years we could all be speaking Polari with a fair input of Chinese (Polari is a mix of Romance languages such as Italian and French with Romani Gypsy, London rhyming slang and a host of other influences. Its main use was in London markets in the 18th-20th century and among theatrical people. It had a strong gay following when homosexually was illegal in the UK).

The claim is that prices will increase across the board. But WA hasn’t explained how it came to this conclusion.

There is no argument from TKR that establishing a map of best sites would be interesting. But how would recognition of a ridge in, say, Heathcote, that has five vineyards producing exceptional wines made from shiraz, help raise the reputation and retail price of a shiraz made in the Riverina and sold in a UK supermarket?

TKR asked Wine Australia:

“The question is simple: on what basis or evidence did Wine Australia base its statement sent out under Croser’s name, who says ‘will’? Why not ‘fingers crossed’ or ‘may’? The sentence as a whole is pure arrogance wherever it originated: ‘it is these wines that will most quickly elevate the image and reputation of all wines we produce.’”

Should the board of Wine Australia answer, we will gladly share.

Site allegiance

Meanwhile, the opposite of single site or single region wines are brands that claim no allegiance to region or grape.

Rosé wines are interesting (see this week’s reviews), the only common denominator being colour, and even that covers the spectrum from the palest pink to almost red.

The latest Nielsen figures from the US market are said to take in about 70 per cent of the off-premise table wine market.  Covered in greater detail in the International Wine News section, what the figures show is that rosé and blush wines were the stars of 2016. Admittedly they came off a low base, but the performance was still impressive:

Value Value US$ Volume 9lt case Av bot price Increase 75 cl bot
Blush +56.9% US$47.7m +44.2% 384,614 US$10.34 84 US cents
Rosé +56% US$141.6m +55.3% 889,046 US$13.28 06 US cents

According to Nielsen, blended red table wines in the US accounted for about US$1.65 billion ($2.14 billion) in 2016.

One of the aristocrats of brand in the US is Dave Phinney. He created the Prisoner brand, selling it to the Huneeus family for about US$40 million in 2010. They built up sales and on-sold it last year to Constellation brands for US$285 million. Phinney’s winemaking vehicle was Orin Swift Cellars, which he sold to E&J Gallo (price not disclosed) last year. Gallo described Orin Swift in its media release as a brand known for its “excellent wines, bold imagery, memorable names and creative labels”.

There is an argument that critics slam brands, which may well be true. Brands tend not to come my way so it’s hard to comment. I did taste a range of Yellow Tail a couple of years ago and was not impressed, but also tasted a range of Jacob’s Creek and was impressed. Wolf Blass and Penfolds nearly always shine and both brands are doing very well in China.

The latest Silicon Valley Bank report carries this paragraph:

“The young consumer is giving blends a chance and, from our view, is taking a page from the matures, who placed their trust in brand vs varietal wine throughout their beverage-consuming years. If premium blends and branding are done well, that approach reduces the confusion for entry-level wine consumers. If new consumers are content with brands over varietals, the observation has massive implications for producers that have leaned on the fighting varietal to develop their brand identity.”

As much as TKR and many others in the Australian industry would like to see regions and sites recognised around the world, with their wines attaining the prices they deserve, it’s a dream not a practicality.

The practical is making Australian brands the most trusted and respected in the world. If that can be achieved then retail prices will rise and all involved – grower, producer, retailer and consumer – will benefit.

It appears to TKR that Wine Australia (WA) is looking to top-end wines to pull those lower down upwards. It’s such a pompous, autocratic approach. TKR suggests WA think of the mass market wines being stronger, better, more dynamic and pushing the top-end wines ever upwards.

We thought WA had a good board, but it’s proving stagnant. We suspect it’s being held down by a couple of dominant members.

TKR has been exchanging emails on this matter with a range of people this past week. Understandably, few want to get into a public scrap with WA. As one said, that is what TKR is for.

Below are a few extracts from those emails:

“Many winemakers have to chase fashion to survive, but I doubt that we will ever be able to declare that we have a mature industry until we only make wines from fruit which shines in its region. Mind you, in the ‘mature industry’ of France, many winemakers are pushing the other way.”

Grants of that size should be for well-thought-out major projects with a very high probability of returning multiples of the amount to the industry.”

“There can be major influences from Wine Australia board members on shaping the grant after submission. Topics are generated through a somewhat opaque process rather than the old format of very general topics and researchers thinking through the topic and submitting ideas. Now the topics are much more focused when proposals are called for.”

TKR recently had a conversation with Robert Joseph, in which he said: The French have been drinking wine for quite a long time. They know less about wine than most Australians and drink far worse wine. The biggest selling wine brands are not even French – they are Euro blends.”

The TKR point being is for WA to look to the people their requirements and lift the bar for them not pander to the elite few.

No small matter

Wine Australia (WA) recently released the Small Winemaker Production and Sales Survey 2016. It reminded me of an incident back in the early 1990s when I was in Margaret River. I was talking with an incredibly pompous winery owner and his equally obnoxious snob of a wife. They told me they had recently appointed a UK agent, and asked what I thought of him.

“A good little operator,” I replied, whereupon Ms Obnoxious-Snob sharply said something along the lines of, “What do you mean, little? Is his business too small to handle our wines? Is he under-financed? Is he of small stature?”

The last made me burst into laughter, and with a disgusted glare the pair went looking for greater intellectual conversation. The question I have for Wine Australia: how tall does a winemaker have to be to qualify as small?

The report was released at an interesting time, as recently there has been some online chatter about the profitability of cellar door. The chatter centred on cellar doors with restaurants or cafés and whether they are as viable as they appear. The consensus was that the eateries would be best leased out to someone who knows the catering business, leaving earnings to come from agreed rent, wine sales via the restaurant and hopefully increased cellar door sales and sales of other paraphernalia to visitors to the restaurant.

WA surveyed 2098 wine businesses estimated to crush up to 500 tonnes (based on Winetitles’ Wine Industry Directory). The results were anonymous, and 223 responses were received, or 10.6 per cent, which WA says is “sufficient for reliable conclusions to be drawn”.

According to the report, $1.1 billion of wine is sold by wine companies with production of up to 500 tonnes per year. The domestic market accounts for 88 per cent of sales, with the main channels being retailers (47 per cent) and cellar door (29 per cent). The 12 months up to November 2016 was good for the smaller producer, with an average production growth of 7 per cent and average revenue growth of 12 per cent.

The report says: “Small winemakers directly employ an average of 5.1 people per business.” According to conversations I have had, a small winery cellar door needs to employ people who can do other jobs as well, such as office duties, warehouse work, and dealing with online and mailing club orders.

One winery owner in Victoria told TKR that on big weekends such as the Queen’s birthday or Easter, if he can get the family working it’s possible to make good money. But if he has to pay penalty rates, it’s a different story.

The pay-off here is lifestyle. The kids and grandchildren come up from Melbourne, enjoy working together in cellar door, and feasting together in the evening. They also go home with a stack of wine.

Most domestic sales are via retailers or cellar doors:

As can be seen from the chart, cellar door, mail order/wine club and own website are very important to the smallest producers. As production increases, the importance of cellar door declines in terms of income. It’s not part of this report, but TKR believes the importance of cellar door to large producers is prestige. Treasury Wine Estates’ amazing facility at Magill in Adelaide shows the importance of the company. It really wouldn’t do to have an old door across two barrels under a shadecloth.

The larger the producer, the greater importance of export:

Many factors influence the success of cellar door. Location is the main one, with the golden circle around Melbourne being a fine example. It’s easy to reach the Yarra Valley or Mornington. Geelong and Macedon are not that far away but the first two are the most visited.

The Hunter and Barossa still top the national list and cellar doors there do very well. Staff who are friendly with some knowledge are better than know-all wine bores, and consumers love a winemaker, preferably with hands stained red from juice.

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