Wine exports up, McLaren Vale Vineyard sales

Aussie wine on the up

The Wine Australia export report to end of June 2016 is bursting with good news. The complete report needs reading. In fact, read it twice. Patterns are emerging, most of which are good, but some show the pedestrian side of exports.

There is, or should be, some concern about bottled exports at $2.50 a litre or below increasing 11 per cent overall to 15.59 million litres. There is good news in that going back five years to 2011 the figure was 34.46 million litres, so it has halved since then. But if you factor in inflation, $22.50 for a nine-litre case would be at least $24.40 a case now.

How come we are still producing wine in this sector? And what does it say about Australia? China is a newish market. It’s a worry that this sector increased in China by 37 per cent. More of a worry are the established markets: the US in 2011 took 5.67 million litres; five years later it is still taking 3.84 million litres. Is there good news? The UK has dropped from 18.34 million litres in 2011 to 2.42 million litres in 2015-16, but it takes more wine in bulk containers. It’s all swings and roundabouts, but we would expect to be seeing this sector decline to such an extent that it doesn’t make the report.

The $2.50 to $4.99 a litre sector (bottled) remained stable overall. The good news was that exports to the UK, Canada and US in this sector all declined. Good, because exports to those three markets in the next sector, $5 to $7.49, all increased. Let’s hope the sales went this way and not down to the $2.50 and below sector. And that the US drop of 6 per cent in the $7.50 to $9.99 sector was not into the sector below.

$2.50-$4.99 $5-$7.49
US Down 8 per cent Up 12 per cent
UK Down 6 per cent Up 35 per cent
Canada Down 13 per cent Up 8 per cent

 

China took 35.11 million litres in the $5 to $7.49 sector, an increase of 41 per cent. If it hadn’t been for the 4 million litres in the $2.50 a litre or below this would be an indication Australian wine was reaching a wider Chinese market. You could say the increase in the $2.50 or below sector also shows this, but what sort of wine is this and what is it doing for Australia’s reputation? Is it nasty wine under cork that is dragging down the good work the higher priced wines are doing?

Overall, the export figures in all price sectors was positive and tell their own story:

$2.49 & under Up 11 per cent
$2.50-$4.99 Flat
$5-$7.49 Up 21 per cent
$7.50-$9.99 Up 12 per cent
$10-$19.99 Up 23 per cent
$20-$49.99 Up 28 per cent
$50 & above Up 31 per cent

 

The grape price reports will be available soon. With luck we will see some of the increased export prices making their way down to growers.

JPMorgan analyst Shaun Cousins, reported in the media last week, said:

“Treasury Wine Estates could boost its margins from 14 per cent to almost 20 per cent by the middle of 2020 if it can continue to build its strong sales momentum in China.”

Cousins put a target price of $10.25 on the TWE stock.

China is still the hot market, doing well in all the price sectors including the highest. As TWE has wines that fetch high prices it’s no wonder the analysts are forecasting a profit increase and higher share price.

Export to china

While we’re fawning over China, the US should not be ignored. To quote the export report, exports to the US increased in

“the $2.49 and under segment (up 6 per cent to $59 million), $2.50-4.99 (up 8 per cent to $315 million) and $5-$7.49 (up 10 per cent to $22 million). The only price segment to decline was the $7.50-$9.99 segment, with value down by 7 per cent to $19 million.”

Looking closer at the $10 per litre and above segment in the US:

  • $10-$19.99 increased by 28 per cent to $22 million
  • $20-$49.99 declined by 13 per cent to $10 million, and
  • $50 and over increased by 77 per cent to $3.5 million.

It’s really beginning to look as if Australian wine is getting a second chance. Let’s make the most of it.

 

Tales from the Vale

The Conte family has sold its vineyards in McLaren Vale. Planted in 1965, the holding is 53 hectares and was put on the market last year for a reported $2.5 million, supposedly as the result of a divorce settlement.

The property also includes a modern residence with 360-degree views of McLaren Vale and the coast, and a water licence for 118 megalitres.

The press article on the sale says the buyer was not disclosed, but TKR believes it’s Dowie Doole (DD), and the final figure was less than the asking price. Word is the new owner plans to rejuvenate the vineyards, which have become run down.

Where DD raised the money is not clear. It could be from the owner’s pockets, banks or third-party investment.

Unless DD has vast expansion plans, the fruit from 53 hectares will be more then its brand requires, so it will have fruit to sell. The house could make a cellar door with offices should DD decide to go that way. At the moment DD does not have a presence in the Vale, as it gave up the lease on the tasting room on California Road and its wine is contract made in Langhorne Creek.

Also buying into the Vale is Casella, which has acquired Hawthorn Ridge and Reedy Creek vineyards, a total of 168 hectares. The vineyards produce mainly shiraz and cabernet sauvignon but also have a number of other varietals, including merlot, grenache and petit verdot. A Casella spokesperson said the company anticipated 1600 tonnes of A and B-grade fruit during vintage.

No price was disclosed but word is it was about $12 million. TKR has been told Paul Buttery, patriarch of the family that established the Gemtree brand, was a major shareholder in both vineyard ventures.

What will Casella do with these vineyards? It’s unlikely the fruit will disappear into the Yellow Tail brand. Casella also has Peter Lehmann, which is entrenched in the Barossa, and though possible, it seems unlikely it would include a McLaren Vale wine in that portfolio. The company hasn’t yet made clear what it will do with the Brand’s Laira brand, which is centred on Coonawarra, leaving the question: will Casella develop a McLaren Vale brand?

Sweet talk

Those of us deeply into wine have a tendency to forget other forms of alcohol, but they all play a part in understanding consumers, and the wine industry needs to understand consumers better.

Roy Morgan has released a report on the leading liqueur brands and their consumption in Australia. According to the report, 8 per cent of Australian adults (or 1.5 million people) drink at least one liqueur in any given four weeks, with different consumer groups being more likely than others to consume particular brands. Out of every 100 glasses of alcohol consumed in an average four-week period, just two glasses will be liqueur.

Baileys is the prince of sticky drops, apparently:

In the 12 months to March 2016, 574,000 Australians 18 plus enjoyed at least one Baileys – more than three times the number that drank the second-most popular liqueur, Kahlúa (165,000).”

These are followed by:

  • Jägermeister (123,000)
  • Midori (121,000)
  • Cointreau (104,000)

Most popular liqueur brands in Australia:

6892-chart1

Source: Roy Morgan Single Source (Australia), April 2015-March 2016, n=15,135

Both men and women enjoy liqueurs, but who enjoys which liqueur most is fascinating.

Male/female ratio of Australia’s liqueur drinkers:

6892-chart2

Source: Roy Morgan Single Source (Australia), April 2015-March 2016, n-1,488, Base: Australians 18+ who drank liqueur in last 4 weeks

Among those who drink liqueur, women consume an average of five glasses per four weeks, just ahead of male liqueur drinkers, who drink four glasses in the same period.

More interesting is the loyalty they have to liqueur brands: 76.1 per cent stick to one brand. That is, the Baileys drinkers are Baileys drinkers; they don’t in the main alternate their Baileys on other days with Cointreau or another liqueur.

The anomaly is the 18-24-year-old age bracket. Nearly 35 per cent of them consume two or more brands in an average four weeks. They also drink more cocktails, hence more liqueurs.

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