Wine Australia’s four ‘heads of market’s’ recently joined forces to present a market overview for a Wine Communicators of Australia webinar late in 2016. They examined the issues, risks and opportunities for Australia’s major export markets. Daniel Whyntie sat in to bring you the highlights of their presentations.

UK: Stop the world I want to get off

Laura Jewell MW Head of Market Europe, Middle East and Africa

Looking back across recent history, the UK market has been pretty stable – recent declines had slowed and there was growth in the retail sector and in sparkling. However, the impacts of ‘Brexit’ have meant the outlook seems to change on a daily basis. The vote to leave was unexpected and it has become very clear the UK Government had not actually planned for this outcome.

The Pound fell off a cliff overnight, devaluing by about 18%, which has more implications than just the obvious. The cost of manufacturing and costs throughout the supply chain will increase; while importers and retailers currency hedging arrangements are now coming to the end of their cushion. So when will prices go up?
In the retail market Naked Wines have already raised their prices, however Majestic Wines have not.

The big question is… ‘Who actually takes the pain?’ As few retailers buy in Australian dollars the pain is with the supplier. Recently when Marmite sought to raise its prices in response to Brexit, Tesco dropped the products – which provoked the Twitter hashtag #Marmitegate.

While the retailer rejected the pricing, it was interesting to note the public were on their side and not the brand owner. The Wine and Spirit Trade Association has indicated prices are likely to increase by 22p per bottle for non-European wines sold in the UK.

North America: Make Shiraz great again

Aaron Ridgeway Head of Market North America

The US is at the crossroads – having seen a very big rise and an extremely dramatic drop off, but Ridgeway believes careful decision making the category could set itself up for a more successful future. This will require restraint not to flood the market and leverage the favourable currency.

Perception remains an issue, highlighted by the negative example of somebody picking up a bottle and quoting of the high alcohol level in Australian red wine, Shiraz in particular.

Australia has found itself in a situation where Shiraz is the varietal most associated with, but despite being only four per cent of total sales it carries almost 100 per cent of the reputation. By building on the stories around Pinot Noir, Cabernet and Riesling, Australia can create the right climate to reengage with more than just Shiraz as the opportunity.

The transition from a marketplace made up of many wholesalers to a smaller number is another challenge facing wineries – as the top 10 distributors control three quarters of all wholesale business. An Australian wine company with one of those 10 doesn’t necessarily guarantee success, as it’s difficult to attract focus even within that network.
The pressure is on Australian wineries and brands to grab ‘mind share’ and to give really simple tools to help focus their distributors.

China: Red dawn

Willa Yang Head of Market China

China remains a massive opportunity as people are more interested in wine as a lifestyle, though it’s still a very immature market and has rapidly evolved to trends every two to three years.

Three years ago online was very small, however ecommerce in China is now booming. When you aim towards China you really need to use the ecommerce entry strategy as part of your business.
At the moment the top players are which dominates with more than 57 per cent market share and hosts the massive singles day sales, is also doing very well with 20 per cent, followed by other smaller players such as VIP and Amazon.

Australia wines have surged 51 per cent in value across the past year; though domestic wines still hold 70 per cent market share, which is down from more than 80 per cent six years ago. Showing there is a growing interest in imported wines, of which Australia has 15 per cent market share.

Australian, regional and individual branding all remain important, but promotions in China can be very expensive. So working together promoting the region, promoting Australia in general is more important sometimes than the individual.

Asia: Free trade boost

Hiro Tejima Head of Market Asia

Despite culture differences and the level of maturity of the market, Tejima said Asia is a very exciting region Australian wineries should try to better understand.

There are three categories within Asia.
First, there are markets like Hong Kong and Singapore which are very Australia-friendly.
Then South Korea and Japan fall into another category – pro-Australia, but lacking Australian wine knowledge, therefor some prejudices to overcome. Then there are the emerging markets, currently driven by people of Chinese descent.

Free-trade agreements are also having a positive impact. In South Korea the performance has tremendous, 42 per cent growth compared with four per cent growth one year before the free-trade agreement.
KAFTA immediately eliminated the 15% import tariff; putting Australia on a level playing field with wine from Chile, US and the EU. However, there hasn’t been a matching increase in the number of exporters – back in 2010 there were 81 and currently there are 83; which means only a few companies are capturing the benefits of the FTA while a lot more should be able to.

Tejima said new interest is being sparked for Australian wine with more consistent activities. It will be important to engage young and vibrant wine professionals and they are interested in new style and new regions of Australian wine.