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18 The Australian & New Zealand Grapegrower & Winemaker www.winebiz.com.au April 2013 – Issue 591

TOP20 Australian wine companiesAnnual review opens the window on our biggest producers

THE EDITORIAL TEAM at Grapegrower & Winemaker – editor Grahame Whyte and journalist Kellie Arbuckle – take great pleasure in introducing our annual Top 20 wine companies review, plus the New Zealand Top 5. Thanks to our editorial panel member, Bob Campbell MW, for his insightful questions that we posed to New Zealand’s Top 5 CEOs.

Business journalist Ed Merrisonhas interviewed all the leaders of the Top 20 Australian wine companies and talked to them about how they have fared during the past year – a year that would accurately be described as immensely challenging on a number of fronts.

The resilience and strength of the Australian wine industry shines through in these revealing interviews, as CEOs share their thoughts on the issues that dominate discussions in the wine sector.

With Australian companies represented at the very pinnacle of the global industry, the following responses will be eagerly read by our subscribers around the world.

They report on our strong presence in key markets such as the UK, US and China; on the influence and impact of our friendly rival across the Tasman Sea; and on the way key companies respond to rapidly changing markets and seize opportunities wherever they arise.

Statistical tables were generated from information collected for The Australian & New Zealand Wine Industry Directory 2013, skilfully compiled by Michael Major of Michael Major of Michael MajorMichael Major Media. This publication also provides a lot of interesting information about our industry. The 2013 edition of this essential publication is now available from Winetitles – see www.winebiz.com.au for more information.

Contents

Wine Australia ............................................................. 19

Winemakers’ Federation of Australia ........20

Wine Grape Growers Australia ......................21

Wine Industry Suppliers Australia ...............22

Top 20 by revenue:

Treasury Wine Estates .........................................23

Premium Wine Brands ....................................... 24

Accolade Wines ......................................................25

Casella Wines .............................................................26

Australian Vintage ....................................................27

De Bortoli Wines .......................................................28

McWilliam’s Wines Group .................................29

Warburn Estate ..........................................................30

Yalumba Wine Company ...................................30

Brown Brothers .........................................................30

Tahbilk Group..............................................................31

Grant Burge..................................................................32

Kingston Estate .........................................................33

Angove Family Winemakers ...........................34

Peter Lehmann Wines ..........................................34

Qualia Wine Services ............................................35

Littore Family Wines ..............................................36

Tyrrell’s Vineyards ....................................................36

Wingara Wine Group.............................................36

Berton Vineyards ......................................................37

Table 1. Top 20 wine companies by total revenue.

Rank Company

1 Treasury Wine Estates

2 Pernod Ricard Pacific

3 Accolade Wines

4 Casella Wines

5 Australian Vintage

6 De Bortoli Wines

7 McWilliams Wines Group

8 Warburn Estate

9 The Yalumba Wine Company

10 Brown Brothers Milawa Vineyard

11 Tahbilk Group

12 Grant Burge Wines

13 Kingston Estate Wines

14 Angove Family Winemakers

15 Peter Lehmann Wines

16 Qualia Wine Services

17 Littore Family Wines

18 Tyrrell's Vineyards

19 Wingara Wine Group

20 Berton Vineyards

Table 2. Top 20 wine companies by total production.

Rank Company

1 Accolade

2 Treasury Wine Estates

3 Casella Wines Pty Ltd

4 Pernod Ricard Pacific

5 Australian Vintage

6 Kingston Estate Wines

7 De Bortoli Wines

8 Warburn Estate

9 McWilliams Wines Group

10 Qualia Wine Services

11 The Yalumba Wine Company

12 Zilzie Wines

13 Garacama

14 Angove Family Winemakers

15 Wingara Wine Group

16 Brown Brothers Milawa Vineyard

17 Berton Vineyards

18 Littore Family Wines

19 Salena Estate Wines

20 Tahbilk Group

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TOP20

HOWEVER TOUGH CONDITIONS may be at home in Australia, Treasury Wine Estates is given heart by the global picture. It sees the market as the most positive it’s been for 30 years.

“Across the world the demand for luxury and premium wine is increasing,” says chief executive David Dearie.

“After three decades of excess production, we’re moving into a balanced supply position. In developed markets, ageing populations are drinking more wine, and demanding wines of a higher quality. And in developing markets younger consumers are engaging much earlier with wine, and when they do they

are demanding iconic western brands.”The company − which owns the

Penfolds, Rosemount, Wolf Blass and Lindeman’s brands − sold 16.5 million cases worldwide in the first half of 2012-13. That translated to net sales revenue of $816.9m, down 2.2% on the same period a year earlier. Earnings before interest, tax and adjustments for the value of vineyards fell 12.5% on a constant currency basis to $73.4m.

One of the key reasons for that profit decline was the increase in the cost of goods sold, up $2.24 per case on the back of rain-affected vintage 2011.

Another factor was the strong dollar. “Given that TWE exports two thirds of the company’s Australian wine production, the continued strength of the Australian dollar remains a key challenge, particularly for our wines which compete at more commercial or popular, price points,” says Dearie.

Dearie is keen to emphasise that those price points are not the focus for TWE; indeed, some of that drop in first-half volume was put down its decision to exit sales of some lowest-price lines of Rosemount, Wolf Blass and Lindeman’s in UK supermarkets, where they were frequently offered in multibuy deals.

TWE is pinning its hopes for an improved second-half performance on its higher-priced offering. The company is making up to 15% more luxury and mass prestige wines available for sale.

TWE has also been investing. Over the past 12 months, it has purchased more than 600 hectares of vineyards in Napa Valley and South Australia, including

Treasury Wine Estates1

David Dearie.

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TOP20 Australian wine companies

Orlando Wines is part of Premium Wine Brands, the global wine business of Paris-based drinks giant Pernod Ricard. It has operations in four countries and distribution in over 70 markets worldwide.

Orlando managing director Brett McKinnon says the diverse geographical footprint offers some insulation from the negative effects of the high Australian dollar. That said, McKinnon thinks the currency and margin pressures in export markets will be the biggest challenge for the Australian industry this year.

Orlando Wines sold 6.9 million cases of Jacob’s Creek in 2011-12, representing a 2% increase in value. That’s as the company pressed on with its premiumisation strategy for mature markets.

This entails adding high-end products to its range, building brands through high-value marketing and sponsorship initiatives, and increasing prices where appropriate. It’s a strategy that requires forward thinking and long-term commitment if it is to be effective, says McKinnon, not least because price rises can cause a short-term decline in sales volumes.

Orlando has played the long game and held its nerve in the UK − its biggest export market − and it appears to be paying off. McKinnon says Orlando is well placed for long-term value growth in the country, where Jacob’s Creek operates at a price premium to the majority of its key competitors.

After Britain, the US, Canada, NZ and Ireland rank as Orlando Wines’ top five overseas customers, and McKinnon expects them all to keep performing well. “However, our offering is by no means focused on these regions alone,” he adds.

“We are seeing extremely exciting growth in emerging markets such as China, India, Thailand, Vietnam, Russia and Poland.”

Another trend catching McKinnon’s eye is the move towards light and fresh varietal wines, such as Pinot Grigio and Sauvignon Blanc. He expects these, and sweeter wines such as Moscato, to continue to gain traction in Australia and key export markets. In response, Jacob’s Creek recently added Vermentino to its Cool Harvest range of wines, which already features Pinot Grigio and a still and sparkling Sauvignon Blanc.

The past 12 months have also seen Orlando extend its St Hugo label beyond Coonawarra Cabernet Sauvignon to take in Barossa Shiraz, Barossa GSM and a Shiraz Cabernet. It has also launched market-specific products such as the China-only Barrel Selection range and Jacob’s Creek WAH, a wine to partner sushi for the Japanese market. Other new releases are likely this year, says McKinnon.

Innovation and brand building are vital in a world where retail consolidation is a reality that “can’t be ignored” and where consumers are confronted by ever more choice thanks to cheaper imports, according to McKinnon.

That’s why it’s imperative for Australian wineries to focus on making premium wines for both the domestic and export markets. “This will ensure that the reputation and ‘brand’ of Australian wine globally remains strong, and that consumers globally appreciate the value for money and extremely high-quality wines that are being produced in this country,” he says.

This also helps explain McKinnon’s confidence in his own company. “Orlando Wines is structured around Jacob’s Creek − one of the most iconic brands our country has produced − and we’re continuing to invest in this brand through marketing and innovation to ensure it maintains its position as an Australian icon at home and abroad.”

two sites in the Barossa and one in Eden Valley.

It’s on the lookout for greater quantities of premium fruit to go into its flagship wines. The past year has also seen it expand fermentation capacity at the Penfolds winery in Nuriootpa and acquire the remaining 50% of what is now the Matua Marlborough winery in New Zealand.

TWE’s top export markets for Australian wines are the US, UK, Canada, Nordics and Asia. Citing industry-body projections for US consumption to hit 500 million cases within the next 10 to

15 years, Dearie identifies that market as “a very important source of our future revenue growth”.

He also promises to place a lot of emphasis on Asia in general and China in particular in the years to come. Following the announcement of the company’s half-year results, Dearie also spoke of “tremendous opportunities” in other emerging markets it is yet to penetrate, such as Russia, India and Brazil.

“As we go forward you’ll see us moving into more of those markets, you’ll start seeing our brands on the back of the very strong vintage that we’ve had

in 2012 and what looks to be a very promising vintage in 2013,” he said. On that same occasion, Dearie called for government funds to be more effectively spent so that ‘Brand Australia’ could tell a better story to a broader audience across the world.

“What made Australia famous in the first place was our great quality regional wine and probably over the past 10 years or so we’ve dumbed that down a little bit and we’ve become more of a commodity-style wine in a lot of markets out there,” he said. “We’ve got to spend some money getting that quality message back out again.”

Orlando Wines –Premium Wine Brands2

Brett McKinnon.


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Accolade Wines hasn’t got all its eggs in the Australian basket. And that’s just the way Michael East likes it.

As it is, the “horrendously high” Australian dollar has forced Accolade to broaden its options, according to the commercial general manager for Australia and New Zealand. Accolade beefed up its sales and marketing presence in the US last year with the purchase of California’s Geyser Peak winery. “We anticipate that will speed our growth in North America,” says East, who cites the company’s ability to produce and ship wine from the US or South Africa as another means of mitigating currency risk.

He also hails last year’s deal with Treasury Wine Estates, whereby TWE bottles Accolade’s wine in Australia while Accolade returns the favour in the UK and Europe. “In order for us to be competitive in any offshore markets, any costs become critical. This move creates a new paradigm for the industry. It recognises that we are in the business of producing wine and getting it to consumers.”The UK remains by far Accolade’s largest export market, followed by the US, Canada, New Zealand and Japan.

Accolade Wines3

Michael East.

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Exports account for 60% of the business, and while this proportion has dropped over recent years, the company is sending more wine into North America, continental Europe and Asia. Accolade is building its presence in China but the business is proceeding with caution, warning that consumption patterns remain deeply uncertain. East says Chile is poised to make significant inroads against Australia’s global market share this year, although New Zealand is the number one competitor. What’s more, the way Australians have embraced the flavour profile of New Zealand Sauvignon Blanc leads him to believe that this will continue to be the star varietal domestically.

As for Australian wine, East thinks

Shiraz will enjoy the greatest volume sales growth. Accolade − which is home to Hardy’s, Leasingham, Brookland Valley and Tintara − is keen to sell more Shiraz, especially in the $15-$40 bracket. East is keen to access more premium fruit, and would like to release new styles and brands into this same price range.

Despite the global breadth of Accolade’s operations, its fortunes are bound up with domestic conditions. “We need to ensure that our base remains stable within the Australian market so that we can continue to compete,” East says. With the industry in such a precarious position, he warns that any change to the wine taxation system could cause significant damage. At the same time, he says an increase in

pricing would be more than welcome. “There needs to be a price rise in the broader market. We haven’t kept pace with inflation. In my mind we need to be far more disciplined about taking price increases.”

As for Accolade itself, East is pleased with progress since the major restructuring that occurred between 2008 and 2010. There are no plans for further divestments or major plantings, although options are open as far as acquisitions go. “We’ve got our holdings in a shape we’re happy with,” says East. “We think we’re close to getting our supply/demand situation in balance. It’s always hard with a product like wine where you are trying to anticipate sales 18 months or more out.”

Casella Wines doesn’t have a problem with its finances or with [yellow tail]. That’s the unyielding stance of managing director John Casella, who defended the company’s position after it posted a shortfall of $30m for 2011-12 – its first annual loss for at least 20 years. That meant some of its covenants weren’t being met, resulting in talks with the bank to allow for more flexibility in the future.

“Casella Wines is continuing to work with its lender and has been granted an extension while discussions continue,” says Casella. “We have a longstanding relationship with our financial institution and the company balance sheet remains solid.”

More specifically, Casella denies his most successful product has fallen out of favour. “Globally, year-to-date sales of [yellow tail] are the best we’ve ever had in terms of volume. The brand is strong,” he says.

The problem, as for so many producers, is the currency. Casella sells 8 million cases, or three-quarters of his production, to the US. Those sales only have to slip a fraction, as they did last year, and the impact is huge. “The process of diversifying markets is always part of what we do,” says Casella. “We don’t want to be too dependent on one product or one market. The thing is, the US market is

so large that it’s hard to counterbalance with sales elsewhere.”

After the US, Canada, UK, Germany and Japan are Casella’s biggest overseas customers. “China is there for the long-term but competition is intense. It could be three to five years before it makes it into our top five export destinations,” he says.

Casella believes Cabernet Sauvignon will be the top-performing mainstream Australian grape variety this year. “Cabernet in the US is number one, as well as in China, in Asia. Even though the percentage growth may be fairly small, you’ve got to remember the base is big.”

And it’s a sure bet that Cabernet will feature in the range that is “a work in progress” for Casella, who emphasises the need to offer products at different price points. The company has holdings in the Barossa, Adelaide Hills, Padthaway, Wrattonbully and Langhorne Creek earmarked for the line.

“Following the essence of [yellow tail], it would have to offer excellent value for money at its price point, which could be anything up to $100 a bottle,” he says.

“As long as we can make a good product and do so year in, year out, we obviously know we can sell it because of the weight of the distribution network we have.”

Domestically, he’s concerned about the effects of retail consolidation.

“Diversity is what a good business is about, and it’s what a good country is about. What we’re seeing here is, to a certain extent, the elimination of diversity. The issue is that might reduce and subdue innovation because there’s only a limited way to get products to market.”

Casella says he’s confident that the decline in Australian wine sales has bottomed out. What the country needs to do now is put more thought into the way it tailors its products.

“I think we’ve got to build a little more character into the wine,” he says. “We’ve got to work on wine styles rather than wine quality. It’s nearly impossible to find a bad wine, but far easier to find a badly styled wine.”

Casella Wines4 John Casella.


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Australian Vintage counts the UK as its biggest export market − and there’s no doubt the high Australian dollar is making life tough there. The company cited a fragile British market as it posted a slight drop in net profit to $3.3m for the six months ended December 31. It concluded: “It will be challenging to profitably grow the UK market based on current conditions.”

Even so, chief executive Neil McGuigan still sees plenty of potential upside in the UK and Europe, where it has a long way to go before achieving full market coverage.

He also sees scope for success – and decent margins − with lower alcohol wine. “What’s on the market at 5.5% is not good enough. We think we can get a very good 5.5% product in the UK and

we’re going to release something this year.”

McGuigan says the company is “really doing a job on China and Asia”, having long ago identified the importance of those regions. And then there are established markets where the wine is still seen to offer good value. Canada, AV’s fifth-largest export customer, is one example. “Canadians love our wine. We think there’s a huge opportunity for our brand there.”

McGuigan sees a need to grow in Australia, as a means of hedging against the vagaries of the exchange rate. The company has also trimmed costs, renegotiating long-term grape contracts in Sunraysia and Griffith and working to ensure its production footprint is appropriate to its sales.

Australian Vintage5

Neil McGuigan



Energy efficiency is a priority, with recent improvements in refrigeration to be followed by the introduction of solar power at the Mildura winery from 2014.

Those savings are necessary because McGuigan doesn’t see the industry pressures easing any time soon. Retail consolidation is here to stay, so companies have to become smarter and more flexible with the big chains. Ditto for e-commerce retailers. And there’s no room for complacency on brands and products.

“We need to engage with our consumers at the cellar door and online,” says McGuigan. “We need to create excitement

about brands and give consumers new and innovative varieties and winemaking techniques.”

McGuigan sees Chile and Argentina as the two main threats to Australia’s global market share. Chile has the edge in China because of price, while the UK’s love affair with Argentinian Malbec looks set to continue. But McGuigan doesn’t believe these factors should distract Australian producers from their task, nor detract from their long-term advantages.

The boss of AV, whose McGuigan Wines brand was last year crowned IWSC World’s Best Winemaker for the third time in four years, says Australians need

to keep making exciting styles of wines and winning international awards in order to stay at the forefront of people’s minds. They have to toughen up and stick to a business model that remains profitable in a high-dollar world.

“Australia has lost out because we’re not the cheapest wine on the block any more. But my view is we’re still the best value in the world,” he says.

“When the dollar changes, the Americans will suck up Australian wine. They’ll flip to it in the blink of an eye. Our wine delivers what the world’s palate is all about: varietal characteristics and purity of fruit.”

Like everyone else, Leanne De Bortoli is being careful. She and the family are keeping a close eye on all market developments, as well as potential opportunities. They won’t be rushing into anything.

And that, she says, is the joy of being a family business: you get to take the long-term view. It helps, too, that the business is well established, with what she calls “a good support base out there”. Then there’s the diversity of the portfolio: vineyards in the Hunter, Riverina, King Valley and Yarra Valley, plus products that range from cask to inexpensive bottled wine, right up to Noble One and Yarra Valley reserve releases.

That breadth also leaves De Bortoli Wines well placed to take advantage of consumption trends, should Leanne’s predictions prove correct. Pinot Noir has become mainstream, she says, and De Bortoli’s scored a lot of success with its mid-priced Windy Peak and Gulf Station examples. She’s witnessed a strong thirst for premium dry rosé and thinks that cool climate $20-plus Chardonnay will be in demand. Pinot Grigio, she thinks, will do particularly well this year. “We’ve planted a bit of it in the King Valley and Griffith to make the fairly neutral, Italian style,” she says. “When you look at sales in the UK and US, it’s been enormously successful.”

Those two countries rank as the company’s top export markets, followed by China, Japan and Sweden. “I don’t see this changing too much, but if the Australian dollar weakens this will open up opportunities in the US and our Swedish sales might have an edge,” says export director Victor De Bortoli. Although he sees the Old World fighting back a bit in Europe and California regaining some of its traditional US base, Victor doesn’t identify any single country as posing a specific threat to Australia’s global market share. “There are many factors involved: value propositions, exchange rates, demand and supply, and country varietal commoditisation. By this I mean some of the most successful brands in the US are not country specific, so the Shiraz might come from Australia, Malbec from Argentina, Pinot Grigio from Italy, Chardonnay from California and so on.”

Leanne says the company is working hard to maintain a presence in export markets and is prepared to be opportunistic in its dealings with overseas supermarkets. “When we put a tender out there, we sometimes have to walk away because we can’t always compete with the often ridiculously low prices that are around,” she adds.

On home soil, consolidation to a couple of major retailers makes it very difficult to get shelf space and maintain it, according to Leanne. “However, we have to work with them to find a way that works for them to fill their requirements but also leaves some bread on the table for us. We’re fairly adaptable as a company, so we’re well placed to offer different wines from our portfolio at different price points. For a lot of smaller operators, I imagine it would be downright impossible.”

Leanne says it’s impossible to say that any of the industry headwinds will ease next year, so producers must work out how to make their businesses more competitive.

One option that merits further attention is e-commerce. “I don’t think we’ve yet seen the potential enormity of online purchasing and the role social media has to play with purchasing,” says Leanne.

De Bortoli Wines6The De Bortoli family.


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“Resourcefulness” is the watchword at McWilliam’s Wines Group. Chief executive Robert Blackwell has made a number of changes to its product offering and routes to market – and says it’s reaped great rewards.

The group, which sold almost 5 million cases last year, has been busy creating efficiencies in all areas “to allow for investment in the right ones”.

On the production side, it outsourced its Sydney production to Portavin, allowing it to introduce a centralised warehouse in Sydney, complete with a paperless inventory system. Meanwhile, its sale of the Lillydale Estate winery in the Yarra Valley was followed by investment in Margaret River Production Pty Ltd, which bought the Boar’s Rock winery in Jindong.

Blackwell says the move gives him more winemaking control and influence in a region with real promise. Indeed, he’s backing Margaret River Semillon Sauvignon Blanc to muscle in on Marlborough and make a telling impact on the crisp, fresh white segment this year.

On the domestic front, Blackwell says the key challenge is driving value and growth into a relatively flat market. He’s seen costs go up across the board, though there’s been “no significant shift in margins” over the past 12 months. McWilliam’s keeps pricing under constant review to ensure costs are recovered and margins can grow over time.

One way in which McWilliam’s has responded to the squeeze is by introducing bottling in-market, though Blackwell stresses that this covers only select products and markets, and is marginal in the context of total export sales. Exports account for about a quarter of sales by volume, with the US, Canada, UK, China and Germany remaining the focus over the next three years.

“We’ve seen significant growth in this area as we’ve realigned both our distribution strategy in select markets and ensured we have the right product offering and differentiation across customers,” says Blackwell. When it comes to international competition, Blackwell says the high dollar has allowed the likes of Argentina and Spain to make inroads into Australia’s global market share.

However, he says this is mainly true of entry-level categories. What’s more, it has issued a wake-up call to Australia to reposition itself and further penetrate the higher-value, mainstream premium price points. It’s a call that McWilliam’s answered with a new portfolio strategy focusing on its top regional brands “In many respects, it’s all about coming back to what each brand stands for: making great, regionally expressive wines and being recognised as regional leaders,” he says.

“It means we will be releasing individual parcel wines from our established brands such as Mount Pleasant, McWilliam’s, Evans & Tate and Brand’s Laira, that talk to their region and tell the brand’s story.”

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Warburn Estate was primed for an overseas sales push – but not anymore.

“We’re predominantly domestic, so the financial impact of the high Australian dollar isn’t as great as for others, but we did have plans to re-establish ourselves in the export market,” says executive director Justin Massey.

“The impact of the dollar means these plans have been put on the back burner, as we continue our focus on cost savings.”

Massey says the Griffith-based business, which is owned by the Sergi family, runs on stable recommended retail

prices and sales volumes. This means efficiencies are key if it’s to find extra margin. In 2012, that meant restructuring its management, “with a primary focus on operational aspects of the business”. The past year also saw Carmelo D’Aquino assume chief winemaking duties.

The company, which changed its name from Riverina Estate in 2005, has more than 1000 hectares under-vine, a crush capacity of 40,000 tonnes and tank storage for 35 million litres of wine. It adheres to what it calls a simplistic winemaking philosophy: find out what the people want, and make it for them.

“As a top producer, we respond to where the market is and where it is developing,” as Massey puts it. Looking at its top five export markets, that response has been strongest in the UK, Germany, Sweden, Finland and Asia. But Massey is wary of the industry shift towards bulk shipping into the UK, and the resulting reduction in value.

“We therefore have an expectation for

a drop in the UK ranking,” he adds.Massey names Chile, Argentina and

South Africa as the producers most likely to cut into Australia’s global market share in 2013, along with more obscure Europeans. He also thinks New Zealand will continue to enjoy success with its Sauvignon Blanc.

He backs this same variety to continue to deliver the greatest volume sales growth for Australian producers. “In addition, lower-alcohol, sweeter varieties such as Moscato and Dolcetto will continue to grow, but from a lower base,” he adds.

Less refreshing is the prospect of a volumetric tax on alcohol, which Massey sees as the biggest challenge to the Australian wine industry this year.

“It’ll push the price of wine up and challenge everyone from grower through to consumer,” he warns.

“With the cost of living increasing, some people in our community may no longer be able to afford a good bottle or glass of wine within their budget.”

“It depresses me and the business!”That’s how Robert Hill Smith views

the impact of the high Australian dollar. Yalumba’s proprietor says his family wine company spent the past year focusing on costs and efficiencies in all areas.

“We make fine wine; that’s a given. Selling it profitably and connecting with our consumers in various segments is the challenge.” Hill Smith said Yalumba has seen margins compress over that time, due in part to the “significant transfer of production margin to retailers”. He expects those margins to tighten further, but has few plans to change pricing or launch new brands or products. “It’s about finessing the offer, not rewriting the script.”

He says the concentration of retail share in Australia is a situation that “needs constant managing of partnerships”.

“We are in business together and need to work together,” he adds.

“We must get the sommeliers and gatekeepers back with our wines and not have them drooling over a no-pedigree Fiano or lowlife Assyrtiko.

It drives me mad because it’s about margin and pomp, not the wine.” Yalumba presently exports as much bottled wine as it sells domestically. It doesn’t ship in bulk and has no plans to start doing so.

The UK, US, Canada, New Zealand and China are its top five overseas customers, and Hill Smith doesn’t foresee any changes to those rankings any time soon. When it comes to global competitors, he believes Chile or Argentina may be best placed to make further inroads against Australia’s market share − though putting vintage tonnages aside, any number of countries are working to erode Australia’s base.

“We have to work harder at defining the quality of our offer in the world market,” he says.

“We have exciting wines and great characters in the bottle and around the winery, so let’s showcase it. We need to get the spring back in our step.” Leadership and fraternity are essential if the Australian wine industry is to pull through the coming years in good shape, Hill Smith concludes.

Roland Wahlquist admits that being a wine producer is a pretty tough business right now. But far from sitting tight and hoping it will pass, it’s been a year of restless change for the Brown Brothers chief executive.

Wahlquist says he’s been investing to bring about efficiencies throughout the system. The changes extend from the vineyard to the winery and beyond: a new Klima machine to cut costs in cool climate cane-pruned sites; a crossflow filter to reduce labour and preserve wine quality through the final stages of preparation; a new labeller to speed up packaging.

The upgrades extend into the sales arena, with an iPad-based system of information and data capture.

Then, of course, there’s the wine. “We’ve relaunched our Devil’s Corner

label, and have a very strong line at $20 and under. The response to them has been good from trade and media,” says Wahlquist.

The company has been pushing Prosecco hard, and Wahlquist thinks 2013 could be a good year for the wine, which still only accounts for 1% of the

Yalumba Wine Company Brown Brothers 9 10

Warburn Estate8


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domestic sparkling category. The other variety he’s tipping to shine is Pinot Noir.

“We think it’s growing very strongly. We’re able to make a very good Pinot Noir at the $20 price point thanks to our Tasmanian operation,” he adds.

Wahlquist thinks Australia can expect plenty more stiff competition from New Zealand as it broadens its offering beyond Sauvignon Blanc and makes inroads with Pinot Gris and Pinot Noir.

In export markets, Wahlquist thinks Spain and Italy are the names to look out for. Brown Brothers currently lists New Zealand as its number one export market, followed by the UK, Europe, China and Singapore. But Wahlquist expects a reshuffle soon.

“China and Singapore are the ones getting the growth and I think they’ll go up through those rankings.”

Brown Brothers has been bottling offshore and chasing efficiencies in its export set-up in response to the strong Australian dollar, but conditions remain tough nonetheless, says Wahlquist.

At home, he says ongoing retail consolidation is a fact of life that producers need to plan for.

“We need to work more closely with both the majors and the independents. We need to give them a more differentiated offer,” he says.

Brown Brother has invested a lot in online communication and social media but Wahlquist sees this as serving a market, rather than a direct sales, function.

“A lot of the online space is dominated by clearance houses and it’s not easy to make money. People go online to buy cheap wine, not good wine,” he says.

Wahlquist insists that companies that adapt to difficult realities and take a long-term view will continue to succeed.

“Our biggest challenge is not to get too caught up in the doom and gloom, because there are opportunities for high quality wine that has a point of difference,” he says.

“Consumers are still prepared to pay for what they see as value – I think the sales of Champagne we’re seeing demonstrate that.”

Tahbilk Wine Club celebrates its 20th

birthday this year. It accounts for 65% of sales of Tahbilk Estate wine and is still growing. “As a business model, it’s a good one,” says Alister Purbrick. And it needs to be, given the challenges in the broader domestic market.

“The two chains (Woolworths and Coles) will continue to grow, there will be more buyer’s-own or exclusive brands taking away shelf space or adding competition for promotional slots, plus we’ll see imports grow as long as the Australian dollar remains high. These three elements make it a fairly demanding and difficult environment to be operating in,” says the chief executive of Tahbilk.

Purbrick says it’s impossible to escape the foreign exchange impact, which has

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also squeezed margins for some of the group’s export-oriented brands.

“We’re in a holding pattern with our exported wine and are not vigorously chasing increased sales. We’ll stay in the game on the basis that everything is cyclical and the Australian dollar will weaken in the future,” he adds. The Tahbilk Group, which is home to the Four Sisters and McPherson labels, exports 40% of its production. The UK, Sweden, Canada, the US and China make up Tahbilk’s top five export markets. Purbrick thinks those same countries will still be in the mix in two to three years’ time, albeit with China growing in prominence. Sweden and Canada have also held up particularly well lately.

“Buyers from those monopolies are

taking a more sympathetic view on margins,” he says. At the moment, all of the wine the group exports is packaged in this country, a situation Purbrick doesn’t envisage changing.

“We strongly believe that if it’s Australian wine it should be bottled in Australia.” Purbrick, who also chairs the Great Australian Shiraz Challenge, continues to see reasons to champion this variety, which he believes will outstrip other varieties in terms of overall growth this year.

“It’s still doing well on the domestic markets and is seen overseas, particularly in emerging markets like China, as being synonymous with Australia.”

He also has high hopes for sparkling wine.

“Moscato and Prosecco are doing well.”

Purbrick also thinks Wine Australia is doing well, albeit with limited funds. He says the A+ strategy is a good one, and the clear marketing of regional and flagship wines with a sense of place is imperative if the Industry is to have sustainable success overseas. “If we’re going to grow as an industry, it’s going to be built around export sales,” he says.

“The Tahbilk Group battened down the hatches after the financial crisis and implemented cost-cutting measures and, even now, we’re still fine-tuning our cost base. But cost-cutting can only take you so far. The future has got to be about finding margin or replacing margin – and that gets you back to what I was saying about regional and flagship wines.”

Fifth-generation Barossa vigneron Grant Burge is proud of his wines and proud of his sales team. He’s also proud of the way the company has overcome everything thrown at it over the past six years: drought, floods, financial crisis, soaring dollar. Sales are growing, with well over half a million cases shifted last year.

“It’s still tough, but we’re going exceptionally well,” says Burge.

And when he says tough, he means it. Burge grows 60% of his own fruit, and he’s now looking at another vintage of “incredibly low yields”. Then there are the headwinds faced by producers across Australia.

“Manufacturing is incredibly impacted by the high Australian dollar; it’s a huge burden from the export point of view,” he says.

“We’ve got oversupply and I think we still will have for years to come. There are a lot of desperate people undercutting others in Australia. There is also a situation of a small number of retailers dominating the market. It’s great for the consumer, but for producers it makes life very hard.”

Burge has risen to these challenges in various ways. He’s pleased with the progress of his distribution company, Vignerons Of The World, whose New Zealand brand, Drift, is alone notching up domestic sales of 40,000 cases.

The Australian market now accounts

for 73% of sales for Grant Burge Wines, up from 60% around seven years ago. He’s working hard to strengthen exports, with talks ongoing with the US, a market that has never lived up to its promise.

Asia has been far more fruitful, with China now Burge’s biggest overseas customer. Japan and Malaysia are also in the top five.

“We were in Asia early, and got established there with very good distributors. We were able to get a foothold and are going strong.”

Burge has also been busy adapting his vineyard for the future. Company sales and broader research tell him that Shiraz is going to keep doing well at home and around the globe. To this end, 80% of the 80 hectares of new plantings he’s undertaken in the last two years are given over to Australia’s signature black grape.

A bit of Cabernet and Merlot has also gone in, some of that at the expense of out-of-favour Semillon. Meanwhile, Pinot Gris and White Frontignac have been planted in the hills. Burge identifies Nebbiolo as one to watch, while Tempranillo has already earned its stripes.

“We earmarked it 10 years ago as something that should go well in the Barossa. We’ve been planting in the high areas and the valley floor, and we think it’s got a real future,” he says.

So what of the future for Grant Burge Wines and Australian wine in general? “Australia should never have gone in at the low end of the market,” he says.

“From my personal position, we’re a medium- to high-priced producer, and we have to sell wine at good prices and give the consumers what they want. There are markets, we’ve just got to work harder to find them.”

Grant Burge12 We were in Asia early, and got established

there with very good distributors.Grant Burge.

Grant Burge.


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Bill Moularadellis calls Shiraz his workhorse grape, and he expects it to keep carrying the hopes of Australian producers.

“Internationally Shiraz continues to be seen as the signature variety for Australia and it continues to resonate with retailers and consumers,” he says.

Shiraz will make up one third of the roughly 100,000 tonnes crushed at the Kingston Estate winery in 2013, with Chardonnay accounting for another third and the balance made up by assorted varieties.

“Chardonnay, Cabernet and Merlot are more exposed to international supply,” says Moularadellis.

“There are pockets of opportunity for lesser-known varieties such as Petit Verdot and Pinot Gris, but these are off a low base.”

Moularadellis has put his money

where his mouth is with Shiraz, buying a new vineyard in Coonawarra which also grows the customary Cabernet Sauvignon. Otherwise, spending has largely been confined to measures aimed at longer-term savings, notably energy efficiency at the Riverland winery.

“It’s a question of ‘steady as she goes’ with us,” says Moularadellis.

“We expect margins to continue to contract as a function of costs and the exchange rate.” Those issues have prompted Kingston Estate to renounce its preference to bottle at source. About 95% of production is exported and the company is taking “every opportunity to bottle closest to our customers”.

Kingston Estate’s biggest export markets are the EU, the UK, North America and Asia, with the latter improving markedly, “but still off a relatively low base”. Moularadellis sees

Kingston Estate13

Bill Moularadellis.

In May, GWRDC presents the latest research about Chinese consumer wine preferences in the fi rst #INseries events.

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A date with China.Hear about the latest consumer insights from China over a breakfast of local produce and learn how to apply these insights to your business.

Speakers: Professor Larry Lockshin, Ehrenberg-Bass Institute for Marketing Science and Angie Bradbury and associates, Dig Marketing.

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South African white wines and Chilean reds as the key threats to Australia’s global market share.

“They both have a duty advantage in the EU and Chile also has a tariff advantage into China. That’s something Australia really needs to be proactive with, in order to level the playing field.”

The words of caution don’t stop there. Moularadellis says the strong Australian dollar has put the trade environment on “a very fragile footing”. He says the “crisis of profitability” has had

an impact on asset values and is also concerned about the slow rate of asset reconstruction in the industry. But he reserves his strongest warning for the subject of tax reform.

“We need to limit the WET rebate to packaged wine. Rebates on bulk wine are unnecessary, are being widely abused and are a significant distortion to the market. I’d like to see us limit WET rebates to eligible retailers with turnovers of less than $10m and to bona fide producers. This will provide a significant benefit to

independent retailers, restaurateurs and niche online operators who do not have the market power of the large retailers. This benefit will directly flow to smaller wine producers who’ve been locked out of the retail trade by the consolidation of the last decade.

“Finally, we need to promote a united wine industry voice against a volumetric tax and encourage the two dissident producers who support this tax to put the whole of the industry’s interest above their own.”

John Angove is pinning big hopes on small parcels. That’s why he’s excited about his microwinery development. It’ll handle anything from one to eight tonnes of fruit. It’s been designed with McLaren Vale in mind, as Angove plots a way to bring fine examples of the region’s Shiraz, Grenache, Cabernet, Merlot, Fiano and Vermentino to the world’s attention.

“We need to develop our processes for those smaller parcels and we will make far better wine. It’s a part of the business that we haven’t been involved with and we need to be.”

Organic viticulture is another area of interest. Angove needs to see further signs of sustainable growth in organic wine if he’s going to stick with it in the long term. But for now his line is going well and this year he processed his first organic Sauvignon Blanc.

This is one grape variety Angove expects to keep going down well with consumers, along with Moscato and, he adds hopefully, Chardonnay. He notes a growing interest in what the Americans call three-red blends, but tips Shiraz to keep its dominant status.

“There’s a bit of a change afoot in style, moving from the super-ripe fruit bombs back to a wine that has a little more finesse about it, which I think is a good thing,” he says.

Angove’s microwinery dabbling brings together two key areas of focus: product mix and higher-margin wine.

“Margins are continuing to be squeezed both internationally and domestically. We want to improve the product and get away from the bottom end, where the margins are least and the squeeze is greatest,” he says.

From a domestic perspective, Angove says consolidation is making life difficult but producers have to work with retailers as best they can. He also recognises the need to be part of “the online scene” and to work as hard as possible at selling through this channel.

As for exports, the high dollar is making life tough, but this is somewhat offset on the distribution side of Angove’s business, where imported agency products have become more competitive.

Halfway through the last decade, Angove was exporting more than 45% of production. Now that stands at between 20% and 25% − around two-thirds of that shipped in bulk. His top five overseas customers are the US, the UK, New Zealand, China and Denmark.

“China will continue to grow and could come up a rung if we keep working at it, but it’s got a fair way to go to catch up with the US or UK,” says Angove. He adds that the majority of China sales are “opportunistic” – buyer’s-own brands and the like – and the battle to make corporate-branded business the lion’s share is “a long, hard slog”.

But an even tougher battle for Angove and the Australian wine industry is being waged on home turf.

“The anti-alcohol lobby is one of the biggest challenges that we have to tackle,” says Angove.

“They’re coming out with some feed for the media and it’s becoming a very distorted argument. The problem is that the industry doesn’t have the buckets of money the anti-alcohol lobby has from the government to try to balance the scales and get what I believe is a more accurate message out there.”

Peter Lehmann Wines has pulled off something of a balancing act, with tumultuous change on the one hand and admirable consistency on the other. But chief executive Jeff Bond knows the business – and the Australian wine industry – is still walking a fine line. The Tanunda-based company achieved 13% volume growth – 6% by value – over 2011-12. And during that time it underwent an overhaul. Domestically, it tweaked its portfolio to offer channel-exclusive ranges and target a sales boost in the $18-25 price bracket. It parted company with long-term distributor Samuel Smith & Son, opting instead to deal directly with the retail chains and bring in Four Seasons Fine Wines to handle on- and off-trade sales to independents.

In the UK, it exited a joint venture and appointed a new distributor, while the US saw the introduction of a new portfolio of wines.

Bond views these changes as a logical response to underlying changes in the market. The move to rebalance away from exports, which now account for 55% of the business as opposed to 70% two years ago, was required – albeit somewhat overtaken by circumstance – to mitigate foreign exchange risk. Bond also saw that the need to develop a dynamic and profitable domestic model also applied to key overseas markets, such as the UK.

The company launched new lines, such as the independent-only Hill & Valley label, which sits in the targeted $18-25 price range. It restructured brands into more clearly defined tiers, tied together with fresh packaging. It shifted its mix to appeal to more

Angove Family Winemakers Peter Lehmann Wines14 15


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youthful consumers and achieve a better balance between men and women.Significantly, it decided to withdraw from the value end of the market, which Bond calls “a zero-sum game”.

“In the UK we no longer rely so heavily on entry level wines there – what are now for us £9-12 wines,” he adds.

“We’ve completely changed our approach and we’re growing our profitability and our top line. It’s a more sustainable model; we’re selling less and making more money.”While making these changes, Peter Lehmann Wines remains in many senses deeply traditional. Its key export markets

are the US, Canada, UK, Switzerland, Germany and Sweden, and Bond points to the tenure of Andrew Wigan, who’s been making wine for the company since it started in 1979.

“We have the authenticity, the provenance, the quality, the story,” says Bond.

“We deliver consistency to the market because we’ve had the same team in position for a long time. We shouldn’t sell ourselves short.”

The company hasn’t had it all its way. Some lengthy contract winemaking relationships have come to an end, and

Bond says he’s working hard to strike up new ones. And lower yields in the Barossa this year meant more spare capacity at the 15,000-plus tonne winery.Bond says the currency remains the biggest challenge.

“It’s killing the industry. We’re looking at the next three to five years and how to evolve a strategy for a long-term high dollar. We’ve established great markets but if you lose shelf space in a country like the US, it’s going to be very hard to get it back. But we’ve been through painful times like this previously, and I’m sure we’ll come out on top again.”

The numbers tell a story at Qualia Wine Services. A couple of years ago, the Mildura-based company was exporting 80% of production. That’s dropped back to parity with domestic sales. When overseas shipments were at their peak, just 20% were sent in bulk. Now that, too, stands at 50% − and may continue to climb.

“The high Australian dollar has had a major impact, in particular in the UK,” says John Pezzaniti, executive director and winemaker at the Mildura-based company. “Our costs will continue to go up and that makes things hard when you’re competing with Chile and South Africa. There needs to be more realistic pricing, for sure, but whether we can achieve it will be another matter.”

Qualia counts the UK, Europe and China as its best-performing export markets. China now accounts for roughly a third of export sales. “We’ve been in China for six to seven years now, but it’s not as straightforward as most people think,” says Pezzaniti. “It’s a hard market in which to build long-term relationships, but we’re growing quite well now.”

As with many of his peers, “efficiency” is a word that crops up often when speaking to Pezzaniti. To this end, he and the team put in winery infrastructure and upped capacity this year. The move allowed the winery to shorten its vintage from the almost 12-week marathon in 2012 to less than seven weeks. At the same time, the crush increased from 41,000 tonnes to closer to 50,000.

Pezzaniti, who worked his 18th vintage in 2013, thinks Shiraz will be the main volume driver for Australian wine.

“It’s been tight the last few years because of the vintages we’ve had. We’re certainly finding Shiraz is our biggest seller. There’s also a bit of interest in Fiano from people looking for something different from Australia, but it’s early stages.”

Pezzaniti says the biggest challenge facing Australia is keeping its suppliers and grower base viable while remaining sustainable with all industry stakeholders – and all that while

maintaining market share against global competitors.It sounds like a tall order, but Pezzaniti appears comfortable

with his end of the deal. “We’re in a reasonable position because we’re a private

company. Our costs are more restrained, we’ll continue to be efficient and it’s important to be sustainable. And still make good wine.”

Qualia Wine Services16

The high Australian dollar has had a major impact, in particular in the UK.

John PezzanitiExecutive director Qualia Wine Services

INDUSTRIES

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“At our end of the market a lot of romance has gone out of it. Wine isn’t the brand-led poster boy of the agricultural industry. We’re a commodity product.”

That’s Vince Littore’s blunt assessment. The managing director of Littore Family Wines has no doubt that the quality is still there and is recognised across the world. The Geelong-based business is shipping the same volume of wine, but Littore says the high Australian dollar is destroying margins and changing the face of the industry.

The exchange rate has accelerated the push for private label overseas, says Littore, while retail consolidation leaves producers with no option but to surrender and go with it, or else lose sales.

“We’re just trying to become more efficient, that’s the way we’re trying to maintain margins. You’ve got to try to operate as lean as you can,” he says. Over the past year, that’s entailed some streamlining in terms of upper-management winemaking roles.

It’s also meant a continuing shift towards bulk shipments.

“You’ve got to bottle offshore to get on the shelf,” says Littore, who doesn’t expect the trend to reverse. “It’s not the value-add that you get and the margin you get when you ship in bottle. Four years ago we would’ve been 100% bottled in Australia. Now we’re about 30% in Australia and the rest overseas.”

Littore Family Wines has worked hard to develop solid market share in Russia and Japan. It’s paid off, with those two countries remaining its best customers. China, Germany and Poland round out the top five export markets.

“China is the key one but that’s a pretty tough gig,” says Littore. “Growth in China is very much at the premium end, and trying to establish a brand there is extremely difficult.”

Littore – whose Moorabool Valley winery crushed around 15,000 tonnes this vintage, with another five or so tonnes crushed off-site – sees South Africa as the nation most likely to eat into Australia’s global market share.

“They got a pretty big crop this year, plus a bit of a currency advantage,” he says. “They’re a bit more efficient than us in terms of labour costs and they’re doing the commodity, bulk-type wines pretty well, like we do.”

And Littore is determined to keep doing them well, at the right price and quality level. “We see our operation as having to hit a scale and level of efficiency where we can compete on a worldwide market.”

Tyrrell’s VineyardsYields in 2013 were down almost 30% on a normal year for Tyrrell’s, thanks to the near absence of rain from July to Christmas. But then again, the 13 inches of rain that fell in 50 hours during vintage had little adverse impact.

“We dodged a lot of bullets with the weather,” is Bruce Tyrrell’s conclusion.

That kind of glass-half-full thinking characterises his industry outlook. But there’s clearly more to the company’s success than dodging bullets. Overseas sales are a case in point. Where many have seen exports shrink relative to domestic sales, Tyrrell’s have increased to 20% over the past four years. China is the number one customer and Asia accounts for two-thirds of all exports.

“A while ago we made the decision that the future lay in Asia,” says Tyrrell.

“We reckoned it was safer to do business with countries with similar interest rates to ours.” The US, the number two market six years ago, no longer features in the top 10. The UK is still hanging on at number five, but significantly, Tyrrell took the decision to double prices there in order to maintain his position. He’s also taking a firm stand on the issue of bulk shipments.

“It’s not the market we’re in. If it’s going to have our name and our label on it, we want to be in charge of bottling,” he says.

Unsurprisingly, Tyrrell is matter-of-fact about the domestic retail environment. “Consolidation is happening all over the world, and it’s not going to go away. The market is the market, and you’ve got to work with it by finding new ways of selling that have more margin.” On this point, Tyrrell points to the example of the farmers’ market, where people are happy to pay more for what they think it a better product. He’s also a big believer in cellar door and wine club.

“We do well over a million cellar door tastings a year,” he says.

“The number one reason people buy a bottle of wine is that they’ve tried it before and they like it. Both over the counter and direct to consumer sales continue to grow for us.”

Tyrrell’s is scoring particular success with the kind of regional and flagship wines that producers are told they should focus on. The trademark Semillon, especially at $18-plus, is selling well, and the single-vineyard Hunter wines have been walking out the door over the past four years. It’s also “putting the pedal to the metal” on the popular Rufus Stone Heathcote Shiraz, which it wasn’t able to make in 2011. It’d love to do likewise with Hunter Shiraz.

“Unfortunately it’s a finite resource; there’s not a lot of good Shiraz country here. What there is, is fantastic but it’d be nice to have a bit more.”

Tyrrell’s was made “an offer we couldn’t refuse” for the family’s Glenbawn winery in the Upper Hunter last year. The extra production facility that’s come back to the main winery should provide some welcome efficiency. Because make no mistake: “Things are bloody tough. It’s hard trying to manage a falling market and the ability to read the market going forward has become much, much more difficult.”

But the most pressing challenge facing the Australian wine industry lies in the social, rather than economic, sphere.

“The anti-alcohol movement wants to wipe out our businesses completely, and that’s our biggest fight,” warns Tyrrell.

“There’s nothing more dangerous than a zealot.”

Wingara Wine GroupTough trading conditions have done little to dampen Diego Jimenez’s enthusiasm for Australia.

“I’m very happy,” says the man now in his sixth year as Wingara Wine Group chief executive.

“This is a great country, the wine industry is very dynamic and has some of the best wines in the world. There’s an adventurous spirit among consumers.”

Another benefit of Australia is its strong reputation in Asia, says Jimenez. The problem is that Aussies might be too easygoing to take advantage of it.

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“Asia likes luxury and Australia is down to earth. That’s great, but if you want to sell a $40 bottle of wine, you have to remember that is luxury. It’s about how we sell it, the whole experience and not just the liquid in the bottle.”

Asia is in the ascendant for Wingara, the company behind Katnook and Deakin Estate. Its current line-up of export markets places Canada at number one, followed by China, the UK, Singapore and Hong Kong.

“Changes to those rankings may happen very soon,” says Jimenez.

“I see China growing to first position by both volume and profit, and Singapore and Hong Kong passing Canada and the UK, perhaps not by volume, but by profitability.”

Exports are now on a par with domestic sales, shrinking back from a 60:40 ratio a couple of years back. Jimenez thinks they may have stabilised, after a couple of changes to its overseas distributors and a move to ship some wine in bulk to Spain for bottling (though this is never the case with Wingara’s main brands).

Margins have narrowed over the past year thanks to the strong dollar, and Jimenez bemoans both this and Australia’s lack of free trade agreements as he identifies Chile as a key competitive threat.

“The Chileans are similar in winemaking capabilities, they react fast to consumer preferences, they have a consumer-oriented marketing mind and their government is more proactive in trying to hold exchange rates,” he says.

Wingara is no slouch when it comes to reacting to consumer preferences, as the success of its Founder’s Block range shows. Introduced domestically in 2006, two years after its export launch, the range may soon feature a Coonawarra Pinot Noir.

It’s a variety Jimenez has earmarked for strong growth this year. He thinks Shiraz will enjoy the best sales growth on absolute volume for Australian reds.

“We’re seeing great interest in Coonawarra for Shiraz. Consumers are seeing the potential for less alcoholic, more elegant styles. At Deakin, good-quality shiraz is a priority for next year,” he says. As for whites, he sees Sauvignon Blanc and Pinot Gris staying popular, but also expects a revival for $20-plus Chardonnay.

He may be happy in Australia, but Jimenez is acutely aware of the headwinds.

“Coles and Woolworths are under pressure to make more profit every year and if you’re not a brand in demand, why would they buy you? You have to offer brands that are attractive to them while maintaining margins, and that’s not easy,” he says. “The biggest challenge we face domestically is the competitiveness of the industry in general, where the biggest retailer also owns brands and where there are more and more brands sold into restaurants.”

Berton VineyardsIt’s less than eight years since Bob Berton moved into the 17,000-tonne capacity winery in Griffith. That period won’t be remembered as the halcyon days of the Australian wine industry, but the company has nonetheless been able to make calm progress.

Over the past year Berton Vineyards been busy expanding its storage base, adding four million litres of capacity. It’s also constantly looking at ways to streamline the winemaking processes.

And Berton is on the hunt for more Shiraz. He says overall demand is evenly split between red and white wine. The local growers are skewed 60:40 white to black grapes, with Semillon and Chardonnay dominating. He has a soft spot for the latter – “a fundamentally wonderful variety that should work but gets taken for granted” – but thinks Shiraz will be this year’s winner in terms of absolute sales growth. Another variety that’s got him excited is Vermentino.

“We’ve done really well with it. It’s got

lovely acidity, ripens early and is a great variety to grow here.”

Just four years ago, Berton Vineyards was selling 75% of production overseas. The high Australian dollar caused the business to “turn inwards” towards domestic sales, which have now drawn level with exports. It’s tough, but there’s no point simply trying to survive, he says. Winemakers have to learn to do good business under a dollar that won’t go down.

Berton’s strongest export markets are the UK, Europe, the US and New Zealand.

“But definitely China and places like Malaysia, Thailand and Vietnam are where the growth is,” he adds. “It takes a bit of patience to understand how to go into Asia. China is the shining light and we’re looking at it as being the panacea. I don’t think it’s the panacea but it certainly gives us hope for the future.”

As Berton and his fellow Australians try to elbow their way into those international markets, many think of Chile and Argentina as the main competitors. But Berton thinks they’re forgetting an Old World adversary.

“I think the sleeping giant is Spain. Spain makes big, rich wines like we do,” he says. “They have the capacity to produce, they’ve got the land area and the vines in the ground.”

Domestically, Berton sees the consolidation of retail as a formidable challenge.

“It restricts access to market for a company that’s young like ours,” he says.

“It’s a different matter for the established companies who have their brand strength to rely on, so I think it has made us complacent as an industry. We’re used to having enough stores, and now we’re confronted by a handful of buyers who control 80% of the market. I think competition is essential in driving our industry forward.”

Berton likes the idea of the internet as a link between winery and consumer and views e-commerce as a vital alternative route to market, albeit one he is yet to take full advantage of.

“What we’re good at is making wine. Now we’ve got to learn how to market ourselves,” he says.

“We’re in a reasonable place. And at the end of the day, if we get through this we can get through anything.”

20I think the sleeping

giant is Spain.Bob Berton

Berton Vineyards

Diego Jimenez.

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