Penfolds Chief Winemaker Peter Gago presents Grange at the 2012 Wine Spectator New World Wine Experience at the Marriot in LA ... such promotion has boosted exports of luxury wine ... photo by Milton Wordley from A year in the life of Grange
Top numbers at top end 2014-15
premium exports booming while cheapies tumble like Oz dollar
by PHILIP WHITE
While a lot of them were too busy sacrificing shoeleather on the sales
and marketing trail, exporters of premium Australian wine had good reason to be
pouring expensive fizzy stuff over the weekend.
Friday's release by Wine Australia of its Export Report September 2015
shows the strongest rate of growth
since the peak of October 2007.
In the 12 months to September 30, the value of exports rose 8 per cent
to A$1.96 billion.
The average value of
exports above A$7.50/litre went up 7 per cent to a record A$15.45/litre. The
higher you go through the price structure, the better it looks: wine above
A$50/litre rose 54 per cent to a record A$133 million.
This is only 0.2 per cent
of total exports by volume, but the report shows it's worth 7 per cent of total
value.
Which is a hint at the
converse situation at the bottom of the market. More of that later.
Wine Australia Chief Executive
Officer Andreas Clark said "We’re seeing the strongest rates of growth in
our premium price segments. Wines above A$10 per litre grew in value 28 per
cent to A$426 million, a record for this segment.
"Wines in the
A$20-$50 segment increased 13 per cent to A$88 million ... The average value of
bottled exports also increased 4 per cent to A$5 per litre."
Penfolds chief winemaker Peter Gago spends about
eight months of his year travelling to promote wines at these levels in the
international marketplace; one can't help wondering what percentage of that
extreme top end growth is his work.
"I've just done Stockholm, Paris, Dusseldorf,
Hamburg, Frankfurt and London," he reported Friday from Shanghai, where he
conducted the international launch of the 2015 release Penfolds top end, all
the way up to the Grange. 400 VIP guests attended from all around the world.
Since then, he's presented the wines to the top
25 US sommeliers at a lavish Wine &
Spirit magazine dinner and tasting in San Francisco.
But as usual, his relentless energy and focus is
always on the next target:
"Good to hear the hard work's starting to
show results," he said, "especially at this premium end. We keep at
it. On Thursday I'll present a 50 minute Penfolds Masterclass, tasting
Australian wines of age and stature as part of the The Wine Spectator New York Wine Experience Grand Tastings … that's
sold out ... we're just chipping away … "
Chipping away? That'll be 1,000 tasters who've
paid US$2,195 each.
King hitters at Wirra Wirra: vineyard doctor Anton Groffen, chief winemaker Paul Smith and managing director Andrew Kay ... best export year yet ... photo Phjlip White
Also doing the
shoeleather, filling passports and chipping away are the likes of Sam Temme, international sales manager at
Wirra Wirra.
"This positive news
is what everyone in the industry has been waiting for and working so hard to
achieve," he said. "We need to focus on export markets and continue
to increase our share in the premium side."
Sam was "just
touching base" after a fortnight in Japan, South Korea and China and
another three weeks in Canada and the USA. He pointed out that his boss, Wirra Wirra managing director Andrew Kay is
on his way back from a successful trip to Hong Kong and China and winemaker
Paul Smith was just back from the USA.
The Wirra team's delighted
at the effect the recent trade agreements are having.
"China seems to have
stabilised," Sam said. "After a few tough years following the
austerity measures brought in by their government. Now with the Free Trade
Agreement kicking in we should see some nice growth ... the agreements in South
Korea and Japan are a major boost to Australian wine exporters and we've appointed
new export partners in these markets. Our traditional markets are also seeing
solid increases - this is the strongest year yet for Wirra Wirra export."
Sam also referred to the
low Aussie dollar. It's no accident that its lowest points in recent years
coincide with good export numbers. Unfortunately, these slumps in the value of
our currency have been a bit too rare for winemakers in the last decade. Orders
placed during the '06 plunge must bear the great responsibility for that
October '07 export peak. Now our dollar's down again, export's up.
Here we hit the wall that
separates the premium Australian wine business from the bulk and bargain bin
end: the whirlpool that sucks all the way down to ruin, as best recently
manifest by the Winemakers Federation report that showed that 92 per cent of production
in the irrigated warm inland areas - Australia's biggest vineyard - is
unprofitable.
Bulk exports fell another
four per cent in value in the Wine Australia report.
"Clearly it’s still
early days," Andreas Clarke said, "and the improvement we’ve seen in
exports in the last 12 months hasn’t yet flowed through to the grape growing
community at large but there are pockets of growers who reported improved
prices in vintage 2015 and we hope to see this trend continue next vintage."
There's pretzel logic to
unravel in the Japan figures: since the removal of tariffs under the
Japan-Australia Economic Partnership Agreement the value of wine exports rose
14 per cent to A$35 million while our bulk wine exports there increased by 388 per
cent!
Asia is the heart of the
top-end growth: wine exports by value grew 31 per cent to a record A$644
million, the report says. China's up 47 per cent in value "to a record
A$313 million driven by demand for wines in the higher price points with
exports to China above A$10 now worth A$116 million."
South Australian Minister
for Agriculture (and Tourism) Leon Bignell couldn't hide his delight. He's an
avid proponent of value-adding: concentrating first and foremost on producing
and selling the very best we can achieve.
"Our government's
been working hard with premium South Australian wineries in the China and Hong
Kong markets. It's terrific to see our strategies paying off with huge growth:
if you add China and Hong Kong together it's now our biggest market."
At the other end of the
quality ladder, the UK remains our biggest market by volume - up 2 per cent -
while value slumped 2 per cent. In spite of a last-minute resurgence, the USA
also fell 4 per cent in value. Traditionally, these are our biggest discount
markets.
Minister Bignell's comment
on this value-vs-volume see-saw is rather pithy but pointed: "There is
considerable work to be done to retell the story of Australia's premium wine"
he said.
"Yellowtail has, for
the past few years, defined the Australian wine offering to the American
consumer. The SA government has a firm strategy to help wineries to sell
premium wine into the US - with a strong focus on Texas."
As I pointed out here in September, Yellowtail, for years regarded as a glittering triumph of export
savvy, comes largely from our highly-irrigated, unfashionably hot inland
regions. But to follow the big rivers upstream from their estuary, Langhorne Creek, commonly
regarded as a premium region, has been selling 77 per cent of its crop at a
loss.
The Winemakers' Federation of Australia 2015 Vintage Report goes on to list a 92 per cent loss in South Australia's Riverland; 88
per cent loss in the Murray-Darling-Swan Hill area, and in the Riverina, home
of Yellowtail winery, a 97 per cent loss.
These telling reports coincide with last Friday's Vineyards Census 2014–15, released by the Australian Bureau of Statistics.
This reports an increase in yields across the Riverland and Murray Darling/Swan
Hill regions. In Riverina, yields have increased by 32 per cent compared with
2012.
This in turn coincides
with an overall decline in plantings of 4,521 hectares across the basin. I can
smell a helluva lot of river water being squirted around somewhere to achieve this
miracle.
As one wise Riverland mate
told me recently "Everybody here's asking what the next alternative
variety is. I say it's the one you've already got growing, but with half as
much irrigation."
And that, to me, seems to
be the key. Internationally, wine lovers are obviously preferring wines which
don't require nearly so much irrigation. The fact that this all swings on an
Aussie dollar that many consider undervalued should temper our celebrations.
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