Ireland is an important European market for Australian wine, one that has had its ups and downs in recent years. Leading Irish consultant and wine writer, Jean Smullen, provides us with an overview of Australian wine’s position in the Irish market and finds plenty of reasons to be optimistic.
The market for Australian wine in Ireland
To put the Irish market for Australian wine into context, you have to look at what has been happening in recent years. Having just come out of years of harsh austerity, Ireland has once again one of the fastest growing economies in the EU and the market for wine is back in growth. This gives Australian wineries a strong opportunity to develop.
Twenty five years ago Ireland had the highest entry-level price point for wines in Europe. The Irish consumer had a thirst for both wine knowledge and better quality wines. During the 1990s premium wines sales grew strongly, especially for wines from Australia and the New World generally. In the early 2000s the Irish market was a very attractive place to do business, with high margins achieved across the board by producers, importers, wholesalers, retailers and the restaurant trade. Sales of wine from Australia and the New World benefited the most, with sales rising from 6% of the total market in 1990 to 75% of the total market by 2004. However, by 2014 this had started to slide and sales of wine from the New World dropped to 61% of the total market.
Irish wine market changes
The structure of the wine industry in Ireland has seen huge changes in recent years with much consolidation and rationalisation. This has mirrored what happened in the United Kingdom around 15 years ago when cross-border shopping with France saw the demise of many independent wine importers and the rise and domination of the multiple.
The Irish wine importing trade, too, has had some harsh reality to contend with. The economic recession has seen a few bigger players survive by picking up brand agencies from companies who have closed down or been bought over during the last five years. The domestic big guns have been whittled down to the following key companies:
- Barry & Fitzwilliam
- Cassidy Wines
- Gilbeys Wines (part of the C&C Group)
- Findlater Wine & Spirit Company
- Febvre & Co
- Irish Distillers/Pernod Ricard
- Richmond Marketing.
Australian wine: well-placed in Ireland in 2016
Today the Irish wine industry is showing a return to health, and from an Australian wine perspective this is particularly good news. Let’s take a look at the state of the wine industry in as it stands today.
The profile of the Irish wine market differs significantly to that of the UK. The off-trade accounts for 81% of all wine sales and in Ireland these sales are dominated by Australia and Chile with Australian wine holding 18.6% of the market in 2014. The average per capita consumption in Ireland is 16.6 litres. It is important to point out that volume and value sales for wine on the Irish market are slowly returning to growth. The market reached a peak of 9 million cases in 2011 but by 2014 total volume case sales dropped to 8.2 million. Provisional figures to December 2015 show that a total of 8.872 million cases were sold, which brings the market almost back to its 2011 peak, though sales value are distorted by two duty increases.
One of the main factors in the decline in volume sale of wine since 2011 was a 62% excise duty increase on wine in two consecutive budgets between December 2012 and October 2013. The hard-pressed Irish consumer, already struggling with reduced disposable income, saw the tax take from a standard €9 bottle of wine increase from 39% of the price to 54%.
Australian wine 2016 off-trade figures - cause for optmism
The Nielsen MAT scantrack figures for the off-trade to March 2016 reveals from a country of origin perspective, Australia, Chile, Spain and New Zealand are driving the Irish wine market – each led by dominant brands. The top three Australian wine brands are McGuigan, Wolf Blass and Hardy’s. Wolf Blass has always held its premium niche and continues to enjoy strong growth in terms of both value and volume sales.
Now more than ever, engaging the Irish wine consumer is the key to up-selling. Ireland has one of the highest populations under 25 in Europe. There is new a generation of Irish who have grown up around wine. Unlike the baby boomers that were not exposed to wine on this market until the 1990s, this next generation are much more familiar with the concept of enjoying a glass of wine with good food.
Eating out is once again starting to enjoy a surge and every week it seems a new restaurant opens in Dublin. The major population cities of Cork, Limerick and Galway are also starting to show strong signs of recovery, though in some of the smaller regional centres the recovery is taking hold more slowly. Wine sales in hotels and restaurants account for 15% of the total market and public houses account for 4%.
Government support for the Irish wine trade
The Irish Government has done its bit for the wine trade and on July 1, 2011 introduced a change in the VAT rate for restaurants decreasing VAT on food and service from 13.5% to 9%. The new 9% rate will remain in effect during 2016. This is a key development in the recovery of the restaurant industry in Ireland which suffered greatly during the recession.
It shows the Government’s commitment to helping the industry recover from the turbulence it has suffered in recent years. The new rate is one step in building a more competitive market. The Irish restaurant industry employs 64,000 people (1 in 4 tourism jobs) and contributes over €2 billion to the Irish economy each year.
Ireland has a very strong and well-developed tourism industry and visitor numbers have been steadily increasing. In 2016 Ireland is set to have its best ever year in tourism if the current trend of growth stays on course. The importance of the tourism industry cannot be underestimated. Eating and drinking in pubs and restaurants is now a vital part of Ireland’s tourism offering which continues to contribute significantly to wine sales in Ireland.
Australian wine's future in Ireland
From the mid-1990s Wine Australia was one of the most active generic bodies on the Irish market. For seventeen years there was a strong presence which contributed to creating greater visibility for Australian wine. Couple that with the migratory nature of the Irish and the strong family ties with Australia and you see part of the reason Australian wine resonated so strongly with the Irish and why it’s managed to maintained its position as the number one country of origin for over 25 years.
Most Australian wines sold on the Irish market in the early years were at the entry-level: fruity and fun with high alcohol levels which appealed to the Irish drinker. The economic crash changed things. The new generation has a very different perception of wine and what they like. At the same time, Australia was itself trading up and moving away from entry-level wine towards the more premium sector. The Irish consumer noticed this, but, due to a lack of funds they voted with their purses and chased the cheapest price and the discounted wine, not much concerned about where it came from – it was all about what it cost.
Now as consumer confidence returns, there is some evidence of consumers trading up,,anecdotally at least, especially in the independent off-trade. Within the restaurant trade, particularly via the corporate customer, entertaining is starting to be more visible.
Recently while working at the coal face of the wine industry in Ireland, some of my projects have included in-store tastings in off-licences and supermarkets. The briefs have included sampling mid-priced Australian wines directly to the Irish consumer. Overall, the experience has been positive; customer appreciation of mid-priced wine (here in the €14-€16 price category) through sampling has helped to generate sales.
From the perspective of the trade, there is a strong awareness that Australia has raised the bar and that they are introducing more premium wine styles into the mix. These wines are gaining traction and are capturing interest in both the independent on and off-trade; this in the long term will help increase value sales.
Last year, with my journalistic hat on, I featured an Australian wine with an Irish heritage on the Moncrieff Show on Newstalk. Newstalk is the only national radio station in Ireland to commit to a regular wine slot, which is part educational, part irreverent, but mostly fun. The audience for Moncrieff is predominantly AB1 males (25-50+) and the show has a daily audience of over 140,000 people. The wine featured was the 2010 O’Dwyer Wines Clare Valley, Shiraz Limited Edition which retails in Ireland at €49.00. Some months later, the Irish distributor phoned me to say that following the review he had received a number of orders for the wine from some of the top hotels in various parts of Ireland; the Irish link certainly helped this wine, but visibility is also a factor.
Australian wine in Ireland: education = opportunity
The mood is shifting: the wine consumer is starting to trade up and just as this second phase of growth evolves in the wine industry in Ireland, so we find ourselves in a void. Wine education, once enormously successful here, no longer exists. The Wine Development Board who trained the trade closed down in 2009, another victim of the recession.
Today though we are seeing many generic bodies, including Wine Australia, supporting our market with events focused on training the trade and the gatekeepers. There is a whole new generation of trade and wine consumers who need to learn about wine. Ireland is not a wine producing country so wine is not a part of psyche, as is the case in other European markets. Focused events such as the Australian Trade Immersion Day and the Australia Day Tasting educate and inform at a time when training is vital to the industry and the lack of it, very obvious.
Australia is redefining itself, much as France did 100 years ago when they set up a system to guarantee the quality of the wine in the bottle by defining the regionality and structure of their industry. A decade from now the modern Irish wine trade reaches its half century and Australian wine’s potential is huge if it continues to educate. With tourism vital to the Irish economy (it accounts for over 7% of our GDP with approximately 8 million visitors per annum) wine is going to be a very big part of that offering.
The key to getting Australian wine’s messages of premium regionality across will be education, education and more education. The wheels for training the next generation have now been set in motion. Let’s keep those wheels moving.
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