Small winemakers see opportunities in export and wine tourism

Small winemakers have reported strong growth in revenue and production across all sales channels for the second consecutive year, according to the findings of Wine Australia’s Small Winemaker Production and Sales Survey 2016–17 report published today. 

Production and revenue for Australia’s small winemakers (those crushing up to 500 tonnes) both grew by 10 per cent in 2016–17, building on growth rates of 7 per cent and 12 per cent respectively in 2015–16.

The report estimates that small winemakers contribute 8 per cent to the total Australian winegrape crush and sell $1.3 billion of wine – mostly on the domestic market.

The domestic retail channel is the largest channel for small winemakers, accounting for 45 per cent of wine sales on average. However, despite growing by an average of 5 per cent, small winemakers did not identify this channel as providing the best opportunities over the next three years.

Figure 1: wine sales and sales growth by channel for small winemakers in 2016–17

Retail consolidation was identified as a concern by survey respondents, but with the recent entrance of retailers such as Lidl, Amazon, Kaufland and Aldi, retail fragmentation has been impacting the major retailers. Small winemakers are well positioned to take advantage this fragmentation to access consumers seeking authentic stories by using digital-driven technology.

Cellar door and wine tourism

Small winemakers nominated opportunities for their businesses over the next one to five years in cellar door and tourism. They are seeking to expand and diversify their businesses by offering an increasing number and range of personalised and interactive tourism-related activities.

This appears to be a successful strategy with cellar door the fastest growing channel (6 per cent average sales growth), and is consistent with recent consumer research by Wine Intelligence indicating a shift among winery visitors from exclusively wine tasting to an overall experience.

Export markets

The export market accounted for 14 per cent of wine sales on average, compared with 60 per cent across the wine sector as a whole. However, this was most frequently nominated by respondents as an opportunity for their business in the next one to five years.  With increasing demand for premium wines in many key markets, a lower Australian dollar and difficult vintages in other major wine-producing nations, the export opportunity is looking brighter than it has for many years. Wine Australia statistics shows that, in the year to September 2017, 752 small winegrape levy-paying winemakers exported wine to the value of $353 million (up 10 per cent).

For this group of exporters, China was the engine room of growth – up 27 per cent to A$118 million – followed by the USA – up 18 per cent to A$50 million.

Online retail

Currently wine purchasing online is a relatively small category. The survey found that sales through a winery’s own website or third-party website together accounted for 10 per cent of wine sales. The low share compared with other fast-moving consumer goods can be attributed to barriers such as the minimum basket size, delivery costs and time, the convenience and range of ‘bricks and mortar’ retailers and the inability to see and taste the wine before buying.

Statistics from IRI show that in the past 12 months, 17 per cent of people in Australia purchased alcohol online – compared with 63 per cent for clothing and footwear. However, IRI predicts that 8 out of 10 purchase decisions in future will have an online component – e.g. information search, social media recommendations, advertising or actual purchases – therefore, this represents an important opportunity for small winemaking businesses.

The full report can be downloaded here.