Aaron Ridgway takes a look at our latest US Export Report and the current market for Australian wine.
Wine Australia’s Head of Market for the Americas, Aaron Ridgway, takes a look at the latest US Export Report and the current market for Australian wine in the U.S. While it’s been a tough ride for many in recent years, there are now clear signs of recovery.
Australian wine – still an emerging category in the world’s biggest wine market?
While the challenges of selling Australian wine in the U.S. remain significant, the release of our latest export figures in October 2016 certainly indicate that a broader recovery may be under way. A decline in volume is offset by an increase in value - just the type of pendulum swing that many say the category has needed for some time. Australia is the second-largest exporter of wine to the U.S., but less than 10% of that volume sells for above $10 AUD per litre. This, coupled with a relatively small brand set (roughly 500 brands: just ahead of Chile but well behind Argentina and only 1/3 as many as Spain), means it is not inaccurate to say that Australia is still an emerging category in the U.S.
US Export Report - iconic Australian brands lead the charge
A big winner in its quest to grow a premium Australian offering is Treasury Wine Estates, led by its iconic Penfolds and emerging sub-$15 19 Crimes brands. ‘Our focus has been on growing in the premium segments of the US market, and we are really starting to see our investments in our brands pay off,’ says TWE’s Chief Marketing Officer, Simon Marton. ‘Innovation within our brands to drive growth is fundamental and we will continue to bring creative distinctive new wines to the US market to drive interest and excitement with wine consumers.’
The on trade: an opportunity for fine Australian wine?
In higher end restaurants, a tough channel for Australian wines in recent times, there are signs that a door may be starting to open. Importers like Negociants USA, Little Peacock, Vine Street Imports and Hudson Wine Brokers continue to promote restaurant-focused wines, particularly in the key New York market. Michael Engelmann MS, Wine Director at the Modern in Manhattan, has evolved the restaurant’s 3,000-bottle list to include 100 wines from Australia - up from just a dozen or so when he started. He often pours Australian wines by the glass, something that is still, sadly, a rarity in starred big city restaurants. But according to Engelmann, there is interest beyond what’s currently imported - surely another sign that Australia is still emerging. ‘Do I see room for a few more Aussie producers? Yes. It’s just a question of whether I can get them or not.’
US Export Report - is premium Australian wine the way forward in the U.S.?
For Australian wineries of any size, a key puzzle remains extracting results from traditional distributor partnerships. Three-quarters of all wine sold in the United States is domestic, and large wine companies tend to occupy much of the mind share (not to mention monthly and annual sales targets) in the top distribution tier. With two-thirds of the wholesale wine market belonging to the top 10 distributors, it remains challenging for large Australian portfolios to compete with Californian wine, and equally tricky for smaller houses looking to take a position on Australia to achieve traction alongside the majors. Gary Gaines, Senior Vice President of Chains at the Winebow Group, which operates in 20 states and sells a mix of importer-sourced and direct-import Australian brands, cites premium price points combined with greater varietal diversity as key for the category’s future. ‘If you look at where Australia is really performing today, it’s in the $14.99-19.99 retail segment,’ he said, adding that much of his portfolio’s growth is coming from family-owned wineries.
The Australian wine revival in the U.S. gains momentum
While California, the U.S.’s largest market for Australian wine, was marginally off in the 12 months to September, there are signs that independent volume retail is on the up. Ryan Woodhouse, who buys the Australian wines at K&L Wine Merchants in California, is very upbeat about interest and sales in his stores. ‘I think (Australian wine) has definitely turned a corner in perception. For years’ people have been saying that Aussie wines are bouncing back, but as of the last 12 months that’s finally ringing true.’
US Export Report - investment: the key to this opportunity
Some Australian wineries are also investing in U.S.-based salespeople as part of their growth strategy. Family owned McWilliams wines, which saw double-digit growth in the September numbers, is boosting its field team and bringing new offerings to market. ‘We’ve invested in new packaging, introduced new brands for the first time in more than a decade and put a local sales team in market to support our importers and wholesale partners,’ said McWilliams General Manager for the Americas, Ian Jones.
Australian wine in the U.S. – the time is now?
While there is a long way to go for the Australian wine category to relive the glory of days past in this market, we are clearly seeing a re-emergence of interest in all price points as perception in the U.S. changes towards Australian wine. Sustainable growth is returning for many in one of our most valuable markets. The time is now to increase the awareness and availability of premium Australian wine in the U.S. But this requires a long-term approach and a focus on re-establishing relationships and confidence in the category supported by significant, consistent investment to drive the Australian fine wine message. There is plenty of work to be done, but there’s now a clear opportunity for Australian wine exporters in this United States. Aaron Ridgway is Wine Australia's Head of Market in the Americas.
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