Australian wine in the US has ridden a market share rollercoaster in the past few years. From the dizzying highs of the 1990s and early 2000s when Australian wine was very much the in-vogue category to the lows of the post credit crunch era, Australian wine has been there, done that and worn the t-shirt.
Recently there has been signs that the US has fallen for Australian wine again. There was steady growth in exports throughout most of 2016 and a surge above $10 per litre FOB. We’ve also seen more premium wine on shelves and wine lists, whilst anecdotal evidence, such as from Kate Webber, suggests that cool climate wines are helping to change perceptions and drive growth in the US.
Articles in the Wall Street Journal, Punch, Forbes and others conveyed similar themes: with some intellectual reckoning, an open mind and a willingness to forget the past, you can find excellent wine from Australia and an increasing number available Stateside.
If we take this as evidence that Australia has overcome the ‘sunshine in a bottle’ perception issue and the fell-off-a-cliff-in-sales issue, then what’s really happening in the marketplace?
The premiumisation trend
According to 2016 year-end IRI data published this month, retail grocery/drugstore depletions of Australian wine fell everywhere in the country except in the Mid-Atlantic region. Its total sampling, which includes some big players like Wegmans, Giant Eagle and Whole Foods, but leaves out others like Costco and Total Wine, grew by 1% while Australia fell by 5%. In Texas and Colorado, the declines were in the double digits.
Unfortunately, the depletion story isn’t as good as the shipment story, but then it rarely is. A restaurant can order more steak, but that’s no guarantee that it’s serving more meals, or that its neighbourhood is gentrifying and housing prices are about to explode.
Nielsen retail numbers for the same period tell a more nuanced and positive story. Total wine sales are up 4% in value and 1.5% in volume, so that aligns nicely with the premiumisation trend currently helping Australia, which shed 4% in volume – consistent with recent shipment data as well. The average value of a bottle of Australian wine sold was flat.
“Currency has allowed us to reinvest and go after retail harder than on-premise,”
Rob Buono, Old Bridge Cellars
Old Bridge Cellars, which imports d’Arenberg, Leeuwin Estate and several other Australian brands, is aggressively working the retail sector and enjoying success. It comes at a cost, but fortunately exchange rates are at a point where some additional margin can be put to use in growing these brands for the long term, something Negociants US MD, Kathy Marlin, believes is key to Australian wine’s success in the US.
Change in portfolio by the big boys
Old Bridge Cellars’ president Rob Buono, has stated that his portfolio has recently been seeing more success with Cabernet Sauvignon and GSM than with Shiraz - a variety that continues to struggle in the on-trade.
Statistically, as well as perceptually, Shiraz (defined by Nielsen as Shiraz/Syrah but likely to contain plenty of Australian brands) remains a major problem for Australia. It fell 11.2% in 2016, twice as fast as the nearest declining category (German table). At the same time, New Zealand and France grew by more than 14%, Portugal grew 12% (off an admittedly low base) and both blended and sweet table reds grew more than 10%.
The big success story in the wine category generally is rosé. It grew by almost 60% in 2016, off an already bumper 2015 and value per bottle jumped a whopping $.84 per unit. More growth is baked into retailers’ plans for the new year. New Jersey’s Bottle King chain carries 75 rosé wines, including a couple from Australia, but is looking to double the offering in 2017. Surely there’s an opportunity for Australian wine growth here?
At a micro level, however, the Aussie story changes quite dramatically. Aaron Meeker, National Sales Manager at Vine Street Imports, explained that his high value Adelaide Hills wines have begun to open doors in some top accounts, particularly on-premise. ‘Anton Von Klopper's wines have gotten us into a lot of places that would never have let us in two years ago,’ he said, adding that a distributor in Rhode Island called him last year specifically asking for ‘high-end, esoteric Australian wines.’
Importers like Negociants, Little Peacock and Hudson Wine Brokers all report that big city wine directors aren’t as hostile as they used to be. Tasmania’s Jansz is found in a healthy number of Manhattan restaurants. Two major fine wine distributors in New York also started relationships with Australian wine importers in 2016 – Verity Wine Partners took on Hudson, and Michael Skurnik now represents about half the Little Peacock portfolio.
Still, these developments don’t add up to the type of opportunity many Australian wineries are seeking, one that is usually based on the successes of the past, the size of the total market, or both. ‘We used to sell x, now it’s y, how can we get back to x’ type equations. Things fell hard and have taken a long time to stabilize, and for most exporters the game simply isn’t changing all that quickly. Consumers aren’t pulling the wines off the shelf the way they used to (hence the poor IRI data) and it’s still unusual to see strong Australian representation on wine lists.
“An astounding number of professionals, who should know better, still seem to lump Australian wine into a single category (big, rich, extroverted, etc.) or worse, with the shadow of cheap critter wines and ooze monsters still looming,”
Australian Wine in the US: Redefining the Opportunity
So, what does all this add up to? Australian wine exports are growing, but there’s still some figuring out of where the wine is going and how it’s being presented, sold and ultimately consumed. The US remains deaf to the expectation that Australian wines will ever be as popular as they once were, which is both positive and negative. It gives the category a powerful chance to redefine itself for long-term stability, but is tough going for companies whose sales have contracted as times have changed.
Consider this:
Barefoot is the number one wine brand in the US today, but its popularity doesn’t prevent sommeliers from building beautiful Californian wine lists. Part of that is parochialism, sure. Americans love to drink American wine. But part of it is also the rigorous understanding that Barefoot isn’t representative of all American wine. It’s a brightly packaged, affordable wine product that the market supports to the tune of 20 million cases per year. A Manhattan wine director isn’t grimacing through a Russian River Pinot Noir sales pitch worrying that diners think Barefoot when they think of domestic wine. He or she is appreciating the wines for their quality, origin, story and price.
Australian wine has an opportunity to redefine itself; an opportunity to re-position itself in the premium sector as a serious player. Doing so will not be easy; it will take time and it will take education and communication and it will need exporters to look at the money they make, rather than simply the number of bottles they ship. But with wines that are undoubtedly worthy of premium positioning, Australian wine can, and many would argue it needs to, be done. When this starts to happen, Australian will really have recovered in the US. Or perhaps it will have been reinvented.
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