Aussie wine’s global focus — part one of three

Australia’s wine exports may eventually be just the tip of the iceberg of success as our amazingly successful, vigorous wine makers go global. As well as wine, we now export technology, equipment and even viticultural skills to the rest of the world. And the next, perhaps biggest, part of the industry’s globalisation, may be in wine-making and marketing enterprises acquired or built from the ground up in other countries.

Watching our wine-export chart climb from 21.3 million litres worth $44.6m to 154.4 million litres worth $603.3m between 1986/7 and 1996/97, it’s easy to get caught up in the ‘gee whiz’ factor while losing sight of how small a player we are.

According to the industry’s ‘Strategy 2025’ published in 1996, Australia accounted then for just 2.4 per cent by volume, and 3.5 per cent by value, of world wine trade — suggesting plenty of room for growth.

But the industry’s ambitious vision of doubling grape output to grab 6.5 per cent of global trade by 2025, encouraging as it is for independent grape growers and smaller wine producers, presents a challenge to larger players with major global ambitions.

Spreading the risk, increasing total capacity, appealing to a wider audience, hedging against exchange-rate variations and catering for the parochial factor are all driving forces behind an increasing trend to establish strategic interests off shore.

There’s nothing new in the concept. France’s Moet and Chandon, part of the giant LVMH  group, for instance, long ago recognised that you cannot be all things to all people. It successfully established sparkling wine production facilities in California and Australia’s Yarra Valley.

LVMH recognised both the finite production capacity of France’s Champagne region and the limited market penetrating capacity of any one brand. Hence, today, Moet remains leading French brand in Australia while Domaine Champagne, from the Yarra Valley, sits amongst the most successful super-premium Australian brands, selling for about half the price of the French original.

An Australian expansion by Remy — owners of Remy Martin Cognac as well the Champagne houses, Krug, Charles Heidsieck and Piper Heidsieck — appears to have failed in its initial effort to create an Australia sparkling wine brand from vineyards in the Pyrenees region, Victoria.

But a complete revamping of the vineyard and a subsequent huge lift in quality may well make a success of Remy’s  ‘Blue Pyrenees Estate’ range of table and sparkling wines.

The biggest  French presence here, and perhaps the least obvious, is that of Pernod Ricard, through its ownership of Orlando-Wyndham, one of our largest producers, exporters and owner of the huge, globally successful Jacobs Creek brand.

The French toe hold in Australia was as logical a step as the overseas interests now being developed by our own very large, publicly owned global players: BRL Hardy, Mildara Blass and Southcorp Wines.

Until its acquisition by Fosters Brewing in 1996, Mildara Blass appeared to be focused more on the domestic market than on exports. Under the leadership of Ray King, with strong brands like Yellowglen, Jamiesons Run and Wolf Blass, Mildara Blass consistently set the industry pace for shareholder returns.

King’s cautious approach to exports perhaps reflected a respect for profits not market share. Interviewed for this column some years back, he said that exports would be undertaken only if they yielded as good a return on investment as domestic sales.

King is still at the helm. But under Foster’s ownership we can already sniff a more global focus. Since the Fosters acquisition, Mildara Blass has bought Rothbury Estate, with its valuable vineyards at Cowra, Cellarmaster Wines — a global leader in wine direct marketing — and recently announced plans for new wine brands to be produced in California and Chile.

For the Californian venture, former St Hubert’s (Yarra Valley) wine maker, Adam Marks has been transferred to the Golden State Vintners winery at Monterey. Here — with occasional help from David O’Leary (Mildara’s Clare Valley wine maker and before that red-wine maker at BRL Hardy) — Marks is to make wine for a new label, to be released, initially, only in the American market.

California’s bumper 1997 crop allowed gave the venture a great start and it seems there will be sixty to seventy thousand cases available for the launch later this years. The brand name has not been decide yet, but initial production was predominantly chardonnay and cabernet with a slightly smaller quantity of merlot and a little zinfandel, a red variety widely planted in California but little known here.

There are also plans for an ‘old vines’ zinfandel’ and a reserve cabernet. The story will continue next week.

Copyright © Chris  Shanahan 1998 & 2007