A great brand confuses

It’s been a field day for wine drinkers. But Australia’s benchmark red-wine brand, I believe, has never seen such grim times. Caught in a three-way pincer of wine glut, fierce retail competition and a parent company seemingly desperate for sales, Penfolds annual ‘Bin’ wine release hit new lows in 2007.

Retail prices slumped to unprecedented levels for the range as a whole. And what appears to me as indecisive marketing under successive ownerships sent a confusing message on the relative merits of cork and screw cap seals.

Penfolds winemakers favoured screw caps from early in the decade following a successful maturation trial with the 1996 Bin 389. But a piecemeal rollout means that of the current releases, Bin 138 Barossa Grenache Shiraz Mourvedre 2005, Bin 128 Coonawarra Shiraz 2005, Bin 28 Kalimna Shiraz 2004 and Bin 407 Cabernet Sauvignon 2004 have screw caps and Bin 128 Coonawarra Shiraz 2004 and Bin 389 Cabernet Shiraz 2004 have corks.

From a consumer perspective, in the short term anyway, things couldn’t be better. With Penfolds reds at fire-sale prices why not fill the boot and drive home with a smile on your face?

But why are the Penfolds prices at their lowest in a decade? Competition and glut play a role. But the malaise in parent company Fosters wine division is probably the key. With a reported ten per cent slide in wine sales in the first half of 2006-07, it’s quite plausible that Fosters are using the annual Penfolds release to bring sales home in the second half, though they tell me that that’s not the case.

It’s the ideal fire-sale brand as retailers invariably offer Penfolds at or near cost on release. And it’s the most significant wine release of the year because of the large volumes and big dollars involved.

But it’s also one in which retailers don’t want to be caught out. In release week in early March, The Canberra Times carried three press ads for the new Penfolds reds in one edition: Woolworths-owned Dan Murphy announced the release without posting prices, adding that it wouldn’t be undercut. Coles-Group-owned Vintage Cellars stuck its head above the trenches offering Bins 128, 138 and 28 at around $22 – only to have it lopped off by 1st Choice (another Coles Group brand) at around $18.

The following week, Dan Murphy cut the price to less than $16 – territory that hadn’t been approached, as far as I can recall, since the 1990s. Then last weekend, Sydney-based independent Kemeny’s chopped again — to $15.80.

What that meant, given Coles and Woolies ‘we-won’t-be-undercut’ pledge, was a new market-wide price that was more than $2 a bottle below last year’s floor.

Confusingly, Fosters have released two vintages of Bin 128 Coonawarra Shiraz – 2004 and 2005. The rationale for doing this, says the press release, is that ‘The Penfolds winemaking team believe the style of the Bin 128 is enhanced by an earlier release’. But that’s at odds with winemaker Peter Gago’s tasting note: ‘this wine needs time” – a view confirmed by my own tasting.

The confusing messages emerging from the current Penfolds release – why am I worth less this year than last? Am I to be cork or screw cap sealed? At what age should I be released? – could not come at a worse time for Australia’s wine industry.

With the price per litre of exported wine in serious decline, we need to build premium brands, not degrade the ones we have.

Whether justified or not, confusing messages, even little ones, about brands creates doubts about quality. And that’s something Australia’s wine industry cannot afford with an icon like Penfolds.

We can only hope that Fosters comes to grips with its wine portfolio. On a brighter note, the new Penfolds releases – Bins 28, 128, 138, 389 and 407 – do stack up on quality. You can read my reviews of the range on this website.

Copyright © Chris Shanahan 2007