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Can Australia overcome a harsh reality in the US
Name: John Gillespie at the Outlook Conference
The export market to the United States has never been an easy nut to crack but post global financial crisis it's become positively concrete.
The American economy is struggling against growing debt and recession, the Australian dollar floats around parity and there is a worrying awareness that the once loved Aussie brand is becoming a little stale among US wine drinkers.
At the recent Winemakers' Federation of Australia Outlook conference, guest presenter and a respected United States wine marketing authority John Gillespie delivered the statistics with a healthy dose of advice in his 'Realities in the USA' presentation.
Wine consumption in the US continues to rise and Gillespie, the US Wine Market Council president and chief executive officer of Wine Opinions, says it's a trend unlikely to change in the near future.
The big picture: US wine consumption
In 2009, 276 million cases of table wine were consumed in the US. It's a figure that's been steadily rising since 1994.
The per capita annual consumption in the US, based on data by the US Wine Council, is also growing, reaching 3.02 gallons per person in 2009. Of those consuming wine, Gillespie says 57% of them are core wine drinkers, drinking every day or weekly. The next biggest wine consumer sector are the marginal consumers. At 43%, marginals drink a couple of times a month.
There about 77 million core and marginal wine consumers in the US and core drinkers consume 91% of the country's total wine consumption.
The latest Nielsen Company data (see pages 66-67) released in October shows a continued growth in consumption but decrease in imports.
In the year ending 24 July 2010, total domestic wine sales had increased in dollar value by 4.5% on the previous year. Imported wine sales decreased by 1%. In total volume of cases, domestic wine sales grew by 2.7% and imported wine sales dropped by 0.5%.
Competition heats up
Gillespie delivered the figures on sales trends, broke it down further among age groups, the different sexes and price points, but there was one question from the wine industry audience which rang out the loudest: Is Australia on the nose in the US market?
Gillespie didn't disagree.
'In looking at results from a recent survey of the US wine trade, and in speaking to distributors and retailers, I do think it is fair to say that there is some disaffection with Australian wines,' Gillespie said, in a later interview with the Grapegrower and Winemaker.
'However, I believe it is mostly a matter of lost share of mind due to very strong promotional efforts from other wine sources such as Spain, Chile, and Argentina - all of whom compete in the same price sectors as Australia.
'There is also the fact that both consumers and the trade feel they already know a lot about Australian wines, while they are more recently discovering wines like Malbec from Argentina and Albarino from Spain.'
According to a survey conducted by Wine Opinions, US on-premise sellers were selling less Australian wine in 2010 than in 2009.
The survey showed 25% of the on-premise trade surveyed said they were selling less Australian wine under $20, 27% said they don't sell it at all, 30% said sales remained the same and 19% said they were selling more.
For premises selling Australian wine over $20, 37% said they were selling less, 28% said they didn't sell it, 28% said sales remained the same and just 7% said they were selling more.
Wines sales from Spain, Argentina and Chile grew in the same period. In the under $20 price point, the survey showed 49% said they had sold more wine from Argentina and 37% said they sold more Chile and Spanish wine. In wine sales over $20, 16% said they sold more Argentina wine, and 11% said they sold more wine from Chile and Spain.
The latest Nielsen data shows a 5.3% drop in the amount of Australian table wine cases imported into the US in the year ending 24 July 2010 and a 7.5% drop in the market share of sales.
In the same time period, table wine imports from Argentina grew in sales share by 30.9% and in total volume of cases by 23.9%. Wine from Chile had an increase in sales share of 1.9% and in case volume 3.7%. Wine from Spain increased their sales share by 1.3% and by 2.9% in case volume.
New Zealand's total dollar value of imports grew by 18% and increased their total volume of cases by 25%. Germany and Portugal also saw an increase in sales share and cases imported.
Wine Assist principal Dan Traucki, who provides export support for a number of Australian brands in Asia and to a lesser extent the US, believes the Australian brand problem is less to do with being 'on the nose' and more about an oversupply of lower quality wine which is turning many of the mature markets and consumers away.
'In the US, I would suggest that the low cost 'critter' type wines have well and truly lost the newness and excitement they previously generated,' he said.
'They probably still have a place in the emerging markets such as part of Asia, but they appear to have just about reached their 'use by date' in America.'
Like Gillespie, Traucki believes the wines from countries such as Argentina and Chile have replaced Australia as the 'new and exciting' wine style and brand among experienced wine consumers - but only in the lower end of the market, which he says Australia should be aiming to get out of.
How do we regain US attention?
Gillespie recommends undertaking more qualitative research on the US trade to better understand the situation and to look for possible remedies.
'I will say that face-to-face work with the trade in the US should always be a priority,' he said.
He also believes there is real potential in the $8 to $18 price point in the US market, which presents good viable opportunities for Australia.
'I think in that price range, there is room for many styles of red, white, and Rose wines,' he said.
'We're currently seeing promotion from Beaujolais to establish themselves in that price range as a lighter alternative to the forceful red wine style.
'There are also many Chardonnays now in that price range that are going to low oak or no oak.'
There's also the 70 million US 'millennials' - aged between 16 to 33 - who have become the wine sectors biggest potential consumer market and are the least affected sector in the State's economic downturn.
'20 million [of US millenials] are still under legal drinking age and this sector will rule the market for quite a long time,' Gillespie said.
'And 41% of the wines that millennials drink is imported (compared to only 25% for baby boomers) so the importance of reaching millennials cannot be overstated, in my opinion.'
Traucki says the United States growing awareness for 'clean and green' products needs to be better capitalised on by Australian brands.
'Clearly we need to lift profile and perception. While we have become known for our cheap 'sunshine in a bottle' wines, we must lift that perception to a more high quality and premium product,' Traucki said.
'The vast majority of wineries in Australia produce wines which sell for between $15-$50 retail in the domestic market, thus it would seem sensible to me to focus mainly on this equivalent area in our target export markets.
'We should be promoting our quality, 'clean green' environment, freedom, diversity and our role in the development of wine quality over the past half century.'
Finish on a positive note
The US economic woes aren't likely to go away overnight, in fact, Gillespie told the Outlook Conference to 'get used to working in such a climate'.
He did, however, reiterate that opportunities still exist for those brands willing and able to stand out in the now crowded US market.
'There is always room for new brands that can differentiate themselves and offer a good quality/value ratio,' he said.
'I can't speak to other export markets, but the US is the largest wine market in terms of value and we are second only to France in volume (and will pass France in the next three years).
'But as in other countries, our wine trade is very much a relationship business, so there is no getting around the need to be personally present in the market.' ?
More articles from the Outlook Conference and its presenters will appear in coming issues of Grapegrower and Winemaker, including Lulie Halstead's take on why we need to rebrand to 'luxury wine'.
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