Fosters Groups Treasury Wine Estates pulls funding for Wine Australia in UK

Foster's Group's Treasury Wine Estates pulls funding for Wine Australia in UK

Foster's Group's wine arm, Treasury Wine Estates, has withdrawn funding from trade body Wine Australia in the UK, its largest export market.

Disagreements over the marketing strategy for Australian wine in the UK have caused Treasury Wine Estates to "temporarily withdraw" from Wine Australia in the country, the Foster's Group subsidiary confirmed today (1 February).

Australia remains easily the largest export of wine to the UK in terms of volume, ahead of France. However, overproduction in Australia, a strong Australian dollar and a consumer shift in the UK to wines from other New World countries, such as Chile and New Zealand, have prompted a crisis of confidence in the Australian wine industry.

Treasury Wine Estates, alongside some of the other major players, are concerned that that Wine Australia's new A+ campaign seeks to promote higher-priced wines at the expense of mainstream brands in the UK.

"We don’t believe that the new A+ campaign currently being leveraged by Wine Australia does enough to promote and represent our total portfolio of brands," said the MD of Treasury Wine Estates in Europe, Middle East and Africa, Peter Jackson.

"In addition, the strength of the Australian dollar is significantly impacting our profitability so it is vital we review all of our on-going investments to ensure they are delivering the greatest return," he said.

The group has challenged Wine Australia to review its strategy. "We still believe there is a role for a generic body to promote and enhance the reputation of Australian wines in the UK and will be happy to review our position once a more commercially-driven campaign is put in place," said the Wolf Blass wine producer.

The company's stance is the first significant test of Wine Australia's new director in the UK, Yvonne May, who only took on the job this month. May could not be immediately contacted by just-drinks.

Australian winemakers saw the AUD rise by 8% against the US$ and by 11% against GBP sterling in the first nine months of last year, according to Rabobank. Exports of bottled Australian wine to the UK fell by 28% in volume in calendar 2010, although total export volumes to the country rose by 4% due to stronger demand for bulk wine imports, according to Wine Australia figures.

In 2009, Treasury Wine Estates' rival, Australian Vintage, also announced that it would withhold funds from Wine Australia.