Australia missing higher-priced wine trick in UK - Accolade Wines - Analysis

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Six months ago, Accolade Wines fired a broadside at the South African wine industry, warning that if wine makers don't get busy building brands then their collective future looks bleak.

Accolade wants its brands to help lift Australian wine

Accolade wants its brands to help lift Australian wine

Today, the company returned with some more bruising advice - but this time it has Australia in its sights.

In a briefing at the Australia Day tasting in London today - just as she had done at the Cape Wine conference in South Africa in September - Accolade's category development manager, Jane Robertson, revealed her company's latest insights into the UK market. Those figures show that while Australian wine is doing well in the country - and better than South African wine - there is still room for improvement.

The good news is that Australia has a higher volume share in the UK market (22.7% last year) than any other country and that, since a slump in 2011, has been steadily regaining ground with UK shoppers. Meanwhile, the average buyer has become younger and more consistent than ten years ago.

Where the category lags, however - and where Accolade believes there is a need for industry focus - is in the worrying lack of growth for Australian wines in the GBP5-and-above FOB price point. (FOB stands for free-on-board and is the cost of the wine delivered to the ship that will carry it overseas.)

According to Accolade's figures, while volumes for GBP3 to GBP4 wines are up by 32% year-on-year and for GBP4 to GBP5 wines up 11%, wines above those price points are all in decline, including in the key GBP5 to GBP6 category, which accounts for 45% of all Australian wine sales in the UK. For the overall market, wine in the GBP6 to GBP8 bracket (which translates to a shelf price of about GBP10-12), has 14% growth as consumers look to trade up.

This is where Accolade believes the industry is missing out, and the company appears determined to do something about it before rival wine-producing countries cut in.

"We've done a good job, but we need to do a better job," Accolade's new GM for UK & Ireland, Rob Harrison, tells just-drinks. "There are countries like Chile that are coming up on the rails and they are doing a really good job."

Harrison took over from Paul Schaafsma three months ago after Schaafsma moved up to CEO. It was Schaafsma who had the strongest advice for the South African wine industry in Cape Town last year. While Harrison is more measured with his words than his predecessor, his advice is the same - it is a focus on brands that will encourage shoppers to trade up.

"There is a place for smaller operations, smaller brands, wineries, etc," Harrison says. "But ultimately, the health of the industry is dictated by bigger brands and we want to be at the forefront of that. A healthy environment where consumers are seeing tiering and such like - that's good for the wine industry as it will give shoppers the confidence in Australia. If we're not doing that job then customers will migrate to other countries.

"Customers are quite promiscuous and we need to make sure we have solid business outside of that commercial GBP5 tier."

It is not all about the producers, however. The UK retail market has been up-ended by German retail chains Aldi and Lidl, whose entrance has led to rivals slashing SKUs and shelf space. (This has affected Accolade's portfolio in the UK, and Harrison says the company has seen a 20% to 30% reduction in SKUs, in-line with the rest of the industry.) At the same time, existing supermarkets are feeling the pressure of Aldi and Lidl's low-price business model and are trying to offer consumers even more competitive prices. According to Accolade, the average price for eight of the top ten Australian wine brands has fallen.

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"That's why you have to give them [the supermarkets] more compelling reasons to stock the products at [a suitable] price point," says Harrison. "That's the challenge for us as an industry - to tell [supermarkets] that the product will sell, that it will have a good on-going rate of sale, that it offers great value - that's the piece we have to work on.

"If we don't, then the reality is that we might have a bad vintage and there are a lot of other countries, like Chile, like South Africa, that will step in."

There's a reason that Harrison is name-checking New World producers. Accolade today cited Nielsen figures that show Australia as one of a handful of countries in the UK market that has positive growth (+3%) for its moving annual total (MAT). The three other countries are Chile (+2%), New Zealand (+11%) and Argentina (+24%). Countries like Chile, Harrison says, have successfully leveraged their brand power into trade-ups, and he urges Australia to follow suit.

He also wants the industry to show more resilience in the face of supermarket pressure to discount. In the past six months, he says, Accolade has moved to narrow the gap between its discount and headline prices.

"You have to have faith and trust that your products will stay and thrive," Harrison says.

Sectors: Wine

Companies: Accolade Wines

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