Theres more to the New World than we may think. But, try telling that to the consumer

There's more to the New World than we may think. But, try telling that to the consumer

While the New World has made hay at the volume end of the global market, many of the Southern Hemisphere's wine producers find themselves at a crossroads, with efforts to encourage trading-up battling against consumers' perceptions. Chris Losh takes a look at the quandary facing the likes of Australia, Chile, New Zealand and South Africa.

“I feel a bit sorry for the Chileans,” said the wine merchant at a recent giant Aussie wine tasting in London. “Their basic offering is so good that they’ve removed any incentive for people to trade up.”

At first glance, this may seem a somewhat sardonic assessment of the state of the New World wine market - in fact, I’m still trying to work out whether it was a genuine compliment, a back-handed compliment or full-on criticism. But, after visiting large generic tastings of first New Zealand, and then the aforementioned Australian one inside the last fortnight, it was hard not to concede that he had a point.

For both of these countries, it’s no longer about the basic offering – not many people seem to go to these events looking for entry-level Marlborough Sauvignon or multi-regional Aussie Cab any more. Rather, the story is all about the trade up; about regionality, quirky winemaking, odd-ball grape varieties.

This is partly down to winemakers stretching their wings and regions starting to get to grips with their terroir. But, it’s also, to an extent, down to economic reality. There’s no point in making ‘affordable value-for-money’ your USP when, frankly, you can’t deliver it.

Kiwi and Aussie wines haven’t been cheap for the best part of a decade and, while there is value for money out there, it’s increasingly only to be found up the price scale. As one Australian producer told me: “With the Aussie dollar where it is, even the guys in the Riverland struggle to make anything drinkable for US$10 nowadays.”

Chile, by contrast, continues to knock out effortlessly gluggable wine of no great ambition at wallet-friendly prices – it’s just that its success has come at a price. So well has it played the value-for-money card that people now think it can’t do anything else. It’s become pigeon-holed as the go-to country for ‘cheap and reliable’. And, while there are positive elements to that, it doesn’t exactly set the pulse racing. 

Chile’s wineries have long been obsessed with asking visitors for feedback on every wine. Twenty years ago, such a market-focused attitude was a breath of fresh air, but the country has been slow to push on from there to create wines of artistry and originality. Yes, there are sparks of excitement, but there isn’t the kind of artisanal movement that is igniting South Africa at the moment.

Whether it’s an inherent conservatism or the ‘business over growers’ nature of the country’s wine industry that’s preventing whole-scale innovation from taking off, it’s certainly true that I can’t imagine many Chilean winemakers saying to me, as Eben Sadie did on a trip to the Swartland recently: “Even if you score my wine at 50/100, I’m still going to make it because I believe in it.”

So, ‘middle of the road’ bad, ‘crazy innovation’ good? Not entirely. 

However much we’d like the future to be about white Rhone blends fermented in concrete eggs, most punters the world over are happy with Pinot Grigio or Sauvignon Blanc. Or even (whisper it) something that isn’t wine at all.

Australia’s sales in the UK at the moment are mixed. The off-trade isn’t too bad (low growth in a flat market), but the on-trade is concerning, particularly in non-food driven establishments. It suggests that people who just want a glass of something to drink (as opposed to accompany food) are going elsewhere – most likely, out of the wine category altogether.

I need hardly remind you that it was on Australia’s ability to supply good-value wine that the country’s success in pretty much every market was founded – and which kick-started the 30-year boom of the 1980s. Characterful wines at the US$20+ level might be interesting to the trade - and make good copy for journalists - but they need, surely, to be seen as an addition, not an alternative, to a decent, mid-priced offering. 

The most disturbing fact for the Aussies in the UK isn’t in volume and value figures, it’s that the profile of their consumer is inexorably ageing. The same people who were drinking Aussie wine ten or 20 years ago are still doing so – and they might even be receptive to a bit of trading-up – but they’re not being replaced by today's 20- or 30-somethings. 

And, therein lies the problem.

How do you make your basic product breezy, simple and cheap enough to pull in the uninitiated, who are put off by esoteric talk of terroir, while simultaneously trying to prove that you’re about more than multi-regional Chardonnay?

My feeling is that we’ll see a twin-track approach: more ‘alternative’ wine offerings, like coolers and low-alcohol from the large companies to try to engage younger drinkers (and, hopefully, soak up a bit of volume), and an increased courting of the on-trade and independent merchants world-wide for those pricier regional expressions.

People might not be talking much about Chile, but the fundamentals of its position in the market look reasonably solid: A good-value country with the odd trade-up. New Zealand, too, is consistent: Expensive, with discounts available in bumper years.

By contrast, the foundations on which Australia has built its business over the last three decades are shifting, with the big brands right on top of the fault line. Over the next couple of years, they’ll have some serious thinking to do about which side of the accessible/aspirational divide they’re on.

My guess is that it will get harder and harder for them to do both.