Ian Mackley, chairman of Australia’s seventh largest wine producer talks to Chris Brook-Carter about brands, acquisitions and competition.                       

just-drinks: How do you see the state of Australian wine industry?

Ian Mackley: The Australian wine industry is very healthy. As you know Australian wine has got its plan for 2025 and that is broken into five-year stages. We are already achieving our plantings quota in vineyards for the 2005 – 2006 stage. The original 2025 plan called for $A1 billion Australian exports by 2001, which was achieved in July 1999.

just-drinks: Where do you see it going?

Mackley: I see us achieving the plan, which calls for $A2.5 billion in exports and about $A2 billion in domestic sales, so it will be an industry worth $A4 billion – $A5 billion in 25 years time.

just-drinks: Given the enormous growth in the industry, how do you sustain the momentum?

Mackley: The success of the industry is in its brands – it is a brand marketing industry. When you look at the channels of distribution globally, certainly in Europe, the retailing part is concentrated very much into supermarket chains.

Supermarkets are becoming multi-nationals. The way the supermarkets operate is that if you get a listing you have to guarantee supply across the whole year, across the whole chain.

The Australian industry has about 12 companies with sufficient size, crush tonnage and the brands to be able to supply the giant chains. That, I believe, is the significant sustainable competitive advantage over an awful lot of the French, Italian, German, and Spanish winemakers.

Equally you have to have in mind, in my opinion, that 80% of world wine consumption is in the £5 (UK price) price point. This means you have to be extremely efficient in viticulture and winemaking. I think Australia is it at the leading edge in these criteria.

just-drinks: Are you saying that wine business is moving towards the brand-oriented structure of the spirits business?

Mackley: Yes to a certain extent. But it is just fast-moving consumer goods. You can go through almost everything in the supermarket and the big brands have been there a long time. With good brand management the lifecycle just goes on and on.

just-drinks: In such a brand led industry, do you worry that you leave yourself open to changes in consumer buying fashions?

Mackley: I think history has already shown that we can adapt very quickly. If we go back to the 60s when table wine started to take off in Oz it was red. In the 70s, it was white. Now it’s swinging back to red, and we have adapted. You might have a year or two where we have had to allocate reds but these have come back on supply now.

Penfolds, for example, has no problems with reds, in fact it is launching new brands. You can adapt that way but also with new plantings. You are now getting more extensions of things like Marsanne, Viognier, Rousanne. If you have the varietals there, it is very easy to propagate cuttings or do graftings and within two years bring wines into production because we are not restricted by appellation rules.

just-drinks: And where does Cranswick fit into the future of Oz wine?

Mackley: Well we are the seventh biggest producer at the moment and hope to move up. We have already achieved the first move when, some 14 months ago, we took over Australian Premium Wineries, which took us out of being solely based in the Riverina in New South Wales. It gave us a 25,000 tonne winery in Mildara and a 300 tonne winery in McLaren Vale as well as vineyards. We now have sourcing in three states in Australia.

just-drinks: How do you continue to grow when three companies dominate the Australian scene to the extent that Southcorp, BRL Hardy and Mildara Blass do?

Mackley: We continue growing partly by acquisition, we do not rule out acquisitions.

just-drinks: Is there anywhere you are looking at the moment?

Mackley: I can’t answer that I am afraid.

just-drinks: Being a medium-sized company in a market so dominated by the big three must be difficult.

Mackley: We are doing nicely in the UK. Obviously if the Australian industry succeeds in mainland Europe, we will have supply problems and we will have to make another acquisition.

just-drinks: Do you see further consolidation in the Australian industry?

Mackley: Yes, I think other companies about our size are looking at the same things we are for the same reasons. Before you can go prospecting in many more markets you need more supply.

just-drinks: Do you see the emphasis of Cranswick’s brands moving in any particularly direction, i.e. to invest more in the lower or more in the premium end of the market?

Mackley: We are nicely positioned I believe, on the basis that the Riverina and Mildara facilities let us operate efficiently under £5 while the South Australian facility puts us in the on-premise market at the high price points. Strategically, you try to position yourself as the market is, in other words, about 80% has got to fit in at the £5 price point.

just-drinks: Where do you see the biggest threat to Oz wine?

Mackley: People always said watch the South Americans. As far as I know the Chileans don’t get their act together as the Aussies have done and operate as a cohesive industry in promotional activites. The Argentines could be the sleeping giants but I think it will be a long time before they get their business in gear. Argentina has a very large domestic market where it is a lot easier to sell on the domestic market than abroad. So while it’s big companies like Trapiche try to expand exports, I don’t see too many others doing the same.

Languedoc is doing some good wines but their constraint is the inability of the wineries to persuade the grape growers to improve the quality of their material. And to try and convince the French grower is a fairly difficult task.

But they are there doing good stuff and I wouldn’t rule out more of the Aussies buying into the Languedoc.

just-drinks: Like yourselves?

Mackley: Who knows.

just-drinks: Would you consider foreign investments?

Mackley: Any Australian company wanting to become big needs to look at that as an option.

Chris Brook-Carter

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