Remember the old Avis commercials about being No. 2 and having to try harder? That, more than any other factor, has led Australian wine into a position in some of the world’s top markets where it is a major force to be reckoned with.
The keys to Australia’s success in the export market are hard work, development and use of technology to grow better grapes, the sense to blend them carefully, and, finally, a carefully honed strategy to market the wines with a complete understanding of the marketplace.
At a time when a vast surplus of California wine has created Excedrin headache No. 29 for American wineries, Australia continues to bring into the U.S. an array of red and white wines that are undercutting California’s best efforts. And at prices that are so competitive most consumers who’d otherwise buy domestic are having their heads turned.
Of course, one could argue that California did this to itself by its predatory pricing strategies between 1995 and 1999. Many of the state’s prestige wineries went on a price-raising binge, forcing all prices up.
Today, California wine prices for mid-range wines (modest merlots, chardonnays and cabernet sauvignons) are reaching toward the $20 mark, yet the wines seem to be worth about half of that. So even when they are discounted to $12.99, some Aussie brand is knocking on the door at $10.99. With other brands at $8.99.
The main attributes of Australian wines are that they are simply made and stylishly presented with balance and early drinkability. The vast majority of this $8 to $15 wine is not for aging, and it does not pretend to be.
Plenty of Expertise
The Aussie invasion may seem to some like instant fame for a new wine nation, but strange as it may seem, the Australian wine industry has roughly 100 years more experience than the California wine industry. It got started earlier, and it didn’t have to deal with Prohibition.
Australia’s wine expertise is based on two remarkable wine schools, one at Charles Sturt University at Wagga Wagga and the other at Adelaide University, called Roseworthy Agricultural College. High taxation on domestic wine in Australia (41 cents of every retail dollar spent on wine) allows the government to spend money on research. And with a nation of just 20 million people, research is essential.
For example, where is the labor force going to come from? Thus, harvesting long ago became a target of scientists, who ended up developing some of the most sophisticated mechanical harvesting machines on the planet.
This allows grapes to be picked without a labor force before sunup, permitting cold grapes to reach the crushers, a key aspect of quality winemaking. Many other inventions followed, including rotary fermentation tanks, various devices for plunging the cap to extract flavors, gentler pumps, strategies for dealing with tannins, and much more.
One of the key aspects of Australian wine that is used to a far lesser degree in California is blending to achieve a level of quality. In most of California’s lower-priced (under $10) wines, the vast majority of the juice comes from the hot central San Joaquin Valley, and thus the fruit can be slightly “cooked” on the vine. Very little of this wine is blended; it is generally bottled into an inexpensive wine.
Australia’s lower-priced wines are being made from fruit grown in Southeastern Australia, a rather amorphous region. But the majority comes from a warm area called the Riverland, where technology allows the Aussie to get 10 to 12 tons from an acre of vines. This area is just as warm as is the San Joaquin Valley, but grapes are handled differently and blends are the secret.
Hill of Hope Vineyards, Hunter Valley, New South Wales, Australia.
In assembling the final wine for lower-priced items, Australian wine makers (all of whom have extensive sensory evaluation training) carefully blend in as much of the cooler-climate fruit as they need to make for a wine that has the varietal harmony that some California producers ignore, figuring no one will notice.
Surprise: consumers have noticed, and they like the Aussie style.
Over the last decade, Australian wine has become almost as recognizable in the U.S. as California wine. Millions of cases of reasonably priced wines made from chardonnay, cabernet sauvignon, merlot, and notably shiraz are now the house wines of lots of American consumers, and a key reason for that is drinkability. One grape variety that has not been part of the Australian mix is zinfandel.
The fact that Australians have chosen to stay out of the commodity wine game ($2 to $5 price points) is a key factor in their success. However, they have crafted wines to fit in the $5 price point with discounts. Other wine-growing regions of the world, such as France, Italy and Chile, have chosen to offer a wider range of wines, from superpremium all the way down to the common denominator wines that sell in the $3 per bottle league.
Almost no Aussie wine is sold that low here, and one reason is the luster attached to all Australian red wine due to the success of a single wine, called Grange and made by Penfolds. This powerful shiraz has established itself as one of the world’s greatest aging wines, capable of being truly glorious at 20 or 30 years.
A bottle of Grange today would cost you about $150 on release, and at that it’d be a cut-rate price. In some areas, a bottle of the stuff is going for $200.
One reason Americans love these wines is the simple fact that Australians make wine similar in taste and style to California, which makes more than 90% of the wine produced in the U.S., and some 75% of all wine consumed here. It’s a flavor and a texture with which we have become accustomed. California’s north and central coasts and most fine-wine districts of Australia all have similar climates, featuring lots of sun and moderate rainfall during the growing season.
Moreover, Australia has plenty of grapes. It has about two-thirds the amount of wine grape vineyard acres that California has (about 275,000 acres), and thus makes a lot more wine that it can sell to its domestic market. So it sees the U.S. market as a huge opportunity.
It began to view the U.S and the U.K. as its prime markets in 1995. At the time, key wine industry leaders got together and drew up a strategy for marketing wines in a methodical manner to both areas.
The document the industry leaders drew up, called Strategy 2025, was a blueprint for marketing wine in international markets for the next 30 years. The amazing thing was not only that major competing companies could come together and hammer out such a plan for success, but that they could do it with a major focus on quality, something the Chilean wine industry has failed to do. And it came with support from the Australian government, something unlikely to occur in the Prohibition-minded U.S.
That led not only to a working plan, but it brought many larger companies into closer contact with the U.S. market, and when they saw how under-utilized (from a business point of view) some of our companies were, they acted.
Foster’s Brewing of Australia fired the first shot in expanding in a major way in the U.S. market when the parent company of the hugely successful Mildara Blass acquired large and prestigious Beringer of the Napa Valley, and all of its affiliated brands. The deal was valued at $1.5 billion and was intended to expand the U.S. market for Mildara Blass wines.
A year later, Canandaigua Wine Co. of New York acquired BRL Hardy of Australia, making Canandaigua (later renamed Constellation) the world’s largest wine company, larger than E&J Gallo, the largest for the last five decades. BRL Hardy had been looking for a partner with which it could associate, and the merger was a natural one for both companies.
Then there were joint ventures, including one in which Rosemount Estate, based in the Hunter Valley of Australia, signed a deal to make two wines with respected Robert Mondavi Winery. Rosemount was already part of giant Southcorp, and the venture led to wines that would be made in the United States by Rosemount, and wines to be made in Australia by the Mondavi winemaking team.
Even smaller ventures came together. Small, premium-oriented Petaluma of Australia joined forces with large, well-financed Washington-based Stimson Lane; Gallo formed a partnership with McWilliams, one of Australia’s oldest family-owned wineries; and Kendall-Jackson developed its own brand from Australia, Yangara Park. There are hints that K-J may soon add a prestige Aussie winery to its portfolio.
The largest wine company in Australia, Southcorp, long ago established a major import office in the U.S., and has greatly expanded distribution of all its brands, notably Lindemans, Rosemount and Penfolds. Southcorp already owns a 600-acre vineyard and winery in Paso Robles in California’s central coast.
Sales of Australian wines, if plotted on a growth chart, remain headed in a northeasterly direction, and demand is even growing in the superpremium sector. The only bad news is that more and more brands are popping up here as a result of a massive surplus of wine in Australia. This means that greater competition may well hold down retailers’ profits as competition heats up and everyone discounts.
But one fact is obvious: no retail shop or restaurant can afford to be without a number of lines of Aussie wines. Consumers are demanding them.
Australia has established a strong beachhead in the U.S., and those who are adventuresome are discovering the great values from Down Under, even without Paul Hogan promising to toss another shrimp on the bah-bee for ya’.