As owner of Jacob’s Creek, the brand that has played a leading role in growing the Australian and overall branded wine categories in the UK, it’s not surprising we take an interest in the latest dynamics affecting the wine market.
So when we are in a position to warn of factors that threaten the Australian wine category’s survival in the UK, we feel duty bound to do so. The threat is real, and we believe there is an opportunity for retailers to help turn this around and start delivering value back into Australian wine.
A decade of heavy discounting across the wine category has taken its toll, which is why we took the decision some time ago to protect Jacob’s Creek by standing firmly behind a robust pricing policy that has continued to reinforce its quality credentials.
Of course, we knew this would be a brave strategy, but as a category leader we felt duty bound to avoid undervaluing our own award-winning wines, and the category as a whole.
“The supply of Australian grapes is about to be hit by seismic change”
The result of this stance is that Jacob’s Creek has successfully maintained the highest price in the Australian wine category, while brand awareness, consumer consideration and preference indices are higher than for any other brand in the category.
However, the flipside has been a fall in UK volume sales for Jacob’s Creek, with a proliferation of lower-quality wines filling the gap - but ultimately at much less profit per unit. This has come at a heavy price for the category, particularly at a time when all evidence indicates consumers are in the mood to pay extra for quality, premium wines from brands they know and trust.
And it certainly doesn’t make sense when it appears consumers have been made weary by promotional fatigue and confusion over what does and doesn’t represent good value any more.
But a significant change is in the offing - and this is the real wake-up call for those retailers looking to continue wooing fans of Australian wines. The supply of Australian grapes could soon be hit by the most seismic changes to the wine industry in a generation, as a complex series of factors - including potential changes to the Australian tax regime and a repeal of agricultural subsidies - looks set to drive a sizeable reduction in grape production, which we believe could be by as much as 3%.
‘So what?’ you may ask. After all, 3% doesn’t sound too bad. Actually, it’s potentially massive for a UK market that is competing for a continuing supply of highly demanded Australian wine. It also means suppliers that have been relying on high volume to offset ever-diminishing profit margins may no longer find the UK a viable place to do business.
It would be a tragedy if supplies to a category that could command a much higher average price were hit as producers faced with a finite amount of product look further afield, scouring the globe for markets that offer the best returns.
At a time when the premium end of the wine market is the only sector in growth, it would be a shame if retailers in the UK missed a golden opportunity to give consumers what they really want - quality wines at a price that is fair all round.
Chris Ellis is commercial director of Pernod Ricard UK