TWE Struggling

[Mahmoud Ali]

Actually, Mike is right about the advantages, after all at one time they were called Beringer Blass were they not and used the synergy of their brands and distribution.

[marsalla]

Thanks Matt, yes, Beringer, Blossom Hill et al.

I imagine the difficulties Ian may be referring to in the US is the complex three tier import/distribution system required in the US. It works well for established players but can be a barrier to entry. That said it can be a barrier to every new wine / spirit business.

I don’t agree with this. They have advantages, not disadvantages over many other non US wineries. Firstly, in the main, they import their own wine to the US. It is then added to the extensive distribution networks they have for their indigenous US brands. ... and this includes some hybrid models in various states as well as direct to customer where allowed.

As such, their position is theoretically better than Bordeaux, Italy etc who are at the mercy of all others in all 3 tiers.

I am confused, I said it works well for established players, which by any definition covers TWE, and that it can be a barrier for new entrants/smaller players.

[Polymer]

I still don't understand which barrier people are talking about when it comes to the tier system...

Generally any imported wine, comes in via an importer. That importer generally sells to retailers...which then sells to end users..

Is that different in the US? Not really....There are exceptions in some countries and some exceptions in the US..but really not enough to matter and it doesn't change the model enough to really bother talking about.

[Mahmoud Ali]

As Polymer states, new entrants are represented by an importer who adds the winery to their portfolio and markets the wine along with the other wines in their portfolio. If the importer/agent doesn't do a good job the winery can change agents, and sometimes it can be quite capricious. Case in point, many years ago an importer in my province did an excellent job introducing and promoting Fox Creek, the result of which was a couple of bottles of the 1998 JSM in my cellar. A few years later I found out that when Fox Creek went looking for an agent in British Columbia the one they picked operated in both provinces and their proviso was that they get the agency for both provinces. So the Alberta agent, after all the work he put in establishing the brand, lost Fox Creek.

[JDSJDS]

Here's my 2 cents from British Columbia, Canada. It's a very different market than the US, certainly, but similar in some ways (three tier system). As others have mentioned, all producers have to deal with this, so I agree it's not an issue at all. Small producers can have problems with all the paperwork required, and the slow payments, but this isn't an issue for the TWE.

Here are prices in BC for recent release Penfolds wines:

Bin 28,128, 138, 311, 51 are all around $57-60 CDN including taxes. The 'big' bins (389, 407) are $115. Magill is $175 and RWT is $200. The current release (2015) Grange is about $1150, although certain back vintages are around $920. There is very little to any discounting allowed in our monopoly system. You might get a month where $5 might be discounted. Now, much of the price issue relates to the very high taxes here for 'foreign' wines - though nowhere near as high as in Australia! - but I think it is mainly because Penfolds wanted to brand their wines as premium wines at premium prices.

They don't seem to move many bottles here at those prices! If they were cut in half they would sell well I think, but certainly Australian wines are certainly not the flavour of the month, and haven't been for at least 5 years here. But large wine producers in particular are extremely loathe to cut wine prices, so I don't expect this to ever happen.

The Australian wines we do get in the government system are the traditional producers, with the old fashioned 'ooze monster' type wines, mainly from Barossa and mainly shiraz under $25. Certainly some of the private stores are bringing in some of the new wave type producers (I have seen Rieslingfreak and Ochota Barrels, for example, in private stores), but the quantity is very, very small and the prices are high there too, as private stores add about $5-6 per bottle above government type retail profit margins. I've been eyeing the Rieslingfreak #8 2017 at about $52, but I can get a Mosel Auslese for that price too; the Ochota Barrels Green Room Grenache 2019 is about $46...

So there are a range of issues here: Australian wines are perceived as being rather passe; they are seen by most people as being quaffer wines, as that is mainly what is sold here; the prices for premium wines, especially Penfolds, are extremely high, and thus seen as being very bad value.

[phillisc]

So there are a range of issues here: Australian wines are perceived as being rather passe; they are seen by most people as being quaffer wines, as that is mainly what is sold here; the prices for premium wines, especially Penfolds, are extremely high, and thus seen as being very bad value.

Spot on with your last points...do Australians think that their wines are better than anyone else's? Yes indeed. (but then so do the French). Everything lives under a Grange halo, yes and therefore priced exorbitantly. Many wines thought of as passe...probably.

Cheers Craig

[Ozzie W]

Australian wines are perceived as being rather passe; they are seen by most people as being quaffer wines

Indeed. We can thank Yellow Tail for that.

What is it going to take to change the perception of Aussie wines?

[Scotty vino]

Australian wines are perceived as being rather passe; they are seen by most people as being quaffer wines

Indeed. We can thank Yellow Tail for that.

What is it going to take to change the perception of Aussie wines?

it'll stay the same to the masses.
With family on the east coast of the US i can tell you a fave drink is yellow tail 'chardonnay' in a neoprene wrapped plastic wine cup full of ice.
Aussie wines are great! I fronted up with a Grosset Piccadilly chardonnay once. They convinced me not to waste it on them.
There is a minority that do like and understand aussie wines. I've been to a few wine bars stocking some decent aussie wines at really good pricing.
The folk working in these places had a fairly sound knowledge of what was mass produced rubbish and what was decent from Aus.
So there's those (the majority) that just want to get railed and like the look of a kangaroo on a wine bottle, and those (like us on the forum, the minority) that actually understand what is good, bad or indifferent. Changing the overall perception? yeah nah.

As you can imagine, Yellow tail chardonnay and merlot magnums march out of Sam's club by the cart load.

[WAwineguy]

see more punters head to the Coopers Bar instead.

The Coopers Bar isn't exactly a paragon of virtuous pricing itself. Most notably I was very grumpy that they refuse to serve beer in any measure smaller than a pint. Not great from a responsible service perspective either.

Why would anyone want to drink less than a pint?

[WAwineguy]

I can't see myself ever buying another bottle of Penfolds, and I know a few others here are in the same position. Other labels in the portfolio retain interest e.g. Wynn black label CS

+1

[Mahmoud Ali]

As someone who has seen the rise and fall of the Aussie phenomenon I think I can say the Yellow Tail and Little Penguin are not to blame. They were but the cheap end of the Aussie wine phenomenon. They joined the ranks of Gallo from the US, generic $10 Bordeaux, Mateus from Portugal, and Blue Nun and Black Tower from Germany and many others supplying the cheap end date of the market. What killed the market for Australian wine was the full blown, fruit laden, extracted wines that fell over in a year or two, what Brian Croser dubbed "dead fruit" wines. I saw people leave the Aussie wine scene in droves. A specialist Aussie wine importer had to diversify his portfolio in order to survive. However despite the prejudice I still bought some Australian wines, ones that didn't fit the new stereotype, things like Bin 389, Best's Bin 0, Yalumba Signature, Lindeman's Nyrang, etc. What I did do was avoid Parker and Wine Spectator high pointers and 15% alcohol and above wines.

With regards to pricing in Canada, importers deliver wines to the government monopoly who then tack on what's called a markup. The government markup is based on the value of the wine as determined by the importer, comprised of their landed cost and profit. Each province has a different markup schedule, based on price tiers and alcohol. Some provinces, like BC, allow private stores to buy wines from the monopoly at a discount. Special imports also have to go through the government monopoly. In Alberta the government does not buy the wine but does operate the warehouse. Here the markup is not based on the value of the wine, but rather a flat tax. It currently sits at about C$3 a bottle. Therefore in Alberta the government tax on a bottle of Koonunga Hill and Bin 389 is the same. Yet the price of these and many other wines are not much different than in other provinces, sometimes even more. This is because the importer sets a higher wholesale price in Alberta than they do elsewhere, thereby capturing the higher tax in other provinces within the Alberta whoesale price. It's a nice gig and almost nobody knows about it.

What I do like about Alberta's system is that agencies import all sorts of wine and take on the risk of selling it to retailers. This surfeit of choice means that sometimes wines don't get sold and agents have to discount the wines, especially as storage costs start to mount and erode their margins. Sharp retailers will buy these wines and pass the savings on to the customer. Also, private retailers in Alberta can reduce prices by any amount to clear out wines, sometimes below cost. Government stores generally can't do that.

[JDSJDS]

As someone who has seen the rise and fall of the Aussie phenomenon I think I can say the Yellow Tail and Little Penguin are not to blame. They were but the cheap end of the Aussie wine phenomenon. They joined the ranks of Gallo from the US, generic $10 Bordeaux, Mateus from Portugal, and Blue Nun and Black Tower from Germany and many others supplying the cheap end date of the market. What killed the market for Australian wine was the full blown, fruit laden, extracted wines that fell over in a year or two, what Brian Croser dubbed "dead fruit" wines. I saw people leave the Aussie wine scene in droves.

+1

[Ian S]

I think the cheapies have a role to play in perception, but normally a country / region will have a range of 'wine enthusiast' wines that fill out the reputation. Chianti is a good example - with still plenty of cheap high volume wines, but a broad range of wines that showcase more artisanal approaches.

The US buying approach suffered from favouring an extreme end of the market, the very ripe, very intense, together with the cheaper industrial / commodity wines. Thus perceptions of Aussie wines were framed by either the cheap end or the rich wines linked to Parker's tastes. For far too many people, these two extremes are all they would have experienced.

Had there been commercial buying / critical interest in Hunter Semillons, Clare/Eden Valley rieslings, Hunter Shiraz, Coonawarra CS, etc. then it would allow for people to gravitate towards their own tastes, if fashions change (as they are for the bigger wines), then the transition is easier to what many of us see as the classics. It's not so easy to dismiss the wines of a whole country if you've experienced a broad range of styles.

[Mahmoud Ali]

I think you make a very good point Ian, however if things in the US was anything like in Canada then the rise in popularity and acclaim of Australian wines came with the ripe, intense wines. There weren't a lot of Australian wines prior to that so consumers had little to no previous experience, not to mention that Hunter wines and Clare riesling were as rare as hen's teeth.

[grapeobserver]

Here in Napa today spotted just walking around Bindi pinot noir, Ochota Barrels, Tyrells semillon and Clare riesling on the shelf. Really up to date staff. Styles/expectations seemingly moving on or already moved on. Also attended interesting Wine Australia tasting in California - showed Tyrells vat 1 semillon young and aged, Tolpuddle chardonnay, Grosset riesling, Cullen Diana, Clonakilla shiraz viognier, Giant Steps Yarra syrah, Elderton Command, Menzies Coonawarra, cloudy Brash Higgins wine, a Tas pinot noir, Mt Edelsten shiraz and quite a few others for diversity and undeniable quality. Kind of what you’d hope they would do. So not all bad news.

[JamieBahrain]

Yes, I wonder how bad it really is? Wine geeks/ collectors / aficionados - a completely different market to mainstream. There “journey” can be significantly different.

Most of the “I know what I like" crowd are more pleased with a quality Wolf Blass than a Barolo! Well in my experience anyways.

[Ian S]

Here in Napa today spotted just walking around Bindi pinot noir, Ochota Barrels, Tyrells semillon and Clare riesling on the shelf. Really up to date staff. Styles/expectations seemingly moving on or already moved on. Also attended interesting Wine Australia tasting in California - showed Tyrells vat 1 semillon young and aged, Tolpuddle chardonnay, Grosset riesling, Cullen Diana, Clonakilla shiraz viognier, Giant Steps Yarra syrah, Elderton Command, Menzies Coonawarra, cloudy Brash Higgins wine, a Tas pinot noir, Mt Edelsten shiraz and quite a few others for diversity and undeniable quality. Kind of what you’d hope they would do. So not all bad news.

That's really reassuring to hear - like the bush after a fire, new life miraculously appears when all seemed destroyed

[Mahmoud Ali]

Good analogy Ian, and very apropos.