The Auswine Forum

OK, so a couple of weeks ago I had to make a quick trip to Paris, and in between a few things managed to get down to Lyon to say hello to a son, stayed the night. Got in late, so went to the local supermarket and got a couple of bottles of Telegramme 2012, the second wine of Vieux Telegraphe (small 7-11 type mart, with virtually no selection of wines)
Paid 18 euro a bottle, (fraction under $25AUD) the wine was quite nice, with cherry and herb characteristics. Maybe 87-88 pts.
Now, in all honesty, can some-one please explain to me how this same wine has a "shelf price" in Melbourne of $95??
Assume, of course, that the 7-11 in Lyon sells the stuff at some sort of profit, and pays some sort of tax.
This is getting plain ridiculous, and i feel genuinely sorry for anyone who wants to buy imported wine in Australia.
Anyway, I welcome the mathematicians out there to do the sums for me.

And that is why I rarely buy imported wine. When I hear what some are paying in Honkers, it makes me cringe. We are getting touched up. Plus there is enough good Aussie wine to not have to bother with the imported stuff in all honesty. With the Aussie dollar falling on it's backside again, it's only going to get worse as well.

Cheers
Ian

felixp wrote:Now, in all honesty, can some-one please explain to me how this same wine has a "shelf price" in Melbourne of $95??

$95 is pretty expensive. A quick check on Winesearcher shows that this can be found for $81. Problem solved

Well, on the plus side...The Euro has been falling lately so it might not be too bad...Pricing gets all funny when there are big currency fluctuations..it depends on where, the stock, when it was bought, etc...Currently there are some great buys in AU..and there are some terrible ones as well...

A few of us were talking about it the other day...in some cases, the actual price in AUD hasn't changed at all..but what is sells for in other markets changes your perception about whether what you're buying is a good or bad buy even though relative to your own income, it hasn't changed one bit...

Add shipping then 50% for WET/GST then add margin. If it is from an importer add their margin and then 30%...and if no importer than more than 30%.

Like most imports into OZ we pay ridiculous prices. That's why my kids buy most stuff over the internet and bricks and motor retailing is suffering. That's one of the reasons the Lowys of Westfield fame have bailed out of OZ shopping centres and taken their very successful retail recipe to the world. The internet is a great leveler of markets. Just look at Myer and DJs. They are stuffed.

Carl

It would have landed cost of about $42 by a quick back of the envelope calculation. Add the storage, internal transport, distributors margin, retailers margin and risk premium for returns, it seems about right. Not fair and you're right to be ticked off, but that retail cost is in the ballpark for sure.

hang on Ross, it was selling for 18 euro in a supermarket, wholesale is therefore probably about 10 euro (they have the same supply chain costs etc). So that is about $14AUD. Add taxes (including the importer's margin as part of the tax, usually around 16%) and the landed cost is no-where near $42. The $42 assumes you purchased it from the supermarket!!!!!!!!!! I got landed cost at about $24/bottle.
shipping is about $1.30/bottle from UK in bulk. GEEZ, YOU CAN DOOR-TO-DOOR AIR-FREIGHT THE STUFF FROM BORDEAUX TO HK FOR ONLY $5 A BOTTLE!!!!(i know that for a fact, or at least that is what I paid!!!!!!) so is almost insignificant. And I assume not too much different from France. So the supply chain costs won't be a whole lot more than the supermarket in France.

Anyway, you say $42, I say $24, so if we split the difference and say $33, which includes the primary importer's 16% which is taxable. So the secondary chain picks it up for $33 and sells it for $95, wow, now that is a business I would not mind being in.

I have had retailers on this and other DB's saying they don't make any money on imports, so who the hell does??????

ticklenow1 wrote:And that is why I rarely buy imported wine. When I hear what some are paying in Honkers, it makes me cringe. We are getting touched up. Plus there is enough good Aussie wine to not have to bother with the imported stuff in all honesty. With the Aussie dollar falling on it's backside again, it's only going to get worse as well.

Cheers
Ian

unless the Aussie wine-makers have a revenue under $600k (from memory) then local producers face the same taxes as imported wines. You probably already know this, but I thought I would re-iterate it anyway. So, really, the cost premium of imported wine should be the transport costs, or am I missing something here.? I suspect the cost premium is the retailers have a lack of competition for imported wines, and therefore can mark up accordingly.
if I was a young wine-lover in Oz, i would genuinely think about getting together with like-minded enthusiasts and do a direct-import. I know Jamie does this in Honkers, I cannot see anything stopping it in Australia.
even if you simply purchased the stuff from the bloody supermarket, you most certainly can get the stuff to your door for south of $55.

Anyone up for a group buy!?

oooh yeah wine prices in Australia suck for imports

will it change
nope
nuff said

felixp wrote:hang on Ross, it was selling for 18 euro in a supermarket, wholesale is therefore probably about 10 euro (they have the same supply chain costs etc). So that is about $14AUD. Add taxes (including the importer's margin as part of the tax, usually around 16%) and the landed cost is no-where near $42. The $42 assumes you purchased it from the supermarket!!!!!!!!!! I got landed cost at about $24/bottle.
shipping is about $1.30/bottle from UK in bulk. GEEZ, YOU CAN DOOR-TO-DOOR AIR-FREIGHT THE STUFF FROM BORDEAUX TO HK FOR ONLY $5 A BOTTLE!!!!(i know that for a fact, or at least that is what I paid!!!!!!) so is almost insignificant. And I assume not too much different from France. So the supply chain costs won't be a whole lot more than the supermarket in France.

Anyway, you say $42, I say $24, so if we split the difference and say $33, which includes the primary importer's 16% which is taxable. So the secondary chain picks it up for $33 and sells it for $95, wow, now that is a business I would not mind being in.

I have had retailers on this and other DB's saying they don't make any money on imports, so who the hell does??????

Fair enough I was working on 18E as wholesale price so I'm happy to concede 10-12E as a wholesale price.

The airfreight France - Australia I was quoted three months ago was $180US per case via wineflite excluding taxes so that works out to be $20pb +duty+WET+GST. I wanted to buy a half dozen cases of burgundy and the 17E pb wine was quoted to be $68 AUD landed. However, I was calculating considerably less than that. Unfortunately wineflite has gone down the tubes. Obviously, the freight logistics is more important than cost. It has to be a specialist wine freighter, ideally with a refrigerated supply chain which pushes up the costs considerably.

As far as being in the wine import business, I agree, it is a business more people would like to be in. Plenty seem to have entered (and exited the market). wine distribution agreements may have something to do with it. However, I see wines at Eurocentric (I'll declare a conflict of interest here) and Andrew Guard that I've had at the cellar door and the difference isn't appreciable.

Perhaps I agree with you, the markups by the major producers, distributors and retailers is the problem. It's just the extent of the problem that is debatable

Goes the other way too. Oz wines exported can be expensive bordering on thievery .....

I buy from grey marketeers in HKG and their retail is cheaper than trade - Torbreck and Penfolds classic examples. Australian wines should be 30%+ cheaper than cellar door and I don't buy unless that's what I pay.

I just brought in another 48 bottles of foreign gear for the oz cellar yesterday and it's well worth the trip !

ok, fuel to the fire

just going thru my emails this morning, and a Sydney retailer advertises 2009 Rieussec at $249.00. But their "generous" offer is a buy 2 get 3 deal.

you can buy the same bottle for $60 in Hong Kong.

I have the feeling some Aussie retailers simply put any price they feel like down and then offer their "generous" discount!!!! Where is the ACCC when you need them!!!

rossmckay wrote:
As far as being in the wine import business, I agree, it is a business more people would like to be in. Plenty seem to have entered (and exited the market). wine distribution agreements may have something to do with it. However, I see wines at Eurocentric (I'll declare a conflict of interest here) and Andrew Guard that I've had at the cellar door and the difference isn't appreciable.

I disagree..they're significantly higher..about 2 times retail...maybe you're looking at wholesale pricing?

The prices are what they are..the dynamics of the retail market in Australia are what make the pricing higher. They work off of much higher margins..their overall margin, even for large retailers, is typically twice that of their overseas counterparts (this is after all costs). They can do this because there is a lack of competition...the market just isn't that big and there aren't enough players that really force competition. Harvey Norman complaining about how not charging GST on online purchases overseas is what was hurting his business..no it wasn't. That 10% wasn't the reason why people bought overseas where they're paying hefty shipping charges and not having a warranty. It was the 30+% difference that made it so shipping wasn't an issue, waiting for it wasn't an issue and the lack of warranty wasn't an issue....

While WET is applied across all wines, it does subsidize a lot of wineries..and it does make a difference.

felixp wrote:I have the feeling some Aussie retailers simply put any price they feel like down and then offer their "generous" discount!!!! Where is the ACCC when you need them!!!

Well they shouldn't be involved in anything like that. They should be involved if retailers are in cahoots with each other and agreeing to not compete with each other and carry the same price...but outside of that (and similar things), the government should have NO say in what the market decides to charge...

My initial reaction is the ACCC does a relatively poor job in that they've allowed the market to degrade into having many duopolies..a single company that gives the appearance of many different companies but they're all the same....but without understanding the intricacies of the Australian market, it is really hard to say..maybe there aren't really any other options...

Polymer wrote:

rossmckay wrote:
As far as being in the wine import business, I agree, it is a business more people would like to be in. Plenty seem to have entered (and exited the market). wine distribution agreements may have something to do with it. However, I see wines at Eurocentric (I'll declare a conflict of interest here) and Andrew Guard that I've had at the cellar door and the difference isn't appreciable.

I disagree..they're significantly higher..about 2 times retail...maybe you're looking at wholesale pricing?

I was only looking at a couple that I've been in the cellar door or bought retail over there and thought to check. Clos de tue Boeuf, Domaine du Collier 'Charpentrie', Eric de Suremain Monthelie are three that are retailed at less that 100% and when they've had the expense of coming all round the world in a refrigerated reefer, with the added duty etc etc, I knew that no matter how much I wanted it to be so, I couldn't get them here cheaper. There is also the difficulty with comparing the equivalent outlet. For example you cannot compare the cheapest over there with the gouger over here.

Whether or not it's value is of course objective. I totally agree that some wines are absolutely ridiculous in their markup over here and I see it mostly in the major retailers, especially for high end bottles, at the lower end and aprtciularly with the direct imports i.e. one less person to put a markup on, not so much.

Jamie, 'bordering on thievery' quote of the day me thinks

Bit like those trusting jewelers or rug salesmen advertisements that bombard Australian TV screens...up to 60% off!!! of what, I am not interested in whats off, more so what are they working from.

1 carat ring purchased for $2000, advertised for $5000, but wait sale price now 50% off!
Wish I was in the business of making 20% when I 'have given away 50% to begin with'.
This is a conservative example.

Suspect that some of these importers sing from the same song sheet
Amuses me no end that you can travel 20 000 km from Adelaide (where they are made) and buy some of Australia's top marques...for a cheaper price....thievery at its finest!!

Cheers
Craig

rossmckay wrote:

Polymer wrote:

rossmckay wrote:
As far as being in the wine import business, I agree, it is a business more people would like to be in. Plenty seem to have entered (and exited the market). wine distribution agreements may have something to do with it. However, I see wines at Eurocentric (I'll declare a conflict of interest here) and Andrew Guard that I've had at the cellar door and the difference isn't appreciable.

I disagree..they're significantly higher..about 2 times retail...maybe you're looking at wholesale pricing?

I was only looking at a couple that I've been in the cellar door or bought retail over there and thought to check. Clos de tue Boeuf, Domaine du Collier 'Charpentrie', Eric de Suremain Monthelie are three that are retailed at less that 100% and when they've had the expense of coming all round the world in a refrigerated reefer, with the added duty etc etc, I knew that no matter how much I wanted it to be so, I couldn't get them here cheaper. There is also the difficulty with comparing the equivalent outlet. For example you cannot compare the cheapest over there with the gouger over here.

Whether or not it's value is of course objective. I totally agree that some wines are absolutely ridiculous in their markup over here and I see it mostly in the major retailers, especially for high end bottles, at the lower end and aprtciularly with the direct imports i.e. one less person to put a markup on, not so much.

Oh..you mean if you brought them over yourself and paid all the taxes...

Yes, there are quite a few (especially right now) that are that...or cheaper..but that is really do to when they bought it and the current value of the AUD although that is starting to spin a bit with the Euro dropping...

Always a dangerous topic, this one...but I will try to work through the numbers on the example above, given my very limited experience in wine importation to Australia.

I have imported 10 cases of Champagne several times. It's not too hard, but 10 cases is about the minimum to make it worth it, as there is a fixed minimum for the shipment of about $600 (I think it would be the same for 30 cases...so in theory you can get a bottle of wine here for about $2, insured, in a cooled container through a specialist).

I lobbed E11 as a wholesale price into my spreadsheet, and this it what it came up with...$37 delivered. I'm sure with a consolidated shipment you could get this down to $35ish...

So, working with $37, this would then go to a wholesaler (you would think). As this is a business, I think it is reasonable to expect they make 35%. Out of this they can pay staff, probably very high rent, delivery to the retailer...and hopefully end up making 10% at the end of the year. If they make GP of 35%, the price to the retailer would be $57.

Then the retailer sets the price, and probably wants to make GP 40% margin (again to pay for rent, staffing etc). 40% is, wait for it, $95...

The problem is in the whole system, not necessarily one person ripping everyone off. Some of the things I thought of in the difference between the two examples (7/11 in France and a wine retailer in Melbourne) are:

The 7/11 is probably operating on significantly lower margins (maybe 20%) as it is a very different retail model. Basically, they sell more stuff to spread the costs of doing business across. They may also margin mix, making wine more competitive price wise.
The 7/11 almost certainly goes direct to the producer to purchase. This cuts out the "importer". If this were the case in the Melbourne example, the wine would be about $60, not $95.
The 7/11 also probably sits on the stock for a few days, as they will sell a limited number of lines in decent volume, making them cashflow positive. The Melbourne shop may sit on that bottle for 6 months or more, as part of a large eclectic, slow moving range...meaning they will be very cashflow negative. Therefor they need a larger margin to fund the cash invested in stock.
WET plus GST is a crazy taxation system. A basic guide is to take the wholesale price landed and assume about 50% of that is tax. So the 7/11 is buying for E11 ($15.50) with very little tax on wine in France. Whereas, by the time it arrives in Australia it is $35+ Multiple cost centres on a high starting price will only end up with a very expensive item.

Now, I realise there will be some tax practices for the wholesaler and retailer that I don't have knowledge of, which almost certainly will bring them a little more profit, but hopefully somebody else can help me with this...

Therefore, I can just about understand where the $95 comes from, and be reasonably sure nobody is making a killing. Would I buy it...no, not in a million years. I wish I could justify more overseas wine purchases, but the system above means I can't.

Simon

Great post Simon.

Sounds like we need to bypass the wholesale and retail margins. Now to agree on a few wines to bring in

Another point being purchasing from large European retailers during sales. I often buy wine from Europe on sale cheaper than what some Australian importers can buy wholesale.

Berry Brothers for example, you see during their sales how many cases are on offer. Sometimes in the hundreds for very small producers.

It's very easy to bring wine in for personal consumption at a lower price than retail, obviously -- you're cutting out the importer, distributor, retailer. That's the same for a lot of products. But try making a business out of it and deal with the courier losses, breakages, thefts, the items that just don't sell, the huge discounts demanded by trade who then don't pass it on to the consumer cos they are desperately trying to make a buck to survive ...

I see distributors going broke, not getting rich. Surely that has to tell you something.

so there just seems to be an inherent problem in our system. Nev, you are one of the cheapest, but there are retailers here selling stuff for absurd prices (like the one I quoted)
anyway, having chatted to a contact in HK, he reckons shipping to Australia from UK in bulk (i.e. 200+ cases) should not amount to more than $2 a bottle.
it seems that the cost is in the extended supply chain, yet, there is a famous Melbourne retailer who advertises "direct import" but the prices are still more than double the UK (which already has had shipping, storage, breakage, FOB, insurance, profit margin and 17.5% VAT etc. calculated in the price)
other than shipping, Nev, the inherent cost differential is simply our taxes v. country X (e.g. Uk) taxes.
if importers are going broke, maybe they are simply importing the wrong stock!!!!
stop bringing in Jura and that German crap, no-one drink it!!! (just kidding fellas)

Simon that is a good post.

However, the small mart I was referring to is actually quite expensive, and I would be surprised if the local Carrefours did not have the said wine cheaper. As we all know, Safeway is cheaper than 7-11, but does not have the store hours or the convenience to local dwellers that the small shop can offer.
They run 24 hours, so their employment costs may well be higher, and given it's prime position down-town, I bet the rent is very high.

Perhaps some are looking at OS prices and then saying "oh, we need to add shipping ,WET, storage, rental, insurance, profit margin etc etc to that" and forget that the quoted prices already contain those expenses for the local retailer.

I mentioned this last year, in March I was in CNDP and went to Pegau's little store in town, the one with the old spanish guy, and purchased 2010 Pegau at 23 euro a bottle. I guess expenses are minimal for this outlet, which is simply a bit of an underground warehouse on the main street, but they still pay the required tax (I think this is also 17.5% in France). The same wine, at exactly the same time, was advertised at $150 in Melbourne, which is five times the price
(also purchased a double magnum of Cuvee de Capo 2010 for the equivalent of $800 )

Anyway, I guess that is why not many people drink imported wines in Australia!!!!!!

Obviously there is money to be made but I think the best money is if you are retailing and, prederably, also importing direct yourself.

I don't see how a direct comparison with local cost vs say cost in France is fair. Yes the French retailer has overheads but they are totally dofferent to here.

Our french au pair was telling us last year how stoked she was that we were paying her $340 plus room and board, given that a lot of people where she comes from in regional France only make 350 euro a week. Minimum wage and business overheads are a totally different kettle of fish here.

But I agree that it is totally depressing haha and no doubt why do many of us have cellars or wine fridges that are predominantly Aussie wines.

Eurocentric wrote:It's very easy to bring wine in for personal consumption at a lower price than retail, obviously -- you're cutting out the importer, distributor, retailer. That's the same for a lot of products. But try making a business out of it and deal with the courier losses, breakages, thefts, the items that just don't sell, the huge discounts demanded by trade who then don't pass it on to the consumer cos they are desperately trying to make a buck to survive ...

I see distributors going broke, not getting rich. Surely that has to tell you something.

So where do you see the importer model breaking vs. your overseas counterparts? Some do very very well...

Do you feel they take bigger risks? Less risk? Their market is bigger? They definitely work off of much smaller margins but they probably do more volume as well. Are they getting a much better price as a result? In otherwords, do you feel Aussie importers are getting a poor wholesale (or no wholesale) price on their goods? Do you see the importers going broke because of bad luck or bad buying choices? Do you think consumer laws play a part?

Do you feel WET has little to no impact or it does have an impact on imported goods..

I know for some very competitive markets, importing yourself is not really worth it..but it depends on what.

Seems like the smaller importers in Australia are doing alright..not enough to really be rich but well enough to make a good living doing something they enjoy.....Do you feel the smaller volume makes it easier in this specific market?

simon1980 wrote:The 7/11 is probably operating on significantly lower margins (maybe 20%) as it is a very different retail model. Basically, they sell more stuff to spread the costs of doing business across. They may also margin mix, making wine more competitive price wise.
The 7/11 almost certainly goes direct to the producer to purchase. This cuts out the "importer". If this were the case in the Melbourne example, the wine would be about $60, not $95.
The 7/11 also probably sits on the stock for a few days, as they will sell a limited number of lines in decent volume, making them cashflow positive. The Melbourne shop may sit on that bottle for 6 months or more, as part of a large eclectic, slow moving range...meaning they will be very cashflow negative. Therefor they need a larger margin to fund the cash invested in stock.

Thank you. I have never thought of these factors for smaller retailers in specialty areas. That helps a lot and I will buy more from "independents" as a result.

Cheers

Michael

Simon,
the importer margin is, or should be, generally 16% of the wholesale price in France. This is about $3 bottle, not the $19 you have quoted. (pre-GST and WET)
I respect this is a retailers web site, so without names, most people here would know the importer who purchases wholesale in France, adds 16% to that price, then you have WET/GST calculations above that.
If ever i buy imported wine in Australia, he is one of only two importers I deal with.

I bought $1512 dollars worth of wines at Henschke the other day and the government TRS refunded me $356 at ADL airport.

1/11 of GST and 14.5% of WET.

I bought $1512 worth of wine over the past six months, the majority of it was Australian, it was delivered to my cellar, and while my wife would question it, I think we'll both be much happier in years to come.
It's most relaxing to buy fantastic wine of great quality made locally with virtually no stress.
Salut!