One for the Tax Accountants (Are Penfolds ripping us off?)

Red Bigot · Post by **Red Bigot** » Fri Jan 30, 2004 6:47 am

I'd be interested in whether the US prices for the new release Bin 389 2001 (USD18-USD20 at many sites listed on wine-searcher or under $A25) can be explained by the removal of WET/GST on export.

Surely freight and a couple of tiers of distribution and US taxes must make up for most of that?

Early Oz pre-release prices are $33-$35 in cases, are we locals being ripped off again?

simm · Post by **simm** » Fri Jan 30, 2004 8:21 am

Yeah,

And then I took a look at the latest release of 'Wine' mag. and the bin release prices were suggested much higher than this, which gives the shops free range to go in there and bump it all up to the expected $30 for 407,28,128 etc, and $40 for 389 'as advertised' in the rags. So now, I suppose, there will be the big-gun bottle-shops bringing it back down to the $28 and $36 respectively for the dozen, and telling us how good a deal it is! Come on now guys, I was keen to find out what the latest vintage is like but it's not likely now. Just turned me off the whole thing. Maybe Gourmet Traveller and co are taking a tip.

And Brian, what are these 'Private Bin' wines from Penfolds? Does anyone have any history and/or TV for them? Never seen one for sale myself, except just yesterday in a local pub for $26 approx. Indicated to me that they weren't anything particularly special, and not terribly 'private' assuming that this is an outrageous pub price already.

All the best,

GraemeG · Post by **GraemeG** » Fri Jan 30, 2004 8:47 am

Yes Brian, I noticed someone's TN on RP's board, with a quoted price of US$18, and thought what-the-hell?

The only small argument I could think of in Southcorp's defence is that they may have enough forward contracts in USD to ameliorate the rise in the AUD - but again I can't help but feel that $18 represents a pretty serious price reduction over, say, the 99 vintage.

So they're taking a bath on margin to win maket share (shades of Lambert's management still?), or they've got so much stock over there anyway theyhave to get rid of it, or....

No, it's no use. I can't rationalise it in any way. The decision with the Penfolds brand seems to be that the home market pays a premium. No doubt the buyers decision will be to leave the label on the shelf until they come to their senses...

cheers,
Graeme

ChrisH · Post by **ChrisH** » Fri Jan 30, 2004 9:24 am

Who is going to suffer from this most ?

If enough others are like me, then it will be Southcorp - I am now largely over Penfolds (last 389 I bought was the 1998) and don't intend to buy any of the 2001 releases at the prices being asked. There are too many other wines that have come on to the scene in the past few years to make Penfolds purchases a necessity any more.

regards
Chris

Peter H · Post by **Peter H** » Fri Jan 30, 2004 9:25 am

A couple of relevant snippets on Southcorp from research done by a well-known stockbroking firm...

80% of 2004 US sales are covered by hedging, although this drops to 25% in 2005.

40% of Southcorps sales come from the US, which is in oversupply, therefore to maintain market share, margins would need to be cut.

Peter.

simm · Post by **simm** » Fri Jan 30, 2004 12:01 pm

Peter H wrote:A couple of relevant snippets on Southcorp from research done by a well-known stockbroking firm...

80% of 2004 US sales are covered by hedging, although this drops to 25% in 2005.

40% of Southcorps sales come from the US, which is in oversupply, therefore to maintain market share, margins would need to be cut.

Peter.

Sure Peter, but why not just take the smaller cut in profit here? Wouldn't this absorb shipment etc, or am I just dreaming? Seems once again the Americans have done some deal, the returns of which are invisible or are side-stepped so deftly with excuses so often that there winds up being no discernable return. Okay, they can do it in politics , but I would have thought that business is business, even here in Australia. Come on people, what's the deal, own up. Americium (a country of slight-of-hand magicians) does it again!!

regards,

Gerard Connors · Post by **Gerard Connors** » Fri Jan 30, 2004 12:47 pm

Brian,

I'm another one who'll pass on the Pennies this year. I might buy 2 389s for the vertical, but I simply cannot justify $35-40 (and from early market pre-releases, it looks like $35 is as low as it will get). Let's look at the competition- what can I buy for $35-40?

Tim Adams Aberfeldy - $38 from CD last year - old vines, hand made, top bloke, the TOP choice fruit, not fourth in line

Seppelt St Peters - $36 on special - how can Southcorp do this for the same price as 389. Maybe they're equal in quality? I know which one has more "X factor" for me.

Orlando St Hugo or Majella - $30 or lower - why buy 407 when you can get these?

Howard Park Regional Range - $25 on sale!

Knappstein Enterprise Shiraz and Cab - low $30s on sale

These are just a few off the top of my head from newspaper ads. I'm sure you and Ric could list off a hundred more examples from your astute purchases.

These are either overtly BETTER wines, or EQUAL quality wines with more "X Factor". I can think of other wines that may even be LESSER in quality that I'd be more "excited" about!

I think that's Pennies problem at the moment - aside from Grange and maybe RWT, they lack the "X Factor" - don't get me wrong they make quality and consistent wine, but it doesn't inspire or excite.

I reckon if the prices, on heavy discount, were as follows, there'd be a heap more interest in the releases:

28/128 $18-20
407 $22
389 $25

Southcorp did it with Riddoch and Michael - eventually I think they'll be forced to do it with the Bin range.
Cheers

Ged

TORB · Post by **TORB** » Fri Jan 30, 2004 12:53 pm

Here is what Brian Finn CEO of South Corp had to say about this subject.

"Really would you buy a bottle of wine because of what it cost to produce and therefore what it costs to buy? If it's a value based product you buy it because of your perception of its quality and that can be everything from the packaging through to the taste and so on. The US market has figured that out. There is a fantastic future for the Australian sector and its going gang busters because we have excellent quality and generally much better wines than the Californians and certainly at much better and more realistic prices. The punters out there know that and that's why they buy it."

Interesting?

simm · Post by **simm** » Fri Jan 30, 2004 1:34 pm

TORB wrote:Here is what Brian Finn CEO of South Corp had to say about this subject.

"Really would you buy a bottle of wine because of what it cost to produce and therefore what it costs to buy? If it's a value based product you buy it because of your perception of its quality and that can be everything from the packaging through to the taste and so on. The US market has figured that out. There is a fantastic future for the Australian sector and its going gang busters because we have excellent quality and generally much better wines than the Californians and certainly at much better and more realistic prices. The punters out there know that and that's why they buy it."

Interesting?

We'd know it too if we were being offered the stuff at the prices they are!!

:roll:

Yes Gerard, there certainly is the Majella factor... hmm... where's the nearest bottle shop? (we don't hear the cogs turning like that for the Bin range now do we?)

cheers lads,

Rob · Post by **Rob** » Fri Jan 30, 2004 4:59 pm

Penfolds used to be my top wine (by volume). I no longer buye made by penfolds or south corp. Just not worth it. I'd give my money to others who look after their customer like rockford.

Muscat Mike · Post by **Muscat Mike** » Fri Jan 30, 2004 5:46 pm

And Brian, what are these 'Private Bin' wines from Penfolds? Does anyone have any history and/or TV for them?

I have had the Private Bin Red, Shiraz-C/S a couple of times at company dinners. I think they were 2001s. Actually it was quite a pleasant drop. Not incredible but enjoyable wine.
MM.

Davo · Post by **Davo** » Fri Jan 30, 2004 5:54 pm

TORB wrote:Here is what Brian Finn CEO of South Corp had to say about this subject.

"Really would you buy a bottle of wine because of what it cost to produce and therefore what it costs to buy? If it's a value based product you buy it because of your perception of its quality and that can be everything from the packaging through to the taste and so on. The US market has figured that out. There is a fantastic future for the Australian sector and its going gang busters because we have excellent quality and generally much better wines than the Californians and certainly at much better and more realistic prices. The punters out there know that and that's why they buy it."
Interesting?

And so do I which is why I don't buy it. There are better wines available at cheaper prices all around the trap in OZ. Hell, you can even buy wine from Margaret River that is cheaper. :lol:

Red Bigot · Post by **Red Bigot** » Fri Jan 30, 2004 6:08 pm

simm wrote:And Brian, what are these 'Private Bin' wines from Penfolds? Does anyone have any history and/or TV for them? Never seen one for sale myself, except just yesterday in a local pub for $26 approx. Indicated to me that they weren't anything particularly special, and not terribly 'private' assuming that this is an outrageous pub price already.

All the best,

simm, I have not seen these, that's probably a reflection on how much attention I pay to Pennies these days, I've just about stopped buying their wines now. Bought 6 of the 2000 389 (@$25.95ea) and will buy 6 of the 2001 389 if I can get it around $26-$28. That and a 6-pack of St Henri 99 on special are about all the Pennies reds I've bought since the 98's in March 2001 and I don't see that changing while they seem to want to have us locals subsidise the export squeeze.

I'm intent on doing my best to support the small makers who are being squeezed out of the shops and export markets, but still manage to make some pretty special and distinctive wines at reasonable prices and look after their customers as well. For my tastes there are much better wines available at the pricepoints of the Bin reds.

brad · Post by **brad** » Fri Jan 30, 2004 9:23 pm

Davo wrote:And so do I which is why I don't buy it. There are better wines available at cheaper prices all around the trap in OZ. Hell, you can even buy wine from Margaret River that is cheaper.

Right... well, we can't have that then. Must be time to put the prices up.

Can't have our good name spoiled by being cheaper than fourth rate Penfolds. :shock:

Peter H · Post by **Peter H** » Fri Jan 30, 2004 9:55 pm

Simm wrote:

Sure Peter, but why not just take the smaller cut in profit here? Wouldn't this absorb shipment etc, or am I just dreaming? Seems once again the Americans have done some deal, the returns of which are invisible or are side-stepped so deftly with excuses so often that there winds up being no discernable return. Okay, they can do it in politics , but I would have thought that business is business, even here in Australia. Come on people, what's the deal, own up. Americium (a country of slight-of-hand magicians) does it again!!

Hmmm... Maybe you are (partly) right, but because of the currency hedge position Southcorp have taken we have no idea what their effective exchange rate is, therefore this may be distorting the apparent discount offered to the Americans.

I am sure that they are never the less offering some discounts to try and keep/expand their market share, but we have seen where that has landed them in the recent past... so again maybe the Australian market is not subsidising the American sales as much as it would first appear (once bitten, twice shy).

I personally am of the same opinion as quite a few of the others who have posted; the best protest vote is a vote with your hard earned cash.

Peter.

Gary W · Post by **Gary W** » Sat Jan 31, 2004 11:26 am

Red Bigot wrote:and will buy 6 of the 2001 389 if I can get it around $26-$28.

Brian,
2001 389 lands at over 30 bucks. I think you will be pushing it to get it below cost...unless there is a very big fire sale somewhere.

GW

Gary W · Post by **Gary W** » Sat Jan 31, 2004 11:34 am

Rob wrote:Penfolds used to be my top wine (by volume). I no longer buye made by penfolds or south corp. Just not worth it. I'd give my money to others who look after their customer like rockford.

I have simply no idea why people have so much animosity towards southcorp. Many great wines and great service (they always replace corked wines with a minimum of fuss) and usually something for everyone at several pricepoints. They are also still majority Australian owned AFAIK and important for the economy and wine industry.

2002 Colstream Hills Pinot - can you get better at $20!! I think not.
1999 Seppelt Great Western Shiraz - All class, fairly priced
2003 Seppelt Drumborg Riesling - Superb wine and great value at $22.
Devils Lair - Cab and chard - Top wine.
1999 St Henri - World class - fairly priced.
2001/2002 Wynns Shiraz - Keenly priced - coonawarra fruit - cellars well mid term.
Wynns Black Label Cabernet - Classic coonawarra.
2003 Leo Buring Clare and Eden Rieslings - full of character. Keenly priced.
etc

GW

Red Bigot · Post by **Red Bigot** » Sat Jan 31, 2004 12:09 pm

Gary W wrote:
Red Bigot wrote:and will buy 6 of the 2001 389 if I can get it around $26-$28.

Brian,
2001 389 lands at over 30 bucks. I think you will be pushing it to get it below cost...unless there is a very big fire sale somewhere.

GW

Gary, I assume this is the W* landed cost, what was the landed cost of the 2000? I got that for $25.95 at release. I don't think the rrp has gone up much, so I'm ever hopeful of a release special in the range I indicated. Definitely won't be buying at the pre-release prices I've seen so far.

Re the anti-Southcorp issue, it's not a blanket thing, I agree with some of the examples in your list. It's just that I think they have treated local buyers of their premium reds (particularly) quite badly over the past 5 years, with constant price increases without appearing to me to retain qpr parity with emerging competitors. The added issue of overseas buyers seemingly getting a much better deal on these wines is particularly irksome, and I don't care (and don't see why I should) what their global market imperatives are when I choose the wine I buy. Lucky for them I didn't buy any JR 98 at $100 to see it drop below $50, otherwise I'd probably never buy another wine from them.

TORB · Post by **TORB** » Sat Jan 31, 2004 12:24 pm

Good answer Brian. I still buy a fair bit of SC stuff but very little Penfolds, the last being the 98 Bin 707. As others have said many of the SC other brands still represent good value but to me the Bin Range (with the exception of St Henri at about $40 does not represent particularly great value anymore.

Gary W · Post by **Gary W** » Sat Jan 31, 2004 1:24 pm

2000 27.49

No they are not w* prices. I don't know what they are. Mine are small independant NSW retailer prices. Guess you may miss the 2001 389. It is a very good wine though and $35 seems a very fair price for a classic wine with pedigree (as opposed to many others springing up at that price)

GW

Red Bigot · Post by **Red Bigot** » Sat Jan 31, 2004 3:16 pm

Gary W wrote:2000 27.49

No they are not w* prices. I don't know what they are. Mine are small independant NSW retailer prices. Guess you may miss the 2001 389. It is a very good wine though and $35 seems a very fair price for a classic wine with pedigree (as opposed to many others springing up at that price)

GW

Ok, so the big guys may have more margin on this, maybe not much more. And LUC to a small independent is up $2.50, so I still have a chance. Whatever way it pans out, I stopped worrying about "missing out" on a particular wine a long time ago and I don't buy just on pedigree. I've had some pretty disappointing Bin reds after buying "lesser" vintages (not that 2001 looks like being one of those) out of habit years ago. I'm very "vintage-sensitive", "try-first" and "qpr-oriented" in my buying strategy these days.

Re newcomers and pedigree, some will last long enough to build a pedigree, some won't last, my aim is to get in early on those that are most likely to build that pedigree. If people don't take the punt on some initial good releases (where the qpr is there, not the stupid prices for new RPJ designer wines) the Oz wine scene will look more like the stock in the chains and that would be a big pity imo.

I'll make up my mind on the Pennies when I try them and see the best release prices. Come back next month and see how it turns out. :-)

Gary W · Post by **Gary W** » Sat Jan 31, 2004 5:04 pm

Red Bigot wrote:Ok, so the big guys may have more margin on this, maybe not much more. And LUC to a small independent is up $2.50,

Actually (and I suspect I am labouring the point a little) over $5 up and I am not suggesting you will be upset about missing out, rather that you most likely will based on price expectation. Such is life.

I will be sure to stay tuned for the next exciting epidode of "will Brian buy 389 if the price is right!"

GW

Red Bigot · Post by **Red Bigot** » Sat Jan 31, 2004 6:21 pm

Gary W wrote:Actually (and I suspect I am labouring the point a little) over $5 up

So, LUC for small independent is at least $32.50. So the best price I've seen so far ($32.99+freight) either represents a 49c markup (incl GST) or that particular vendor is getting a lower LUC. And the next most common pricepoint so far ($35 incl freight) may be a markup as low as $2.50 less GST and freight cost included. I guess I should be applauding the generosity of these merchants if that's all that's in it for them.

Maybe this is another one of those rare times where the big chains come in handy. (Sorry Gavin, still waiting for some more of those small maker 2002 SA reds to come through on your site, I am considering the Heartland Directors Cut though :-)

)

Enough, no more here on this from me until 1 March, or earlier if I get a taste and offer good enough to tempt me.

belly up · Post by **belly up** » Sun Feb 01, 2004 8:53 pm

Oh your kidding!

It's the first time I have read this forum, and Brian just argued his way through 2 1/2 pages and you haven't tasted it?

That's like deciding to bunt before you see the ball.

That is such negative and dissapointing talk from aussies.
I don't understand the pessimistic attitude.

TORB · Post by **TORB** » Sun Feb 01, 2004 9:21 pm

belly up wrote:It's the first time I have read this forum, and Brian just argued his way through 2 1/2 pages and you haven't tasted it? That's like deciding to bunt before you see the ball. I don't understand the pessimistic attitude.

When you have been drinking the stuff for 30+ years you have a fair idea of the way the game will play, you know the players, you know the form and you know what its worth.

Muscat Mike · Post by **Muscat Mike** » Sun Feb 01, 2004 10:13 pm

That's like deciding to bunt before you see the ball.

If you have played baseball or softball you would know that you are usually TOLD BY THE 3RD. BASE COACH WHEN TO BUNT and that is well before you see the ball.
MM.

Murray · Post by **Murray** » Sun Feb 01, 2004 10:56 pm

That's bunt with a 'b' right?

...just checking....

GraemeG · Post by **GraemeG** » Mon Feb 02, 2004 8:53 am

belly up wrote:Oh your kidding!

It's the first time I have read this forum, and Brian just argued his way through 2 1/2 pages and you haven't tasted it?

That's like deciding to bunt before you see the ball.

That is such negative and dissapointing talk from aussies.
I don't understand the pessimistic attitude.

I think there has been some level of dismay at Bin 389s price & quality in recent years. You could easily pick up the 96 vintage for A$20. Since then, I think afficianados would argue that only the 98 has been up to the mark, with 97 and 2000 being particularly disappointing wines. Never-the-less, the shelf price across those 5 vintages (2001 in not yet available in Oz) has scaled to over A$30 which is a pretty fair hike for some slightly iffy wines.

And, has been pointed out by others, the bar is being lifted all the time by new players entering the market, growers who for years have sold their grapes to the major players and are now putting top quality fruit into their own labels. It's impossible to think the the launch of the RWT shiraz, for instance, has not taken something away from Bin 389, which was already queueing after Grange and St Henri had taken their share...

I'm sure there are still plenty who buy Bin 389 every year regardless, but for many it's not the automatic buy it used to be...

cheers,
Graeme

simm · Post by **simm** » Mon Feb 02, 2004 11:31 am

TORB wrote:Good answer Brian. I still buy a fair bit of SC stuff but very little Penfolds, the last being the 98 Bin 707. As others have said many of the SC other brands still represent good value but to me the Bin Range (with the exception of St Henri at about $40 does not represent particularly great value anymore.

Hi Ric,
Are you still getting St. Henri for $40/b? The last 1999 I saw was over $50. :idea:

Can I have some of yours at $40 then? :wink:

I think a part of the problem is that they are sticking to tried and true formulars for each wine and after a while that quite simply gets boring. Of course it's worth buying the great vintages, especially 389 and St.Henri but we're talking big price jumps here IMO. 707 up is just the wee bit out of my price range, and the last RWT I tried I didn't think was a real knock-out for the price ($150 thereabouts).

cheers

Red Bigot · Post by **Red Bigot** » Mon Feb 02, 2004 12:29 pm

belly up wrote:Oh you're kidding!

It's the first time I have read this forum, and Brian just argued his way through 2 1/2 pages and you haven't tasted it?

That's like deciding to bunt before you see the ball.

That is such negative and dissapointing talk from aussies.
I don't understand the pessimistic attitude.

What Ric and Mike said...

I've been buying and drinking the Pennies Bin reds since the late 60's, early 70's, I think I'm qualified to comment. I used to play a fair bit of baseball in the 60's and 70's too, so I know a little about bunting as well.

What really is a negative and disappointing attitude is you judging me, this forum and aussies on one post where you obviously don't understand the background. Want to start again?