Glass is half empty for wine exports(2)
"At entry-level [prices], we have lost the fight to Chile and Argentina and I don't think it will ever come back," said Peter Toohey, the managing director of Beelgara Estate. Beelgara is Australia's 20th biggest wine group, with a history that stretches back to 1930.
"UK supermarkets, like Tesco etc, [are] commodity-driven. There is also a tax-free kick in South America that we don't have – but also their wines are very good, they are clean, the packaging is very good and their input costs are just at a level we can't replicate," Mr Toohey said.
Beelgara recorded a fall in revenue from $18.2 million to $16.6 million in 2010-11, as profit dropped from $388,164 to $172,179 for the latest period.
Mr Toohey said Beelgara had sought to diversify its exposure away from troubled markets overseas by pulling out of key European and North American regions to focus on Australian cafes, restaurants and bars, also known as "on premise".
"We are very, very strong in the on-premise market, and that isn't part of potential duopoly
"We are seeing growth at higher price points" ... Ross Brown.
of Coles and Woolworths, and that's not a criticism, it's an honest observation. We are very strong in a market where no multinational will ever have a massive hold," he said.
Beelgara had also made a successful push into China at both premium price point and entry level.
The currency remains the single biggest problem for wine companies, and Mr Purbrick believes weaker overseas currencies have helped imported wines go from a 5 per cent market share three or four years ago to more than 20 per cent of the Australian market.
"The imported wines are certainly squeezing local product off retail shelves," he said.
Ross Brown, who until this year led Victorian wine group Brown Brothers for a decade, said cheaper wine from Chile and Argentina not only posed a threat to Australian winemakers but cheaper wine from within Europe was also finding its way into the British market.
"'When the exchange rate changed by 40 per cent, that's a dramatic change to be able to compete with and that's beyond our control. The only thing we have in our control is to leverage our premium price points and reposition the quality and image of Australian wine."
Brown Brothers reported flat revenue in 2010-11 – it had targeted growth of around 8 per cent – and its profit fell sharply after booking a writedown on losses linked to a poor vintage.
The sales and marketing general manager at d'Arenberg, Philip Jeffries, said a contributing factor to its lower earnings in 2010-11 was the currency, with up to 70 per cent of earnings for the 100-year-old wine group flowing from exports.
D'Arenberg had flat sales of $25.06 million in 2010-11 as profit slid to $435,000 from $1.65 million.
Mr Jeffries said stronger sales in China and Hong Kong had helped ease the earnings pain.
"It [Asia] is a positive thing at the moment. It doesn't replace more mature markets of the UK and those areas, but it can help balance a little bit in difficult times," he said.
The chief executive of Taylors Wines, Mitchell Taylor, said his company had increased revenue to $48.82 million in 2010-11 from $44.33 million as it focused on quality wine sold at higher prices.
"The sweet spot we found in the market was for quality premium table wines above $15 to the $30 segment. There is good growth in that segment, domestic growth," he said.
Taylors Wines lost $3.19 million in 2010-11 against a profit of $1.08 million, the fall triggered by accounting changes and a $4 million writeoff from a poor vintage.
