News
Clever people need not apply
This could be the best news for Australian wine this year. Monty James, the Australia-based marketing manager for New Zealand Winegrowers (NZW), has been appointed to manage NZW’s expansion into key Asian markets. James has been behind much of the promotion that has put NZ wine on the map in Australia. Let’s hope his replacement is not as clever.
Gaining the upper hand
The National Alliance for Action on Alcohol is continuing its holier-than-thou campaign. The alliance wants to ban happy hours, no doubt so all will go home and be captivated with early evening television news and Today Tonight reports about overgrown hedges and old men sunbathing naked on trampolines.
Speaking on behalf of the alliance, Professor Mike Daube said: “This isn’t just the health burden. We’re talking about 75 per cent of police operational budgets going to alcohol-related issues. The evidence is crystal clear that price and access are vital to reducing our alcohol problems.” I really would like to see figures to back that statement. Making statements with nothing to back it up can work both ways. Unfortunately, my gut feeling is the anti-alcohol lobby is gaining the upper hand.
Naughty
Diageo has received a US$16 million ($14.7 million) slap across the wrist for paying bribes estimated at US$1.7 million to Indian government officials between 2003 and 2009 to grease sales of Johnnie Walker Scotch whisky. Officially it fell foul of the Foreign Corrupt Practices Act (FCPA). Diageo neither admitted or denied the claim; just paid the US$16 million fine, which speaks volumes. There could be more trouble to come, as Indonesia’s national anti-corruption commission is looking into Diageo this week.
Look after the pennies ……
Nielsen figures for the second quarter report that Australians are buying cheaper alcohol brands to help balance the household budget. Alcohol is not the only sector affected; less is being spent on home entertainment, new clothes and groceries. There could be harder times ahead, with water, electricity and gas prices increasing.
The treasure chest
The Treasury Wine Estates (TWE) share price has taken a battering throughout August from a high of $3.59 on August 1 to a low of $2.83 on August 9. It climbed over $3 on 10 August and has been steadily climbing since (time of writing 18 August.) There are still rumours circulating that Chinese conglomerate Bright Foods has not lost interest in acquiring TWE.
Whether the Bright Food Group acquires Treasury Wine Estates or not isn’t preventing it from buying other Australian assets. There’s a strong rumour that Bright is paying or has agreed to pay about $400 million for a 75 per cent stake in Manassen Foods.
The interesting part is that the stake is to come from CHAMP Private Equity, which owns Accolade Wines. One can’t help but ponder various theories, such as if Bright and TWE do not strike a deal would Accolade suit Bright’s expansion plans?
Party at home
According to Mintel Research (UK), after the global financial crises and following recession drove many to stay home and entertain, a lot (including 18-24 year old) are continuing the habit.
Mintel found that the average amount wine drinkers spent on a bottle of wine for drinking at home was £6.01 ($9.54). However, for 18-24 year-olds - who drink less wine than any other age group - this rose to £8.35 ($13.26). While this partly reflects an indulgent attitude to in-home drinking, it is also revealing about their lack of knowledge about wine: for example, over a fifth (22 per cent) of 18-34s find that the large choice of wine in supermarkets makes buying too complicated compared to just one in ten (11 per cent) of over-34s.’ There are lots or other statistics such as discounts appeal to the younger set therefore perhaps that false £9.99 reduced to real price £5.99 fools them.
One in five UK youngsters between the ages of 18-25 is unemployed. Let’s assume they have bigger problems then worrying about wine. Let’s also assume that its mainly those that have some form of income that are doing the home entertaining and one in five of them don’t really understand what they are buying so use price as a barometer. What it shows to us is the gap between those that know and care about wine and those that just drink it is as far apart as it ever was. The whole regionality push in the UK will be a long hard slog. How far it will advance exports of Australian wine is debatable.
Groupies get bang for their bucks
Australian Vintage has cut a deal with California-based The Wine Group, which has agreed to buy the 90,000-tonne Loxton Cellars Winery for $27 million. According to Australian Vintage CEO Neil McGuigan this will go to repaying debt.
It’s a big discount on the $60 million Australian Vintage was asking in 2008 when Indian winemaker and owner of Thachi Wines, Indage Vintners, was in the buyer’s seat. When Indage withdrew, Australian Vintage was lumped with the winery for an extra three years but did get to keep the $6 million deposit Indage had paid along with a further settlement.
The Wine Group is a quiet achiever, reported to be the world’s third largest wine producer after Gallo and Constellation Brands. Its Australian brands are virtually unknown on the domestic market: FishEye and Little Roo are produced at Griffith, NSW. The latter was in a legal scrap (maybe still is) with Casella this year over label infringement involving the Yellow Tail brand.
The Wine Group has said it plans to run both its Australian facilities to capacity. If it does, they will be processing about 105,000 tonnes of fruit. This raises certain questions:
• How much of this fruit is for its own brands?
• How much of this is contract processing?
• If for its own brands, is this due to increased sales?
• Does it want to take business from other contract wineries?
It will also put The Wine Group in the top Australian tonnage rankings behind:
• Accolade Wines, 250,284 tonnes
• Treasury Wine Estates, 197,670 tonnes
• Casella Wines, 159,098 tonnes
• Australian Vintage, 152,007 tonnes
• Pernod Ricard Pacific, 147,000 tonnes
But ahead of:
• Kingston Estate Wines, 80,000 tonnes
• De Bortoli Wines, 60,000 tonnes
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