Analysis of the strengths of Australian wine foreign markets shows that products are recognised for consistent taste, easy-to-understand and attractive labeling, and competitive pricing. In response, the AWBC and WFA have developed a promotional strategy which taps into those brand values, promoting Australian wine as a category, rather than individually. It is hoped that improved awareness of Australian wine, in general, will develop new export markets. A generic national marketing campaign provides 1200 small wineries with the opportunity to develop export markets. The budget for the promotional strategy is approximately $6 million per annum. This is broken down into a levy on wine exports (about $1.4 million), a levy on grape growers ($2 million), and the balance comes from wine companies that pay money to be involved in additional marketing initiatives. The industry plans to increase the money spent on its global marketing campaign so that market awareness may be increased further still. Establishing joint venture marketing promotions with firms that supply the wine industry will create additional funding. Participants in these programs could include bottle makers and cork producers.
Industry placed relatively little emphasis on developing new domestic wine consumers between 1985 and 1995. This is changing, so that the AWBC and the WFA can ensure that their domestic consumption target of 21 litres per household is met (up 1.7 litres from current figures). ‘Agenda 2000–2010 sets out how domestic growth will be achieved. The strategy incorporates an industry expenditure budget of $200,000 (minimum) per year for domestic marketing. Any further money for domestic promotion will then be obtained from wine companies involved in user-pays promotions. The industry’s marketing strategy could include new packaging; development of new wine products by blending wine with other beverages; sweeter varieties (appealing to new wine drinkers and younger consumers); and the promotion of health benefits from moderate wine consumption.
A hypothetical industry SWOT Analysis shows that wine offers the unique ability to satisfy consumers’ demands for individualised and customised products that are natural, environmentally friendly and healthy. The analysis reveals that water is not a major constraint in industry expansion because there is considerable scope for improved water efficiency within the viticultural industry. There is also the opportunity for water transfer from lower value adding agricultural uses. To achieve the required water outcomes, the industry would pursue a strategy of influencing government policies relating to water access, transfer and pricing.
Continuing the SWOT Analysis, significant opportunities exist for increasing domestic wine consumption as a result of population growth in wine consuming age groups and growth in the popularity of dinning out. Tourism growth presents another opportunity to the wine industry, particularly for smaller wineries that have cellar doors. Strategies to increase the wine tourism market and capture a greater share of the tourist dollar include increased collaboration between wineries and tourism operators, enhanced tourism services at wineries, and joint promotion with state tourism authorities.
Some threats to consider are social pressures concerning alcohol, and legislative changes. A higher dependency on exporting has magnified normal trading risks associated with exposure to exchange rate fluctuations. And an obvious weakness is the Australian winemaker’s exposure to seasonal conditions.
So, you see, that by developing marketing and business plans, and revisiting aspects of these plans periodically, the Australian wine industry is well positioned to ensure the continued creation of a thriving and growing industry. “The paths to it [that is the creation,] are not found but made. And the making of the pathways changes both the maker and the destination”. P. Ellyard.
Thirty Strategies for 2025
Listed are thirty strategies set out in ‘Strategy 2025’. Knowledge of this set of strategies is useful for understanding how the Australian wine industry can improve its competitive positioning in both the international and domestic wine markets.
Strategies for Image and Influence
1. Progress and sustain the community acceptance positioning of wine (health, environment, lifestyle).
2. Adopt a targeted publicity strategy to communicate the uniqueness and capabilities of the Australian wine industry.
3. Extend the influence of Australia in world wine forums and institutions.
Competitive Advantage
4. Increase research and development effort and application to the priorities of quality and specification improvement, cost reduction and supply security.
5. Further develop the existing wine industry 'learning' culture of innovation and cooperation to compete.
6. Benchmark industry production and management processes to assure world best practice.
7. Accelerate the adoption of environmentally sustainable policies and practices in all aspects of the industry.
8. Maintain the existing minimal regulation to ensure market responsiveness and production flexibility.
Markets
9. Broaden the appeal of wine so it is more accessible and attractive to the occasional and prospective consumer segments.
10. Gain, via market research, a better understanding of consumer behaviour and attitudes relating to wine.
11. Enhance and expand market distribution channels for wine.
12. Develop new products to create new market opportunities and evolve existing products to anticipate and meet consumer needs.
13. Develop promotional initiatives to increase the loyalty of the existing wine drinker segment; extend occasionality of consumption in the marginal segment; develop consumption in the prospective segment.
14. Utilise wine regions, as defined by geographic indications, as a brand marketing opportunity.
15. Increase cooperative export promotion effort and focus on specific branded market segments in targeted countries.
16. Improve access to export markets by small and medium wine companies.
Wine Tourism
17. Capitalise on wine tourism opportunities by stimulating wine tourism and improving the profitability for wineries.
Resource Capacity
18. Encourage viable expansion in vineyards, wine processing storage and packaging capacity and supplier capability to meet market projections.
19. Influence water access and pricing policies to ensure that the wine industry can secure its additional water supplies.
20. Implement a national, industry driven training initiative to expand quickly the supply of skilled personnel and to broaden and upgrade the skills of existing employees.
21. Undertake a major investor education programme to attract equity investment and loan finance into the wine industry.
Profitability
22. Institute periodic benchmarking of the financial performance of the industry by relevant categories.
23. Pursue cost reductions through productivity improvement and adoption of world best practice in packaging and logistics.
24. Introduce a risk management strategy that identifies and formulates contingencies for industry wide risks.
Government Partnership
25. Establish a policy and facilitation partnership with government to create a favourable business climate for wine industry investment and growth.
26. Continue, in partnership with government, alcohol and health programmes to reduce alcohol abuse.
27. Ensure that state and local government land use planning policies, infrastructure provision and regional development strategies are supportive of the wine industry.
Industry Institutions
28. Review wine industry bodies' structure to ensure that they enhance a 'whole of industry' strategic focus, to amplify market influence, to clarify roles and to ensure resource efficiency.
29. Redesign Australian wine industry internal communication processes, forums and media.
30. Improve the scope and reliability of data utilised for forward production and market planning.
The State of Play on Australian Wine Exports
In the twelve months ended January 2001, Australian wine exports reached $1.51 billion, 24% up on the previous twelve months. In the same period, the export volume reached 313 million litres, 20% up on the year before. Over this period, the highest level of exports for Australia went to the UK.
Australian wine exports have grown from $0.5 billion to $1.5 billion in the 4.5-year period ending January 2001. Half of this growth was attained in the last 1.5 years.
Red Versus White
Winemakers have indicated that in the next few years, the overall supply of winegrapes will be more than adequate. However, within five years an overall balance of supply and demand is expected. Within these aggregated results there is, however, a marked difference between red and white winegrapes. The supply of red winegrapes is expected to equal demand following a five-year period. However, the supply of white winegrapes is expected to fall short 5 % of demand. The national average price for most winegrape varieties declined in harvest 2000 relative to 1999 prices. The attitudes collected in a survey of winemakers revealed that excess supply is thought to be short-term only.
Low-priced Market Segments Versus High-priced Market Segments
As the Australian wine market becomes increasingly complex with respect to various segments, differences in supply and demand within the different segments are becoming more pronounced. The WABC reports on an excess supply in the lower-priced segment of the industry while the higher-priced segment remains in short supply overall.
Fighting Fit on Red
We all know that a glass a day keeps the doc away, or at least cardiovascular disease. Marketing managers in the wine market are keenly promoting the health benefits of red wine. Red wine contains natural anti-oxidants, protecting the body against ‘free-radicals’, which may damage DNA of genes and impair vital enzyme reactions. Anti-oxidants prevent oxidation. The anti-oxidant component of red wine is phenols. Phenols are a family of molecules that are mainly responsible for the distinctive colours and flavors of red wine. Red and black grape varieties have high levels of phenols below the skin. The process of crushing grapes for fermentation leaves the skin in contact with the juice. In contrast, white wine makers remove the grape skin and remove the phenols.
Perhaps this explains lower demand for white winegrape varieties?
New Online Course: Masters of Wine Marketing
This is a first of its kind globally. The University of South Australia is targeting an international audience with a postgraduate Masters course web-based wine marketing degree. The course was developed in response to strong interest in Australia’s acknowledged success in wine marketing. The course kicked off in July 2000.
Industry Structure
(as at year end 1999)
The industry’s four largest producers are Southcorp wines (37%), BRL Hardy (32%), Orlando Wyndham (20%); and Mildara Blas (11%). Together, they account for 70% of the production of branded wine. There are 1193 other winemakers in Australia.
Forty per cent of all wineries export wine. Some 935 wineries sell wine ‘bricks and mortar’ style, and 757 producers make wine on site. Some 297 wineries conduct e-business.
Industry Bodies
The Australian Wine and Brandy Corporation (AWBC) is the Australian Government Statutory authority with responsibility for the promotion and regulation of Australian wine. The activities of the AWBC include export inspection and regulation and the maintenance of the integrity of Australian wine labels. Its subsidiary, the Australian Wine Export Council (AWEC) manages marketing programs.
The Winemakers Federation Australia (WFA) is the industry’s political body which represent Australia’s wineries.
Check out these journals for more information on the local and international Australian wine market: Australian and New Zealand Wine Industry Journal @ , Wine Business Monthly @ , Winepros for the latest online articles @ , ‘Wine Contact’ an official newsletter produced by the AWBC, and the Wine Industry Directory.
Case Source List:
Michelle Hannen, “Wine Makers Get Even Bolder”, Business Review Weekly, January 25, 2001, p.38–39.
- Australian Wine in the News on line 17 May 2000.
- Masters in Marketing Wine 31 May 2000
- New Australian Winery born every 94 hours 14 April 2000
- New Zealand Wine and Grape Industry
- Australian Wine Export Council
‘Strategy 2025’ seeks to diversify wine markets to ensure continued growth rates parallel those experienced in Britain. Examination of recent history shows that Australian wine producers successfully develop new export markets in Britain by strong grassroots marketing involving wine tasting. The initiative came about in response to an oversupply of grapes and increased competition in the Australian market in the 1980s. By 1995, Australian wine had 8% of the British market and by the end of 2000 its share had risen to 17%.
