Dan Jago of
Tesco has warned the Australian wine makers to change
their winemaking styles and make lighter and more
refreshing wines or face a crash in the British wine
market, accusing them of complacency for too long.
'Wines with 13% or 14% alcohol just
aren't exciting any more and customers are now looking
to the Old World for more refreshing wines,' he said.
Jago is director of beer, wine and spirits for Tesco.
He was speaking at the Winemakers Federation of Australia's
annual conference in Melbourne.
"If you don't change, others
will change faster," he said, pointing to South
American and South African wineries getting stronger
in the British wine market.
Many winemakers weren't happy about
his remarks. One of the Barossa's Burge Family Winemakers
remarked, "The British have a grocer's mentality
towards wine. They want Australian quality at Chilean
prices. I don't want to be dictated about flavour
by a British supermarket."
Hunter Valley winemaker Bruce Tyrrell,
who supplies wines to Tesco, was even less charitable
in his reaction. "He should go back to selling
dog food. For years, Australians have been supplying
the British with technically correct wines that have
good colour and are full of flavour, compared with
the Europeans, who have been supplying them with technically
poor wines with no colour and which taste like cat's
piss, " he said.
Mark Ritson is an associate professor
of marketing at Melbourne Business School, who also
visits the London Business School. He has a more balanced
view when he says,' It would be a huge error to mistake
Tesco for a British version of Coles or Woolworth.'
Unlike these Australian supermarkets,
Tesco's success hinges on a remarkable degree of knowledge
and focus on consumers. It is a retailer that has
put extraordinary consumer understanding behind its
policies. 'If Jago says Australian wine producers
need to change, it is not his personal or arrogant
opinion; he is speaking for a market he knows infinitely
better than any Australian winemaker.'
It appears Australians are about
to make the same mistake France made 15 years ago,
when in the face of a growing demand for simpler and
more reliable wine, they maintained their antiquated
and over-complex appellation system and claimed that
quality issues were the fault of ill-developed English
palates. The French also failed to recognise the threat
posed by Australia because they did not accept that
Australian wine could ever equal theirs.
It appears Australia is in danger of repeating the
mistakes of the French. Last week's reaction to Jago's
comments suggests many winemakers are intent on ignoring
changing customer tastes in this important market.
It would be a big strategic error
to continue producing wines in the traditional Aussie
fashion while failing to recognise that newer, cheaper
and more innovative wine regions are emerging. Australian
producers are in grave danger of suffering from a
fatal case of strategic amnesia. Only 15 years ago
they were the beneficiaries of French winemakers'
arrogance and stupidity. In the face of a growing
demand for simpler wine and more reliable quality,
the French maintained their antiquated and over-complex
appellation system and claimed that quality issues
were the fault of ill-developed English palates. The
French also failed to recognise the threat posed by
Australia because, quite simply, they could not conceive
of Australian wine as being in any way equivalent
to their own.
Now it seems that Australia is in
danger of repeating the mistakes of the French. Last
week's reaction to Jago's comments suggest many winemakers
here are intent on ignoring changing customer tastes
in one of their most important markets. It would be
an enormous strategic error to continue producing
wines in the traditional Aussie fashion while failing
to recognise that newer, cheaper and more innovative
wine regions are emerging and designing their wines
around the emerging, unmet tastes of the consumer.
It's a classic case study that we
teach again and again at business school. An industry
listens to customers and grows into a titan. But,
having grown, it then assumes that its approaches
and methods are always going to be what consumers
want. The established industry is too big, too product
focused and too arrogant to change its approach as
consumer tastes change. Competitors spring up to fill
the gaps left in the market. It was the story of French
winemaking. Perhaps it will become the Australian
story too.
Mark Ritson is associate professor
of marketing at Melbourne Business School.
Australian exports may suffer
In the meanwhile, Australian winemakers,
riding 10 consecutive years of rising export sales,
stand to lose their market share as their dollar trades
at a 23-year high . Moreover, the record drought during
the last 2 years has pushed up the cost of grapes.
The second largest wine company in
the world, Foster's and the other top publicly trading
McGuigan Simeon Wines will have to cutting profit
margins or raise prices and lose a share of export
markets.
The falling dollar and rising euro
also stand to hurt exporters in France, Italy and
Spain, the three biggest wine-producing nations, while
benefiting U.S. wineries.
The cost of grapes from the 2007
harvest rose 5 percent over 2006, according to Australian
Wine & Brandy Corporation, a government regulatory
body. Average prices per bottle rose only 2 percent,
the largest increase in eight years and the first
since 2003.
The 2008 harvest may be as low as
800,000 tons, over 40% less than this year's harvest
of 1.4 million tons, according to the Winemakers'
Federation of Australia.
EU Procedural Hurdles for
Australian Exports
India is not the only country subject
to archaic laws and procedures. Australian wine exporters
are also facing tougher international labelling laws
from the EU.
Earlier exporters had to apply a
genetic label but now each country in EU is demanding
specific labelling requirement to comply with their
own health regulations
"In France they've now made
it mandatory that we have a pregnancy warning on the
labels and the Germans want a sulphite warning in
two languages on their labels. We are required to
print separate labels for different markets within
Europe or put stickers which of course again is time
consuming and costly," says Rick Anderson, a
South Australian exporter from D'Arenberg
It must give the Indian wine producers
and importers a feeling of Déjà
vu.
Subhash Arora
December 7, 2007
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