A brand-new wine company that nobody has ever heard of before makes several thousand cases of wine. It designs a label and a look, and packages its entire first vintage, which it stacks in its own air-conditioned warehouse. A meeting of the partners is called. The meeting decides that it’s time to introduce the wines to the marketplace. So it decides to put the distribution of the wine out for tender. As far as I’m aware that story is entirely true and the wines are still sitting in their warehouse. It is extremely unlikely they will ever be sold in Australia, or anywhere else for that matter. It’s chaos out there. There’s a plethora of would-be market successes who are faltering at the very first step – they can’t even get their wines listed by a distributor, let alone stocked by a retailer or restaurateur. Rob Hirst, chief executive of Tucker Seabrook, a major national distributor of quality wine, estimates that over the next year there could well be between 300-400 new Australian wine companies knocking on distributors’ doors. Distributors are constantly receiving distress calls to get catalogued from proprietors of juvenile wine brands. Even if they like the wine but can’t carry it themselves, they usually can’t even get any of their competitors to carry it, for they’re all stuck in the same boat. Even if a new winery does get listed in a distributor’s folio there’s no guarantee of success. The consolidation rapidly occurring in wine retail circles naturally limits a small winery’s opportunities to get shelf space. Retailers are already concerned at the number of unheard of brands they are expected to carry, and it’s natural they much prefer to stock brands with a history and a positive market presence. Alan Nelson owns and operates one of the most dynamic smaller wine distribution businesses in Australia. He’s finding that many retail outlets, especially the larger ones, don’t have the time to spend with agents representing twenty-five distributors. ‘Why would you do that when you can do it all with six?’ he asks. ‘Many people are saying they just want to talk to four suppliers.’ All of which makes it very difficult for those small wineries that endeavour to distribute directly to the trade, bypassing the wholesale margin. ‘Some are failing terribly’, says Nelson. ‘Restaurants and large retailers in particular are telling many of these guys to forget it. You need breadth in your range if you’re going to get the time with the buyers. There are only a few exceptions, like Scotchmans Hill, which has a great track record.’ Why can Scotchmans Hill do it? Because they’ve spent the better part of a decade building a strong brand. ‘I’d be petrified if I had a vineyard coming into yielding with a view to releasing a wine within six to eight months’ says Nelson. Even if a new collection of wine distributors suddenly emerged to handle these wines it’s unlikely their fate would be any different. Besides, there are only so many wine brands a consumer can be expected to recognise and remember. ‘If a brand is not recognised there’s nothing we can do to help them’, says Rob Hirst. ‘We can’t move their wine. It’s a real challenge for some people, and the challenge is just going to get bigger.’ Alan Nelson’s chief concern is that by the time people ask distributors to stock their wines it’s usually too late. ‘People go and make loads of wine and then they decide how they’re going to sell it’, he says. ‘They’ve already done all their marketing and packaging; there’s no distributor involved. But we’re at the coalface; we’re the ones who have to sell, it. There has to be a strong association between distributor and winemaker; a meeting of minds. Once they’ve already packaged 400 cases of this or 2,000 of that, what can we do?’ The general reluctance of distributors to carry wines of more than a single producer from an individual region greatly diminishes the opportunities faced by winemakers. ‘Five years ago I went to Marlborough (in New Zealand) and came back as the distributor of Seresin wines’, says Nelson. ‘There are some great brands there, but today everyone represents someone or other from Marlborough. So if I find someone there with great new wines I can’t even help them – not even when I call my friends in the trade on their behalf.’ Likely to worsen the situation for many grape growers is the fact that more and more are coming out of their medium-term contracts with winemakers. Our large and medium-sized wineries are in for a field day, as they will be able to cherry-pick from a huge number of mature vineyards in full production, each of whom will be more desperate than ever to sign on again. Their alternative is the otherwise unthinkable option of having to invent and nurture a successful wine brand from the ground upwards. While they might have helped to popularise the image of wine, the taxation concessions for vineyard growers has done few favours to the wine industry, argues Rob Hirst. ‘It’s damaged the industry by attracting a whole lot of people and investors into wine production for the wrong reasons’, he says. ‘There is no home for their wine.’ In reality there could hardly be a worse time to introduce a new wine brand to the Australian market. For starters, it is a wavering on becoming a declining market. It is unlikely that sales in 2001-2002 will match the preceding twelve months. So, anyone expecting to sell between 5,000 -10,000 cases of wine each year is going to have to take those sales from somebody else. Who? One of the larger or medium-sized companies, able to meet such opposition head-on with discounts, promotions and sheer bully tactics with retailers? Hardly. One of the smaller, yet entrenched value or high quality brands with a loyal following of customers? Ditto. Rob Hirst agrees that the entrenched producers are improving their standards in order to survive. ‘They have to and they are’, he says. So what advice does Rob Hirst offer for the not insignificant number of people who believe they can introduce substantial new brands of wine to the market? ‘You would have to be very sure that you have already organised a home for that wine, be it a mixture of cellar door, on and off premise domestic sales and exports. All that has to be together, plus a point of difference. The wines also have to be outstanding value for money, for the consumer is really in for a field day. Everyone know that wines now selling for below $10 have to be worth $15, and if they’re selling at $15 they need to be worth $20-25, et cetera.’ Alan Nelson agrees, but adds that it’s no use finding a distributor if it’s not a good one. I wonder if any other industries have the number of new entrants entirely lacking in a business and marketing plan as does Australian wine. Extraordinary as it sounds, a whole load of people clearly didn’t think it was necessary. After all, growing and making wine is a lifestyle decision, isn’t it, and the Australian wine bubble could never burst, could it? Right. So what’s likely to happen? A dramatic improvement in all price points, especially at the cheaper end of the scale, as established brands fight to guard their territory. On the other hand, look out for a constant sequence of once-off fire sales as speculative winery ventures lacking in marketing options and forethought go under. I’d expect such wines to vanish as quickly as they arrive on the marketplace, probably sold through a single group of retailers, at very affordable prices. Some of them will be very good. I’d expect this phenomenon to continue over the next two to three years. And as the dust begins to settle on what was a higher yielding season than anticipated in the inland river regions, it’s unlikely that the well of bulk wine presently clogging the system will be substantially reduced. Despite early predictions, the vintage is unlikely to be small enough to shift the balance back into under-supply. This will hardly help any new brands being launched, for the competition in the domestic market will certainly be fiercer than ever.
