‘Come on mate, are you taking the ???’
Do you occasionally feel this way when looking at the price of Australian wine? If you do, I doubt you’re in the minority. Here I’ll do my best to explain what’s going on.
These days the prices being asked for Australian wine are often beyond belief. $65 is the new $45; $85 the new $55. There’s also a shiny new cadre of Australian wines with numbered rows and self-congratulatory back labels priced at well over $100 – many of which are not even the most expensive wines under their brand. And, if that wasn’t extreme enough, there’s yet another new class whose price begins around $250 and which can head uncomfortably close to four figures.
What’s going on? Are these wines any good? How can you navigate your way around them? Do you now need to pay a lot of money to drink decent Australian wine?
New century, new pricing
The turn of last century saw something happen to Australian wine pricing. Troubling many of our leading Australian makers was that their wines were being immediately snapped up on release by a burgeoning crowd of speculators, only to appear moments later on the secondary market at two or three times their original price.
One such maker was Steve Henschke. On one hand he wanted his long-term buyers to be able to afford his wines, but on the other he felt a bit of a fool since others were making about 200% on investment in a matter of weeks – far surpassing the profit his company was making on the very same bottles. His family did all the work, he rightly told me, while those trading made huge profits for doing absolutely nothing, entirely without risk. I suggested Henschke should immediately up their prices to match the going secondary market expectations for the wines.
The 1998 Hill of Grace sold for $95 at release, but only three years later the 2001 vintage was on the market for $385, an increase of around 405%. Ever since, its prices have closely mirrored those of Penfolds Grange.
Back in those days I believed elite Australian wines should increase their prices to world prices, provided they were indeed world-class wines. Time and time again I would defend the prices charged by Phillip Jones for his Bass Phillip Premium and Reserve Pinot Noirs. By and large, these wines were excellent, if not outrageously brilliant. Their prices slotted neatly into those of comparable wines from Burgundy itself, and because of this they were regularly bought by serious Burgundy collectors.
The changing relationship between quality and demand
It’s one thing to launch a wine with an ultra-expensive price, but another to maintain it. Wine is as pure an example as you will see of price being an equal function of supply and demand. Bass Phillip’s demand was very high – quality and the tireless promotional efforts of Phillip Jones being key – while supply was small and finite. The same goes for many of our top individual vineyard wines, Hill of Grace being an obvious one.
If the demand isn’t there, wines just disappear. Typically, their owners won’t allow them to drop back to whatever price the market accepts – there’s too much loss of face this way. Large companies typically just dump such labels, usually deploying the same vineyards to create comparable labels under different brands. Witness the virtual disappearance of several major brands and their most expensive wines in the Treasury Wine Estates folio over recent years – Wolf Blass and Saltram being two examples. It’s likely the fruit for former expensive labels (think Wolf Blass Platinum and Saltram Eighth Maker) was syphoned into the Penfolds-China vortex where TWE could sell more wine at higher prices. An increasing proportion of the company’s Coonawarra production is now sold as Penfolds, not Wynns.
Can a new brand be launched with instantaneous demand? Possibly, if it’s linked to a maker and vineyards that have a track record of delivery at the high end. Take a guy like Dave Powell, who in his Torbreck days helped push Australian wine prices through several barriers, locally and internationally. When someone like him introduces a new wine at $750 per bottle, those in touch are on full alert. Next, they realise that he’s continuing a tried and proven recipe from the same outstanding vineyards he’s worked with for years and it all makes perfect sense. Powell’s Kraehe and Steinert Shirazes from 2021 under the new Neldner Road label are instantly world-grade wines which, supported by Powell’s reputation and the provenance of his former wines, slot neatly into the market of international collectible classics. And, having created this immediate demand, they should maintain their presence in this sought-after space.
Other than quality, what else can build demand for wine? Today quality is rivalled by other marketing and image-driven factors more akin to a commitment, an emotion or even a passion. These days people buy wines from makers who fit their image of how life should be lived – regardless, it can seem of whether their wines are any good. Or even indeed if they like their taste. Now, more than ever before, it’s about identifying those in the same tribe and sticking with them. There’s a lot more going on here than just appreciating quality alone, and this process is a major reason behind the high prices charged for and the high scores given to many wines I consider to be second or third-rate, at best.
While many very costly wines are now made with techniques that are organic, biodynamic, ‘natural’ or ‘made with minimal intervention’, not all refer to this on their labels or in their marketing. To many owners, these are simply production and quality issues which are but a single component in their overall mix of making, marketing and messaging.
I can’t help being sceptical about wine brands whose marketing and brand identification is more about a production technique than quality or place. I’m also frequently astonished by the willingness of this buyer segment to spend up big on wines I find difficult to drink, let alone enjoy.
Things have certainly changed. No longer do you need quality to create and maintain demand for your wine. I reckon the last time this happened was when the church and the medical profession created alcoholic beverages (allegedly) to improve the health of their congregations and patients…
The peloton effect
Just as cyclists in the middle of a peloton can be dragged along by the speed of those in front of them, the increasing prices of the very most expensive wines can indeed drag others upwards. Of course the brand owners need to feel happy to play along, but plenty of expensive wines owe their high prices today because of gaps in the market created by the upwards movement of others. History shows, however, that while many such wines are indeed excellent, a large number of producers are simply taking advantage of the phenomenon, speculatively charging as much as they can get for as long as they can get away with it.
This also happens within a single brand. Over time a company might move its flagship wine from $55 to $95 – a not uncommon occurrence – usually accompanied by the movement in price of its next best wine, say from $45 to $75, then the next from $35 to $55. Seen this before? Of course you have. And typically there’s no commensurate improvement in quality.
There are now dozens of Australian wines priced over $150 that are frankly worth little more than $45. On the flip side, there are plenty priced well below $150 per bottle that could justify double their price if quality was the only issue in the mix.
Temptation in China
Australians have a recent history of using China to increase prices, or even to create brands and labels to sell at eye-watering prices. Over a decade ago in Beijing I remember watching with astonishment as Peter Simic, then Winestate Magazine’s owner, attempted to flog to Chinese buyers a Fleurieu Peninsula cabernet-based blend costing them over $1000 per bottle. I don’t recall Australian buyers being given the same opportunity.
Penfolds took this to an art form in China, or so the company believed. To the contrary, my networks kept telling me that Chinese buyers were becoming tired of paying the constantly rising prices for the same wines whose quality might have been going the other way. So what did Penfolds do when the China market reopened? Loudly and publicly increased its prices by 6% – not a sensitive move designed to win back old friends, to be sure – and one it is possibly now regretting.
Today a Yarra Valley winery charges $800 per bottle for a range of brand-new wines, more than $500 per bottle higher than its previous high-water mark. Time will tell of course, but I don’t have the same kind of confidence that these wines will be bought and accepted by those seeking out Hill of Grace, Neldner Road and the like. Maybe China will accept them? Let’s see.
Bucking the Trend
Fortunately for Australian wine buyers, there are still plenty of brands that for one reason or other are selling for well below their actual worth and quality.
Muddying the relationship between wine price and quality are people like Doug Bowen’s family. They own a name winery in Coonawarra and their long-established brand seems not to have increased its prices for decades. They’re not alone. Immediately after buying a load of vineyard for a knock-down price from what was The Hardy Wine Company, Tim Adams told me he wasn’t about to increase his production but instead make better wine for his customers by cropping lower. Like those from Bowen Estate, Tim Adams’ wines still sell for way below their actual worth. These guys are far from alone; the online store at Oliver’s Wines is packed with a raft of brands that over-deliver on price.
Then there are those like Giaconda’s Rick Kinzbrunner, who actively resist the opportunity to make more money without doing anything differently. Rick has seen his Chardonnay increase to around $120 per bottle at his online release, in full knowledge that much of the stock – which sold out this year in about five minutes flat – reappears for sale just milliseconds thereafter at around $285 per bottle. And then increases further…
Rick calmly rebuffs me every time I suggest he increase his prices. Giaconda Chardonnay could easily sell for $300, but Rick doesn’t care. He says he wouldn’t know what to do with the extra cash and he’s comfortable with the fact that his long-time supporters can still buy his astonishing wine. God bless him.
Larger wine companies own many classic brands but are often incapable of extracting their real value and worth. While Accolade has dramatically escalated the prices of its more famous wines over recent years, I have concerns over the ongoing viability of several of its most famous brands, whose wines lack the cut and polish of yesteryear.
Almost certainly due to a lack of marketing spend over the last 8 or so years, TWE’s non-Penfolds brands have seen their prices lag or even fall over that time, while still delivering their customary excellence. The staple and flagship wines under the Seppelt, Coldstream Hills and Wynns Coonawarra Estate labels (to name a few) are frankly priced at bargain levels when you look at what they’re up against in terms of price. And that’s even without joining their commercial website where many of their top wines are available to ‘family and friends’ at wholesale prices.
The good and the bad news…
Yes, there’s much that’s beyond belief or reality in the way prices are attached to many bottles of Australian wine. Some are significantly over-priced for a raft of reasons related to ambition, opportunity or cynicism.
Yet there are plenty of Australian wines priced above $150 and much more that are worth every cent. Indeed, some are still bargain-priced.
The flipside is that there are still plenty of wines priced far too cheaply against their quality and their competition at their price. Most of these are priced way too low because their brand owners can’t do anything about it.
Others, however, are priced that way because that’s precisely what their brand owners want.
It helps to know which.
Note. While Jeremy Oliver reviews wines that fall into each of the four categories mentioned above at Oliver’s Wines, the platform’s online Shop will only ever carry wines that punch above their weight at whatever price-point they’re to be found.
