Australia: the brand

Wines & Vines, March, 1999 by Robert M. Nicholson

(The following article is an excerpt from an address delivered in Sydney at the Tenth Australian Wine Industry Technical Conference in August 1998 by Robert Nicholson of International Wine Associates. The conference is organized once every two years on behalf of the Australian Wine Research Institute and the Australian Society of Viticulture and Oenology. The theme of the 1998 conference was "2025 Meeting the Technical Challenge". The program was designed to address the objectives stated in the Australian wine industry's Strategy 2025 document with papers presented over a period of five days covering the wine business from the grape to the consumer. In this presentation dollar figures are USS; vineyard plantings are in acres: statistical sources are OIV and the individual institutions of each country. Unless otherwise noted all cases quoted are in standard nine liters. Robert Nicholson is the principal of International Wine Associates, a strategy management company that provides bands-on strategic, general management and investment advisory services to wine industry clients on a worldwide basis. In the last nine months IWA has either initiated or served as strategic advisor and provided due diligence services on wine industry transactions with a combined value of over $160 million. IWA can be reached at P.O. Box 1330, Healdsburg, Calif. 95448. Tel: (707) 433-8122, fax: (707) 433-7519 and e-mail: wineweb@aol.com.)

In the context of the theme for this conference Professor Terry Lee assigned me "Australia - The Brand" as the title of my presentation and asked me to address the global market positioning of Australian wine. In evaluating how I could present a paper worthy of this audience I thought it might be interesting to look at Australian wine and how your wines have performed on the world market with wines from Bordeaux, a major "Old World" producing region. The objective is not so much to compare Australia's performance against Bordeaux, but rather to see what can be learnt from Bordeaux and how Australia - The Brand has performed in relation to Bordeaux.

Australia's Strategy 2025 identified that over the life of the plan total world wine revenues will increase only from $65 billion to $69 billion by the year 2025 and that global wine volume will decline, but that the composition of the world market will change towards better quality bottled wine in the commercial and premium segments, or in the $3-15 per liter categories. As we look at Australia and Bordeaux together we will see that Bordeaux is, in fact, well positioned to compete in a global market that is moving up-scale, and will prove to be a formidable competitor, but that Australia may well have the right product formula to take advantage and amplify that trend and possibly even challenge Bordeaux's leadership position.

I was lucky enough to have grown up in the French wine trade and studied at Bordeaux University Oenology School in the early 1970s. I spent the first five years of my career working in the French wine trade, mostly in Bordeaux, where my first serious job was as assistant to the export director of Louis Eschenauer, a leading owner of classified growth properties and the third largest exporter of Bordeaux wines at the time. I was therefore weaned on claret and have always felt I owe a large debt of thanks to the Bordeaux trade for having taught me something about wine.

Bordeaux - The Key Facts

Wine has been produced in the Gironde, the southwest of France, since Roman times. Today there are approx. 290,000 acres of vineyard planted to premium grapes used in the production of wines for the 57 different appellations of the Bordeaux region, in an area that is 105 kilometers (one km = .66 U.S. miles) from north to south and 130 kilometers from east to west. There has been some recent discord in the local trade about applications from Bordeaux that are now under consideration in Brussels, seeking EU approval to expand the planted appellation area by as much as 85,000 acres.

Current plantings are equivalent to the total vineyard area in Germany, South Africa or Hungary or slightly below California's total acreage and about three times as large as Australia or Chile. With regard to Bordeaux's share of French appellation controlee wine, its size is roughly equal to the Rhone Valley, Alsace and the Loire Valley put together, and Bordeaux acreage is almost five times as large as Burgundy or Beaujolais.

Depending on the year, average annual production in Bordeaux is between 500 million and 600 million liters of wine, of which 75% is red and 25% is white. This is 25% of all French AOC wines. Of this total, less than 3%, or only about 1.7 million cases is classified as Grands Crus, the highest of the Bordeaux appellation classifications and the wines that have built the global reputation of the region over the centuries. One person in six draws their income directly or indirectly from the winemaking economy. The industry employs about 60,000 individuals and has 7,000 wineproducing chateaux properties, 13,000 winegrowers, 5,000 of whom belong to the 64 local cooperative cellars. Bordeaux has 400 wine wholesale companies, of which the largest 30 account for 90% of the turnover. The average local stock capacity of the industry is 1.7 billion bottles of wine per year, or 140 million cases. Bordeaux wines represent almost 40% of total French fine wine export revenue (excluding sparkling wines). Vineyard plantings are about 1.5% of the world's vineyard area, with Bordeaux exports accounting for 4% of all wine export volume and 10% of export value.