We all know the importance of the US wine market. It is still much bigger than the Chinese market and is growing, but not as fast as China. The current growth in the US market is in Australia’s sweet spot: wines above $15 are growing faster than lower-priced wines. Australia was a powerhouse in the US in the late 1990s until the global financial crisis in 2008, when many Australia wineries could not afford to sell their wines at the prices they had set in the market. The weakening US dollar and subsequent strength of the Australian dollar made the returns untenable for all but a few wine companies.
The long-term outcome of this withdrawal from the US market was not only a reduction in the sales of Australian wines, but some pundits accused Australia of abandoning the market and creating mistrust of the Australian wine sector among distributors and on- and off-premise retailers. A secondary effect of the withdrawal has been a loss in awareness for shiraz/syrah among US wine consumers. I was a supervisor on a Masters of Wine thesis a couple years ago that clearly documented the lack of awareness of shiraz/syrah among US wine buyers. This has resulted in a lot of shiraz/syrah being used in red blends along with another hard-to-sell varietal, Merlot. So all the grapes planted in California and Washington state are being made into wines, but not with varietal labels.
There has been evidence of some growth in the US wine market for Australian wines beyond the tremendous job Casella has done with Yellowtail. Almost all the Australian wineries working and revisiting the US market are focusing on wines above the $12 USD price point with varying degrees of success. I would like to report two things: first, some anecdotal views experienced during my two recent visits to the US in the last five months; and second, some preliminary results from a project my research group and I are conducting as part of a Wine Australia project in the US market.
My anecdotal reports are limited to the west coast (Northern California and the greater Seattle area), the Midwest (Ohio) and New York City and environs (Connecticut). I mainly visited supermarkets and specialty wine stores and a few restaurants. Beyond Yellowtail, Australian wines are few and far between on retail shelves and on wine lists. This is not news to most readers. When I asked either wine staff in restaurants or floor staff (when I could find one) in retail stores about Australian wines, I did not receive any negatives, merely an almost Gallic shrug of the shoulders, “We have so many other good selling wines, why should we bother with Australia…”. No one commented that Australia makes bad wines or that they are poor value for money, just that they are an after-thought, not in the top of mind awareness of either trade staff or consumers. No one accused Australia of abandoning the US market or hurting the wine trade. One of the original goals in Strategy 2025 was to grow the influence (and sales) of Australian wine in key countries to where an Australian wine section would be developed and stocked. I never found an Australian wine section in a retailer or on a restaurant wine list. I hope some exist, but I didn’t find any.
The project we are in the midst of, funded by Wine Australia, is to look at barriers to the growth of Australian wine in the US market, especially compared to key competitors. We will then develop a series of strategies with Australian wine producers to overcome these barriers and test them with the US trade. The first part of the project was to interview Australian exporters to the US for their ideas on what the barriers are. Then, we did a survey of a limited number of US wine trade (retail and distribution), to confirm or not the existence of these barriers and which were the most important in their eyes. This is where we are at the moment.
We found that the most important/significant barriers according to our US trade sample are:
• Consumers do not know much about Australian wine regions;
• Australian wine is perceived as low-priced by consumers; and
• Wines from other countries are easier to sell.
The least important barriers (basically unimportant) are:
• Australian wine styles do not suit the market for wines above $12;
• Australian wine styles are too similar to other countries; and
• There are not enough Australian brands in the market to create a sub-category.
In the middle, as somewhat of a barrier or ones with little agreement among our sample, are the following factors:
• Wines from other countries are more trendy;
• Gaining shelf space at retail;
• The perception of Australian wine among wine media;
• Shiraz/syrah as a wine varietal is no longer favoured by US consumers;
• Finding the right distributor;
• Lack of education about Australian wines;
• The commitment of Australian brands to the US market;
• Australian brand representatives do not visit market often enough;
• Good Australian wines are too expensive;
• American consumers are unfamiliar with Australian wine styles;
• Finding the right importer;
• There is not enough generic promotion of Australian wines;
• Lack of financial incentives to distributors to carry Australian wines; and
• Lack of financial incentives to retailers to carry Australian wines.
The next phase of our research is to test and compare the most important plus some of the mid-important barriers across seven competing wine producing countries with a much larger sample of the US wine trade. This next phase is structured to give us more of an idea of where Australia has key strengths and important weaknesses compared to other wine producing countries. We will also field a consumer survey to confirm or not whether the consumer-based factors are barriers for potential consumers of Australian wine. Both of these surveys will be completed this year. Once these results are in, we will convene a panel of wine exporters to help us develop strategies to overcome the key barriers. These will then be tested with the US wine trade (distribution, on- and off-premise retailers) to see how they would react to these strategic initiatives.
The research both in Australia and in the US was quite complimentary about the role of Wine Australia in helping to re-energise the US market with its limited scope and funding. There were a few negative views among Australian exporters working in the US market regarding the commitment and focus of others in the Australian wine trade. There is strength in numbers. The more wineries invest in the US market with marketing support for their wines (e.g., visits, events, online updates, even bringing US trade to Australia), the greater will be the effect on the market.
Growing the sale of Australian wines in the US market will depend on the scale of Australian wine marketing efforts there. There certainly was scale from around 1998-2007 in the US and this is happening now in China. I believe that the more wineries commit to the huge US market, the greater will be the impact of our marketing activities for all Australian exporters.