What’s been the most-discussed issue at AGWA Board meetings?
Brian Walsh: “Most recently, the Discussion Paper for the Strategic Plan 2015-2020. It’s our view that the way to increase our prosperity is to focus on the high end of the market. It’s where reputations are made. Our reputation needs to be made on great Australian wines from great Australian places.”
Brian Croser: “The fine wine sector provides a disproportionate amount of the value and profitability of the industry. I thought the article WBM did with Lawrie Stanford, executive director of Wine Grape Growers Australia (on there being two industries) was terrific. He is promoting the concepts we are putting forward – that there are two products and two sources for them: fine wine vineyards and branded commodity vineyards. They need different strategies and research and market development, and largely the market development with commodity brands can be left to the big companies. They will get the halo that will come with our efforts with fine wine. Lawrie accepts that, which is a break-through. We had a meeting with WFA chairman Tony D’Aloisio, who has also accepted it, which is also a break-through because there has been a force within that organisation to not go down this path.”
Walsh: “We’re acutely aware of how critically important commodity wine is to the whole equation, we have to have everyday wine, but the reality is those large companies have more to spend on their brands than AGWA will ever have. They don’t need us, they just need the reputation of Australian wine to be elevated.”
Croser: “Accolade is putting a lot of money behind Hardys. We can’t even begin to match that kind of money. John (Casella) agrees; he is on the Board and totally supportive.”
Walsh: “In terms of research, we want to question each piece of research. Is it going to help elevate the perception of Australian wine globally? Is it going to help us be more competitive? They’re the two big challenges. If it doesn’t tick one or both of those two boxes, then should we be doing that research? And we’re talking about a 30-year end game, not a five-year one. We do, however, also support a percentage of funds being allocated to ‘blue sky’ research.”
Croser: “In the Discussion Paper you’ll find a statement talking about the transferability of intellectual property in the research game, how quickly other countries use research done at the AWRI. The first thing Chile does when it has a problem, like smoke taint, for instance, is to look up the AWRI, because that’s where the best information is. That’s fine, because we benefit from other countries’ research, but what we’re hoping to do is promote more specific research that is only applicable, or mainly applicable, to Australia, as opposed to Chile or France, as it relates to our unique environments, the terroirs we work with, our people and our brands – all the things unique to Australia.”
Is the AGWA Board functioning well?
Walsh: “Yes, we think so. It’s an interesting dynamic. Everybody asked about Kim Williams. He is as passionate about wine as anybody on the Board.”
Croser: “He has a better cellar than anyone else on the Board. It’s not just a good cellar, it’s amazingly eclectic with wines from eastern Europe and South America. He knows a lot about those semi-obscure places, not just Burgundy. He’s a scholar. He’s just written a book about his life, Terms of Engagement, and one chapter is about wine.”
Walsh: “He brings a set of eyes that most of us haven’t had exposure to. He heads up the Market Development committee and has been working closely with Stuart Barclay, general manager of Market Development.”
Croser: “He takes no prisoners. He’s dealt with Rupert (Murdoch) for a long time.”
Walsh: “Every Board member is on at least two committees and the two major ones are Research & Development, and Market Development.”
Walsh: “John Casella is another good thinker, very smart.”
Croser: “John doesn’t say much, but everybody listens when he talks. The Board is really well balanced in terms of the talents. I’m astonished by some of the skills that have come to the table. Personally I’m loving it. I left industry politics in 1988 and went across to the University of Adelaide because I knew what was going to happen. I had a decade of frustration about the lack of clarity and purpose. With the formation of AGWA and Brian’s wholehearted commitment to the concept of the two-industry approach, now there is clarity, we have an agenda. And Brian represents both sides. I think being chairman of Riverland Wine is a good thing.”
So Brian (Croser), you would always lean towards Research over Marketing?
Croser: “Yes, that’s been my interest in life.”
Walsh: “Brian is on the Market Development committee, not on the Research & Development committee.”
Croser: “He wouldn’t let me be on the R&D Committee. I protested. It comes back to this: at the core of fine wine – the technical, the environmental, the terroir… all of that stuff – is also the core of research and what wine quality is all about. It is also at the core of market development. The two come from the same soul.”
How are the former entities, Wine Australia and the GWRDC, getting along after the merger?
Walsh: “Fine. That’s the beauty of this thing, we’re all aligned. It’s all harmonious. Our focus has been to make sure the integration of the two bodies runs as smoothly as possible. By and large we think that’s happened. I think WBM described it as North and South Korea… we never saw that. I don’t think that happened at the office level, they were carrying out their functions. There was a little bit of argie-bargie. The fact is we’ve all got a service to provide.”
Croser: “Kate Harvey is the new general manager of Corporate Affairs. She was the general manager of the GWRDC. I think this is an important appointment. It’s a real sign there is no longer the silo of Research and the silo of Market Development, they’ve come together.”
Tell us about the other staff changes?
Walsh: “We’re happy with our recruitment process. Andreas (Clark) has done a stirling job holding the fort. Stuart Barclay has commercial nous and a deep understanding of the market from all aspects. He knows what’s happening in the digital space. He’s a deep thinker, doesn’t rush in and try to change the world, tries to get to the nub of the issues and understands where the opportunities lie. We’re chuffed that Laura Jewell has come on board in the UK. The subliminal thing about Stuart and Laura is they wanted to work for us because they are committed to the dream, they’re not just here for the money.”
Croser: “I’ve known Laura for 25 or 30 years. She is a star. She is a great follow-up to Yvonne (May) who was a great personal friend. I can’t think of a better appointment.”
Is lack of funding an ongoing issue?
Croser: “AGWA’s budget is $35 million, which isn’t small, but only $5.5 million is dedicated to Market Development. I saw the other day that Bordeaux has put in 230 million euros or something over five years.”
Walsh: “And if you assume that our levy payers expect us to have staff in the UK, America, Canada and China, and you resource that, then the marketing spend as distinct from the human spend, is negligible, really. We’ve always got to do things on a shoestring. While it would be lovely to have a bit more dough, we can’t assume that’s going to happen, so we actually have to work within our means.”
WFA is trying to free up $25 million in tax savings for marketing. Is that viable?
Walsh: “Look, everyone has their own view on that, but we’re not banking on it.”
Croser: “There are two big barriers. With the NZ Closer Economic Relations Agreement, you actually have to go
back and renegotiate it. I can’t see that happening. Number two is the simple money issue. Anyway, it just means we have to live within our means. The means are not small; $35 million a year is a lot of money, it’s about getting industry to reprioritise expenditure.”
What have been some of the big Board decisions to date?
Croser: “The wine industry had dropped the ball on data collection. The GWRDC had decided that research funds couldn’t be spent on data collection. So we’ve had a gap in viticulture stats and been flying blind for two years, but from this vintage we started collecting stats again, which is vital.”
Walsh: “The merged entity is $1 million better off, which will go to supporting programs that are already in play. But we’ve found the money to collect stats again.”
Croser: “There is so much data we don’t get. We’re talking about just filling a gap that used to be filled, which is the viticultural data, but when you talk about any statistics on cellar door sales, internet sales, on-premise sales, there is an absolute a dearth of data, all you can really get is the data out of Coles and Woolworths. I know that Brian has already been talking to the big companies. We had a meeting with Accolade to try to help us fill some of those gaps, because the picture of the industry is completely different to the one we get through the big retailers. We end up making decisions as an industry based on information from the duopoly as opposed to the total picture.”
What do you see as the priorities for overseas trade shows?
Walsh: “The priorities will come up through the Market Development committee. We went to the Vancouver International Wine Festival where Australia was the theme nation, and Shiraz the theme variety; that was a one-in-eight-year opportunity. We squeezed a few dollars out of some savings of the merged body to put on a good show and make sure there was a bit of wow factor.”
Croser: “That has been the philosophy of the Board: do less and do it better.”
Walsh: “I think there are about 10 options for trade shows in Hong Kong, Shanghai and Beijing, and we’ll have to choose one, and we’ll take the best advice and some of that will come back from our members. Apart from Vancouver, we were involved in the Australia Day Tasting in London and Prowein in Germany. The feedback from our wineries has been very, very positive, most particularly on the level of interest and excitement from the trade. The buzz has been palpable.”
How do you measure marketing spend?
Croser: “In the past there has been a lot of anecdotal feedback, you wouldn’t say it was scientific measurement. It’s the old marketing adage – we know half of the marketing worked, we just don’t know which half.”
Walsh: “Andreas is setting up processes for that, on everything we spend, so we can tell if it worked or not.”
Why the short-term Board appointments?
Walsh: “The Minister (Barnaby Joyce) chose this path. The Board will have to reapply for our jobs. There will be another selection process. It started in March.”
Croser: “Then they’ll go through the process of selecting the Board, which, if it was the same one they selected last time, would mean a lot of us won’t be there. Hopefully they will be appreciative of the fact that we’ve got some momentum. But this stuff we have no control over.”
Do you think Canberra fully understands the importance of the wine industry to Australia?
Walsh: “I think through their Senators they probably do. One of our jobs is to keep reminding him to not look at the top line of our export dollars and not compare that to other commodities, but look at the regional employment and wealth generation and the value-adding multiplier that we’re getting for our wines. They’re the sort of messages we need to keep reminding them of.”
Croser: “There is a large percentage of Australian politicians who have wine businesses in their electorates, but the thing politicians hate more than anything else, is trouble. They hate bad news, and the wine industry has been pretty consistent for a decade with bad news… retailer duopoly, the oversupply, tax, and to some extent we don’t have a role in any of that. I see AGWA as being a positive voice for the industry where we can say it’s so important to the regions, and to the perception of Australia as a cultured, sophisticated country. We do the best research through the AWRI and now we’re going to say we’ve got some of the best terroirs in the world and explain why… all of these things can be put forward as a positive picture of the industry to politicians.”
Walsh: “It’s not just about agriculture, either, the whole tourism interplay of wine is well developed and one of the great legacies of the previous Wine Australia Board was its arrangement with Tourism Australia and the fact our marketing teams are now domiciled in the same offices in Australia, London and Shanghai. They’ve been rubbing shoulders on a daily basis. And for virtually no money put in, we get this rub-off effect. We have seen this through the successful Restaurant Australia campaign.”
Croser: “There are some good stories happening in the industry, and they’re not talked about, you should devote half your magazine to them… you do anyway. There’s hardly a wine show that Australia doesn’t dominate in one way or another. I know wine shows are a bit passé to sommeliers as such, but in fact they are a good barometer of what’s happening with Australian wine quality versus the rest of the world. And in Australia, nobody ever writes about the wine shows here, they are passé, but in fact they’re a wonderful exhibition and test of Australian wine quality and we intend to use Australian wine shows much more as a way of saying Australia is doing some wonderful things. For instance with our Pinot Noir, which is at least as good as New Zealand, Chile and other aspiring places, and here’s the proof.”
How do you feel about the future of the Australian wine industry?
Croser: “Totally optimistic, but you have to look through the current difficulties. And don’t forget, when Brian and I started, 80 percent of the grapes grown in this country were Doradillo and Muscat Gordo and things like that. We have seen a complete revolution in the vineyards of Australia, from the Riverland and Riverina through to the fine wine areas. A huge transition over a short period of time. Some say our statement about becoming the pre-eminent wine producer is pretentious and elitist, but I can see that happening. I know what goes on in Oregon and California because I have vineyards there. I get all the feedback from Bordeaux, Burgundy and Champagne through the family connections. All of those entities are going to face more and more problems in terms of maintaining supply for various reasons including pollution and cost of investment. Land prices in all of those places – and Chile as well – are going through the roof. I see us sitting in a very cosy place in a 30-year horizon. What’s not understood is that of the 65 wine regions in Australia, 26 are as cool or cooler than Bordeaux, and that gives us a huge opportunity in the fine wine arena.”
Walsh: “We would like to collaborate more with some of our international competitor countries. There is so much goodwill out there for Australian wine, we don’t have a lot of enemies, we have a lot of good mates throughout the world. A few years ago I was a little perturbed about losing market share of Australian wine in Australia, now I just think that’s part of our transition. If you look at New Zealand, it’s a successful wine producing country but about 50 percent of the wine consumed there, is imported.”
Croser: “It’s just a levelling up process. The number of consumers who are showing interest in learning more about fine wine – right across the demographics – is exciting. It’s like the black economy: it isn’t seen, isn’t measured. It’s where things are bubbling, innovation is happening. As an old technological purist, I don’t agree with orange wine, but I love that it’s happening. It’s fantastic for the industry. It creates a buzz, and some elements of it will work and will translate into major economic successes. We need people to understand that we do have a vibrant and carefully constructed agenda, but that we are constrained by decisions of our predecessors, but we’re working on it.”
Things have been so tight but wineries are hanging in there. Is that a mystery to you?
Croser: “There is also a lot of hope. I mean there are a lot of passionate people in the industry who believe in the future of Australian fine wine, and they’re the majority of the 3,000 small winemakers we have. I think they’re doing more than hanging on, a lot of them are investing in it. I see direct sales in America are growing by 16 percent per annum, totalling nearly $2 billion versus off-premise which is growing by five percent, totalling $7 billion. So boom! The average price of direct is $30 a bottle in the US, so you can imagine what the profitability of that is, compared to the off-premise.”
Walsh: “The only thing is, though – and this will be contentious among our levy payers, for sure – is that the big prizes still exist offshore, in terms of where the growth potential is. Part of our charter is to work where there is market failure, and market failure is generally defined as something you just can’t do by yourself, you need support to make it happen. By and large people can organise themselves in their home country, they can pick up the phone and visit somebody and hopefully make the sale. We want them to be successful and we will assist where we can, but the large part of our available funds will be on helping to provide the platform for people to sell wine in international markets.”