Australian Vintage's target is to move its business to 80% branded and 20% bulk
Australian Vintage remains committed to moving its balance between branded and bulk wine to 80% of its business, but will always have a significant stake in bulk wine, according to chief executive Neil McGuigan.
It has been able to slowly push the emphasis on its branded wines over the last eight to 10 years and is now around 65% brands and 35% bulk wine.
McGuigan said it was still strategically important for the business to be involved in contract and the bulk wine business. He told Just Drinks recently: “We need to get that to 80%. We'll never be 100%, because we have a grape juice concentrate business for winemaking in Australia, Canada and Japan. Also, some of our partners around the world need bulk wine from us from time to time.”
He also stressed it made good commercial sense to have part of one foot in the bulk wine market. “If there's a shortage in bulk wine, we might make more money selling bulk wine. But, you've got to take the long-term view: Are you going to be a brand or are you going to be a trader? We were traders, we needed to be a brand.”
The two sides of the business, though, do work hand-in-hand. He added: “Whichever one you choose, you've got to have a full winery. The only way I can guarantee that we have a full winery is if we have a robust brand around the world. If there's an opportunity suddenly to sell 5m litres and make good money out of it, I'd probably have a crack, but I'm not going to steal it from this guy or that guy, I'll find the grapes. But, if I can't do it, I can't do it.
“You've got to make a decision and you've got to decide where your goalposts are. You can probably change your mind once but, if you change it again, you lose total credibility.”
Australian Vintage is currently around 50-50 in terms of the vineyards it owns and how much grapes it is buying in. “If I put long-term leases and owned vineyards together, it's about 50-50 with short-term purchase arrangements,” said McGuigan. “Normally, we have about a third of each. As we become a more branded company, it becomes more important to make sure you don't run out of the varietals that you're selling around the world. Maybe that ideal percentage is not quite right and, as we become more branded, that 30% done on a yearly basis may come down to 15%. We're having that robust discussion right now.”
He added: “My preference is to agree long-term contracts with growers. If I can't get them to do that, then we'll do it ourselves.”
He said that whilst all its vineyard operations are in Australia he would not rule out looking elsewhere. “It is not on our radar in the short term.”