Small Australian winemakers see revenues and volumes leap for second year running
Smaller winemakers in Australia have experienced a jump in their revenues and production levels for the second consecutive year. This is according to the latest Wine Australia’s report into the sector, published today.
Income and volumes for small winemakers (defined as those crushing up to 500 tonnes), both rose by 10% between 2016 and 2017, building on growth rates of 7% and 12% respective in the previous year. Small winemakers contribute 8% to the total Australian winegrape crush, selling $1.3bn of wine, most of which is in the domestic market, says the report.
The largest channel for small winemakers is the domestic retail outlet, accounting for nearly half (45%) of wine sales on average. However, despite this channel growing by an average of 5% over the year, small winemakers didn’t identify this as providing the best opportunities in the next three years.
One of the big concerns cited by respondents was the increasing trend towards retail consolidation, though the recent arrival of discount retailers such as Lidl and Aldi into the sector means that small winemakers are well placed to exploit this fragmentation to reach consumers seeking what Wine Australia refers to as “authentic stories” using digital driven technology.
The big opportunity, as far as small winemakers are concerned, lies in the cellar door and tourism. Many said they are planning on expanding their businesses by offering interactive tourism related activities. And according to Wine Australia’s report, this appears to be a successful strategy, with cellar door being the fastest growing channel at an average 6% sales growth.
Meanwhile, the export market accounted for 14% of wine sales for small Australian winemakers, far less than the 60% across the wine sector as a whole. Despite the relatively low proportion of winemakers exporting, it was frequently cited as an opportunity for their business in the next one to five years.
“With increasing demand for premium wines in many key markets, a lower Australian dollar and difficult vintages in other major wine producing nations, the export opportunity is looking brighter than it has for many years,” states the report.
In the year to September 2017, 752 small winegrape levy paying winemakers exported wine with a value of $353m, a 10% increase on the previous year. And China was the export destination of choice for many winemakers questioned in the survey, with exports up by over a quarter (27%) to A$118m, followed by the US, where small winemakers’ exports jumped 18% to A$50m.
While online wine buying is currently a small category, Wine Australia’s report reveals that sales via a winery’s own website or third party accounted for 10% of wine sales. The relatively low share compared with other FMCG’s can be attributed to barriers such as delivery costs and time, minimum basket size and the convenience of bricks and mortar retailers. Also, the inability to try wine before you buy can put off consumers, claims the report.
Despite these hurdles, 17% of Australians bought wine online in the past year, according to IRI statistics, compared to 63% for clothing and footwear. However, IRI thinks that in future up to 80% of purchase decisions will have an online element, such as information research or recommendation from social media, if not actual purchases, so represents an important opportunity for small wineries.