'Wines with 13% or 14% alcohol just aren't exciting any more and customers are now looking to the Old World for more refreshing wines,' he said. Jago is director of beer, wine and spirits for Tesco. He was speaking at the Winemakers Federation of Australia's annual conference in Melbourne.
"If you don't change, others will change faster," he said, pointing to South American and South African wineries getting stronger in the British wine market.
Many winemakers weren't happy about his remarks. One of the Barossa's Burge Family Winemakers remarked, "The British have a grocer's mentality towards wine. They want Australian quality at Chilean prices. I don't want to be dictated about flavour by a British supermarket."
Hunter Valley winemaker Bruce Tyrrell, who supplies wines to Tesco, was even less charitable in his reaction. "He should go back to selling dog food. For years, Australians have been supplying the British with technically correct wines that have good colour and are full of flavour, compared with the Europeans, who have been supplying them with technically poor wines with no colour and which taste like cat's piss, " he said.
Mark Ritson is an associate professor of marketing at Melbourne Business School, who also visits the London Business School. He has a more balanced view when he says,' It would be a huge error to mistake Tesco for a British version of Coles or Woolworth.'
Unlike these Australian supermarkets, Tesco's success hinges on a remarkable degree of knowledge and focus on consumers. It is a retailer that has put extraordinary consumer understanding behind its policies. 'If Jago says Australian wine producers need to change, it is not his personal or arrogant opinion; he is speaking for a market he knows infinitely better than any Australian winemaker.'
It appears Australians are about to make the same mistake France made 15 years ago, when in the face of a growing demand for simpler and more reliable wine, they maintained their antiquated and over-complex appellation system and claimed that quality issues were the fault of ill-developed English palates. The French also failed to recognise the threat posed by Australia because they did not accept that Australian wine could ever equal theirs.
It appears Australia is in danger of repeating the mistakes of the French. Last week's reaction to Jago's comments suggests many winemakers are intent on ignoring changing customer tastes in this important market.
It would be a big strategic error to continue producing wines in the traditional Aussie fashion while failing to recognise that newer, cheaper and more innovative wine regions are emerging. Australian producers are in grave danger of suffering from a fatal case of strategic amnesia. Only 15 years ago they were the beneficiaries of French winemakers' arrogance and stupidity. In the face of a growing demand for simpler wine and more reliable quality, the French maintained their antiquated and over-complex appellation system and claimed that quality issues were the fault of ill-developed English palates. The French also failed to recognise the threat posed by Australia because, quite simply, they could not conceive of Australian wine as being in any way equivalent to their own.
Now it seems that Australia is in danger of repeating the mistakes of the French. Last week's reaction to Jago's comments suggest many winemakers here are intent on ignoring changing customer tastes in one of their most important markets. It would be an enormous strategic error to continue producing wines in the traditional Aussie fashion while failing to recognise that newer, cheaper and more innovative wine regions are emerging and designing their wines around the emerging, unmet tastes of the consumer.
It's a classic case study that we teach again and again at business school. An industry listens to customers and grows into a titan. But, having grown, it then assumes that its approaches and methods are always going to be what consumers want. The established industry is too big, too product focused and too arrogant to change its approach as consumer tastes change. Competitors spring up to fill the gaps left in the market. It was the story of French winemaking. Perhaps it will become the Australian story too.
Mark Ritson is associate professor of marketing at Melbourne Business School.
Australian exports may suffer
In the meanwhile, Australian winemakers, riding 10 consecutive years of rising export sales, stand to lose their market share as their dollar trades at a 23-year high . Moreover, the record drought during the last 2 years has pushed up the cost of grapes.
The second largest wine company in the world, Foster's and the other top publicly trading McGuigan Simeon Wines will have to cutting profit margins or raise prices and lose a share of export markets.
The falling dollar and rising euro also stand to hurt exporters in France, Italy and Spain, the three biggest wine-producing nations, while benefiting U.S. wineries.
The cost of grapes from the 2007 harvest rose 5 percent over 2006, according to Australian Wine & Brandy Corporation, a government regulatory body. Average prices per bottle rose only 2 percent, the largest increase in eight years and the first since 2003.
The 2008 harvest may be as low as 800,000 tons, over 40% less than this year's harvest of 1.4 million tons, according to the Winemakers' Federation of Australia.
EU Procedural Hurdles for Australian Exports
India is not the only country subject to archaic laws and procedures. Australian wine exporters are also facing tougher international labelling laws from the EU.
Earlier exporters had to apply a genetic label but now each country in EU is demanding specific labelling requirement to comply with their own health regulations
"In France they've now made it mandatory that we have a pregnancy warning on the labels and the Germans want a sulphite warning in two languages on their labels. We are required to print separate labels for different markets within Europe or put stickers which of course again is time consuming and costly," says Rick Anderson, a South Australian exporter from D'Arenberg
It must give the Indian wine producers and importers a feeling of Déjà vu.
Subhash Arora
December 7, 2007 |
