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 The wine world outside Australia may look at its wines as cheap quality wines but they do have a lot of relevance and respectable share for the Indian market where he ubiquitous Jacobs Creek is the king of imported wine labels as the number one imported wine brand. The lower the price at reasonable quality, more the opportunity for marketing provided one has a good distribution channel.
And Down Under, you may be able to find today a bottle of wine that's less expensive than bottled water or coke. For example, a bottle of red wine at the bargain basement price is about one Australian dollar, or US $.81 (Rs. 51). Compare this price to an average 350 ml bottle (less than half the size of a standard wine bottle of 750 mL) of water that sells for about A$2.50 and you get the idea of how low it can go, according to a report in the BBC News. And this price includes the wholesale tax and a retail tax on top of that!
Prices have been affected by several factors, including recent foreign exchange rates, falling international demand, and an excessive amount of product in the domestic market. “A lot of the export volumes that we were previously selling to overseas markets have come back to the domestic market as international demand for our wine has dropped off,” Paul Evans, CEO of the Winemakers’ Federation of Australia (WFA) is quoted as saying. This increases competition between local producers, which drives down prices further.
Another factor keeping wine prices low is the taxation policy on alcohol. Wines are taxed on the price value of the product as it is sold, and not on the alcohol content (quite like in India where the customs duty, excise duty and the VAT are cumulatively increasing and price- based and not based on the amount of alcohol-a contentious issue in most wine producing regions in the world).
Supermarkets like Woolworths and Coles control more than 70 percent of all retail wine sales. They are able to sell the oversupply at the basement bargain prices and still make good margins, according to Foxnews.
Déjà Vu
This is not the first time the prices have crashed; it may be a case of déjà vu for many of our readers.’Wine Cheaper than Coke and Water’ screamed the painful headlines of the Daily Telegaraph Australia in December 2009, five years ago.
Woolworths' large-format liquor chain Dan Murphy's was then selling cleanskin (without the name of the winery or winemaker) wines at A$1.99 a bottle. Woolworth was then charging A $2.25 for a 750ml water bottles and A$3.07 for 600ml of Coke. And how did they sell wine for A$1.99? By buying it for as little as 45c/liter from the Riverina district, where Dan Murphy's was known to have bought the product, according to rumours then. ‘Australia's wine industry has been facing a grape glut since 2007. And it is getting worse, with a new winery opening every two days,’ according to the same report.
Good news for Indian importers consumers
The good news is that the Indian importers looking to expand their portfolios and the budget conscious consumers can benefit from the consequent price reduction. They might be able to add low-end Australian wines suffering from the glut, at much cheaper prices. There may be time to churn some of the portfolios where the branding is not so effective anyway, or where the Retail market is the strength of the importer or the retailer. Affordable and quaffable wines were never available at such low prices in recent years. It might be a winning situation if an importer can get contracts for medium tern because these prices won’t stay that low for ever. (we know the case of Spicejet Airline and what the bargain basement prices have done for their survival.)
This is also a time for the big producers to visit India and renew or rejuvenate their relationship with the importers and the market. A positive point, that. McGuigan (Australian Vintage), a respectable brand, was being represented by Hema Connoisseurs in India. But last year the company withdrew from the Indian market as they found the hassles created by the ambiguous notifications of FSSAI not workable. This was despite their label getting increasingly popular. However, Nicolas Heretiguian General Manager of the parent Australian Vintage, their export rep is part of a business delegation currently visiting India to find a way out of re-exploring the market. He will most likely not only re-open the chapter but perhaps offer discounts to compete with the mega brand Jacobs Creek which has been able to ward off every imported label because of its low prices and the depth of its distribution.
Hardys Stamp imported by Sula has already dropped its prices to sub rs.-1000 on a couple of its labels perhaps to enable it to take Jacobs Creek Head-on! Whereas Jacobs Creek Merlot, Chardonnay and Cabernet Shiraz are all priced at Rs. 1100 each, Hardys Cabernet Merlot sells for only Rs. 820 now and their delicious Riesling Gewurztraminer is priced at a very competitive Rs. 940! Even the Chardonnay and Semillon blend and the Shiraz Cabernet have been prices lower at Rs. 1060 and Rs. 1080 respectively. The sparkling wine lovers will find the Hardys Stamp Chardonnay Pinot Noir Sparkling wine a lot more palatable at Rs. 1320 (even the Indian Chandon sells for Rs. 1240!) as compared to the similar bubbly from Jacobs Creek at Rs.1580. (both listed at an average price of $ 11+tax at www.wine-searcher.com)
Interestingly, wine prices may not be able to escalate in the near future. According to Treasury Estate, the biggest stand alone stock exchange listed wine company in the world, the glut had been there for 10 years now. Its global supply and production manager said in October 2014 that ‘the oversupply lowers input costs and, for now, it is likely to continue’.
The current situation might bring the costs down and hopefully, the Indian consumer will benefit but the volumes are likely to go up because of the possibility of sub- 800 rupee prices on the decent, quaffable Oz wines. In that case, they can well compete directly with several Indian wines selling at similar prices. Australia is already leading as exporter to India after surpassing French imports, thanks largely to Jacobs Creek who is a strong no. 1 wine exporter to India. Wines at low prices will be a boon for the Indian market-who cares if the world think Australia makes cheap wines!
Subhash Arora |