Getting WET.

I was trying to avoid weighing in on this tax reform issue currently before the wine industry.  I have contributed on behalf of my business, but was going to steer away from stirring the pot.

Except…

Except there seems to be a hefty dose of the ludicrous going on here.

Basics: WET tax is a 29% tax added by the government when GST came in because they – the government – wanted a higher tax on wine. Not alcohol: wine. The rebate – up to half a million a year – was instituted to assist small to medium wine producers in building business. There has been some rorting. And why we have been allowing NZ producers to claim the rebate on their wine sold in the country is beyond me. The tax was tightened up last year to ensure that the one batch of wine could only have the rebate applied once. Makes sense.

These new (ish) proposals from the WFA are intended to grow the wine business. And to build sustainability. And to stop the rorting.

So, the idea is to limit the WET to producers who process 70% or more of their wine in their own facility or have material investment in the region like a cellar door. Paraphrased, obviously. Because the actual phrasing has left most of us scratching our heads wondering whether or not we qualify.  Is just growing grapes enough? Why do we need to then process in our own winery? For some, that is an expense too far. And would put some of the bigger employers (ie: the contract processing facilities) out of work. What about a cellar door? Sure. Need to build one. It needs to be economically viable in and of itself rather than just being a rebate-grab (like a tax-grab, with even more red tape), and the producer must find an extra six plus hours or so in each day to run it. And the funds to build it, and to pay for staff.

Has anyone actually spoken to cellar doors operators recently? Asked them how business is? How sales and revenue are going? And how many events and additional input is required to make that side of the business viable? Which all cost money, and don’t necessarily generate much more than some hijinks and overwhelming fatigue. Very many cellar doors report sales declining, with customers trying wines, and checking to see the cheapest possible price online rather than buying there and then. Order forms are dispensed, and then disposed of wholesale at the end of the trip by the customer. And then there are the very many customers who treat cellar doors as an excuse for nothing more than free wine.

Not all of them, of course. And running a cellar door can be a rewarding and glorious experience. But it takes time. And money. And making the WET rebate claim of a winery contingent upon cellar door business is a clause which will benefit very few. The whole idea – as best I can manage from the mangled proposal – is to award the rebate to parties building the business in their area. Putting funds back into local tourism and business to build the community. Brilliant. Maybe we should ALL open new cellar doors. Except last time I checked, building a cellar door does not ensure hordes of customers and a flood of business. Build it and they will come? Maybe. But the cost benefit of building and opening a cellar door versus potential sales to a group of people more used to buying discounted wine online seems problematic.

And what about those of us with properties in multiple regions? How does that work? Or those of us using a regional cellar door facility, as opposed to having one of our own? Anyone?

So, we are building the regions by building new side of the business which might not actually be viable. No probs. Will get right on that.

The WFA also plans to limit the wines on which the rebate might be claimable. So, no cleanskins or retail own-brand wines, because they ‘play no role in regional development’. Umm… Where to start?

  • Many consumers get their start in wine by trying different styles from different regions at a cheap-ish price point. Sometimes cleanskins, sometimes entry-level branded wines, sometimes retail own-brands. This actually lets the consumer find regions and styles they like. And will probably continue to drink.
  • Just because it doesn’t have a winery’s own brand on it doesn’t mean the sale of that wine has any less input into the region.
  • Indeed, for many producers, contracts to supply cleanskin or retail own-label are the method by which they are able to fund the growth of their own brand. Much like the supermarket contracts for own-brand honey might save a long-standing family of preserve and condiment producers. One helps the other. The sale of all has a positive effect on the region.
  • Just because we like to think that own-brand wine is somehow inferior (which has its own inherent issues, to be addressed another time), does NOT make it so. It is a valid channel to market, and in the current state of the market, ceasing to provide the rebate on these wines will not hurt the duopoly, it will ONLY hurt the producer. And how is that good for anyone?
  • What about Kemeny Hidden Label? The Wine Selectors range? The Aldi ranges? Where is this magical line drawn?

The market has changed. It has evolved. This is what happens.

So, if we are going to change the WET system, let’s be smart about it.

Yes, there is a duopoly. They buy a LOT of wine of a LOT of us. Consistently. They pay on time, and we choose whether to deal with them or not.

Yes, there are own-brands being circulated – these help the restaurant groups, the caterers, the retailers – both independent and not quite so independent – make margin which helps offset other costs, and have brand which reflects their business.

Yes, there are cheaper wines available now. This does in some cases help to get more people drinking the stuff, expanding our market.

Yes, there are the online and auction sites. These have always been there (at least as auction or clearance channels). Only now? Now they are available on our phones, our tablets. They are easily accessible, manifestly simple to use, and the wine is delivered to the door. This is the change. This also means that those who might need to clear something have a raft of options from which to choose. There will always be businesses needing to clear stock for whatever reason. The internet and our smart devices just make these a little more visible. And accessible.

Yes, we have had a strong dollar for some time. Hence the flood of quality, reasonably priced imports. It happens. Equally, some exports have been impacted, hence the flood of cheaper wine made available to the market, and to the clearance outlets.

And yes, we have a lot more producers these days, all looking for market share. Yes, some of them are ‘virtual’ producers.  Contrary to the 7:30 Report story last Friday (25 Oct), the virtual producers are not exclusively buying bulk/fruit and on-selling to the supermarkets at super cheap prices in order to claim the WET. Some do, it is true. But many of them? Many of them are young winemakers, starting out. They have arrangements or contracts with growers – who are in the business of growing and selling fruit, and need buyers like these virtual producers for this to work – and often work for larger producers. They do not, however, have their own land or wineries. They are often making some smart, interesting wines. They are working hard, often at multiple jobs. They – sometime more than the bigger names – have a stronger voice representing regions, and regionality. These are the winemakers and personalities we need in the wine game. They enthuse people. They spark interest. And why should we rip away the WET rebate for them when their voices do so much not just for their own businesses, but also for the industry?

I agree that there needs to be some change. I agree that there are businesses using WET as their profit to sustain unsustainable business. But this haphazard approach seems to have irked much of the industry. And perhaps, just perhaps, if you have managed to make so many people so very irate, there is a flaw in the thinking.

A couple of the bigger players want the WET rebate eliminated. Great. It wasn’t enacted for them in the first place.

The WFA is having secret squirrel discussions rather than open debate. And then threatening unwarranted legal action against a media outlet. Nice work. That will help everything go smoothly.

Maybe we can start over? Because the way this is going so far is not helping anyone.

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A time to live, a time to love

I would like to start by looking at two very different wine gigs. Savour : had its moments but missed, I think, a lot of opportunities. And the Wine Day Out, held yesterday in Melbourne : a new type of wine gig, because it avoided patting anyone on the back.

Granted, Savour was charged with rewriting the story of Australian wine for a global audience. No small task. And, to my mind, a few misjudgments were made, but overall, there was the  projection of pride and style across (most) regions, if not across all pricepoints. See the last post if you wish to catch up.

And Wine Day Out? Well, to me, the event was about freedom. We entered the room, and for the most part managed to leave our brands and our identities at the door. Run by Jess and Dan at Bottleshop Concepts, the event became about people discussing their business, their industry and its issues, not about backslapping or ego. We listened to a person who doesn’t understand wine – or care about it – talk about branding and the core of our identities. We listened to Nick Stock talk about the fragility of our identities, couched in between references to Walter White, Miley, Rihanna, and – gods help me – twerking. We listened to people who understood brands and markets talk about how to work our stories into the reality of brand promotion.

And then. Then, I think, one voice reminded people why we were there. Andrea Frost spoke with a joy I remember from long ago. ‘Wine makes beauty tangible’. Remember that? Those sips of wines when the world changed for the better? When you knew you had something for which to aim? To make something that great, or to find it again. Or something equally blinding.  For some it is books. Music. Food. The symmetry of mathematics. An idea made real. Tangible. Beautiful.

Joy, encapsulated in a moment, a location, a situation. And eloquently narrowed down by Ben Edwards to that moment when (if) a sommelier can explain why they bought the wine…

I think that sometimes, the demands of our business – currency markets, client financial issues, distributor finagling, chain pricing pressures, wine gluts – force our focus away from why we might be here in the first place. The joy. Those pure instances of beauty.

Sure. We have dinners. We preach our joy in the industry. We shout about our glory… But we also have daily pressures from our beloved industry. As do many running agricultural businesses. Or those relying on trends, branding, a marketing spend, innovation, retail vagaries. I think, however, the recognition of the beauty which hooked us in is often drowned out by these other factors.

The room paid rapt attention through the discussions. We engaged. And over lunch, I began to see a spark. People pushing thoughts and ideas back to the fore. Innovation bubbled away behind the eyes. Excitement built.

Issues were discussed. Not just derided, but solutions sought.  Beer and cider was drunk, and people didn’t discuss the wine, rather the business, the game. And not to whinge, but to explore.

And this was just a start. More of this, please. More open chatter. People not spruiking, but wanting to delve.

I think there is a purity to what we do, and there are so very many factors affecting our presentation of ourselves and our wines which can obscure that vibrancy, that purity. We think we are representing one thing and then we find ourselves bemoaning the duopoly, pricing pressures, the environment, the writers, the buyers… Et al.

The consumer doesn’t care. Really they don’t. The joy? The beauty? That is where it begins. Inspire, then teach the consumer to love. Whether it be ongoing affair with $10 chardonnay, or an enduring search for gruner and meunier. There is no wrong here.

So, let us inspire again. Be inspired ourselves, and share that. Joy is infectious. Beauty is intoxicating.

Share this. Share why there is no choice for us. There is only beauty made tangible.

Apologies to Andrea Frost for appropriating her words. I probably owe her a Campari or two.

Selling stories in a vacuum

So. Big wine conference. Wine types from all over the world brought in to talk, exchange notes, and see that Australia is capable of more than the ‘sunshine in a glass’ style of winemaking. Savour.

Millions spent. Much chatter. Some press, even, from around the world. Wolf Blass got irate for some ill-defined reason. Food and wine consumed in terrifyingly large quantities.

But. Maybe I am missing something. I often do.

There was a lot of chatter about the perception of Australian wines, and how in the export market, we have kinda sold a certain story, price point and wine. And that it is time to change this up. No problems here. Sunshine in a glass? Great, but maybe we now need to focus on selling our quality and diversity. Fantastic. I am all for it.

Except…

A substantial part of both our diversity, and our offering is the ‘sunshine in a glass’ approach. Wine which ticks boxes for a number of consumers. A very great number of consumers if we look at the wine sold in various markets – including our own – over the last few decades.  And if we are going to talk about diversity, should we not also talk about the wines which have been successful? And perhaps look at why these wines have been, and still are successful? Perhaps look at the diversity of not just our regions, but also of the people and styles produced within each of these regions?

And what about the market? The consumer? What do they want? Because, if we look at China, they want recognised brands for the most part. If we were to look at the US, there is a massive increase in moscato sales – assisted by the urban culture getting behind this sweet, spritzed drink. If we look at the UK? Cheap (ish) grocery wines – you know the ones. The ones you pick up like you do your milk and bread. The same each week, familiar, with a whack of residual sugar for the most case. Reliable, consistent purchases.

And these are the wines very many people enjoy. They tick boxes: price, style, local availability.

I’m a big believer in the story, but before the story comes the wine. And before the story becomes a success? Comes the idea of understanding one’s market. Relying on the story, and preaching how the story can change the consumer mind can be dangerous. Because there will be someone out there paying more attention than you.

I am also a big believer in producing your best wine from your property. The best expression of you and your land and your vines. It would be handy to then have viable markets and channels through which to sell those wines so you can do it all again next year.

OK – so Australian wine is more diverse than everyone got used to thinking. It is good, and varied, and often more expensive. And there were writers and top sommeliers and retail buyers here raving about the diversity and the quality. Great. Brilliant, even. But maybe missing a little something.

Many wines from the more ‘commercial’ regions and producers are also vibrant, diverse and value propositions. But other than two of the big names from the big (sponsoring) players, these producers were not in evidence. There are any number of producers making juicy, fruit-driven styles which appeal to a certain palate. Not however, the palate being discussed at many of these lectures. An aspirational proposition, Savour was all about delivering the message that Australia produces quality, and diversity in its wines. Aim high, and filter down.

I wasn’t at Savour. I am relying on the messages conveyed by those who were, and the lectures posted online. The message I received, from guests and exhibitors was that it was great to talk about the quality and diversity of Australian wine. But… Where were the wines currently forming the backbone of Australian wine exports? The wines successfully being exported – and sold, and consumed – in volume?

Great to see our wines being tasted and appreciated en masse.  Wines from across the country, with most regions ably represented. But was this exercise about purely rebranding Australian wine? Or selling some it? Or both? And if just rebranding, am I alone in thinking that rebranding without acknowledging the wines which are currently successful in market is a little contradictory? And possibly, a little damaging? We have had the world’s media here to talk about our wine, and yet we fail to discuss the success stories? Because… what? They are not high-end? Niche wines? Boutique? They don’t have an engaging story of quality and diversity?

They have a story. They have comprehensively listened to the market, and delivered that which the market craved. Not local, I know, but equally noted for the success in this field is Kiwi Sauv Blanc. With one key difference: the producers are proud of the wine, and the style, and the success. As well they should be.

It seems Australia is selling two stories: the quality/diversity/niche/boutique story, and the one we don’t talk about so much at events like Savour. The production-on-a-grand-scale, tank farm wines. The wines the consumers like to drink. Big business…

And the consumer? Well, we all know that the higher end of the market is crowded. And crowded with wines from around the globe. So Savour was pointing out our potential for quality and diversity – great – but not talking about one of the brilliant aspects of our quality and diversity, which is our capability to produce large volumes of wines the consumers enjoy drinking at a price.

Hmm. The fallout from Savour – Wolf Blass excluded – seems to be positive. The message being taken to the world is positive. This is a good thing. And oh, some of the wines on display… Be still my beating heart!

I just wonder. Would including the – let’s call them the volume propositions – have damaged Brand Australia so very much? Or would it have reassured drinkers and buyers world-wide that that quality and diversity exists at pretty much every level of production? That all (well, most, anyway) Australian wine can be good. At all price points.

I agree that associating wines of a certain price point with food – ahem, Restaurant Australia – is beneficial. But on-premise as an exclusive focus for wine sales is dangerous. Sales are – generally – slower, they drip-feed out. Bills are drawn out, paid when the restaurateur gets there. Distributors focussing on the on-trade frequently fail on the back of the vagaries of the industry. Nice to be on a wine list at a noted high end venue, but so are two thousand other wines. Why yours? Oh, because of the story. At that end of the game, who is telling your story? And who told it to them? How did it get to be where it is, and who will get to know two thousand stories to sell each and every one of them?

An on-premise plan should be only a part of a grander plan. A more cohesive plan. Food and wine? Great. But more importantly, why your wine? That should be the start of your story. Make the wine great. Those interested will then discover the story. Make it easy to get to, given we are so very far away from the world where much of our wine will be sold. Make the story palateable to all – a simple story, told well.

But make the story complete, Savour. I might be a bit of a wine snob when it comes to my own palate, but not when it comes to the wines we produce as a nation. The majority of which, are pretty great. And exceptional value for money. Include everyone. Big names and volume propositions next to the farmer making two hundred cases of fiano and nothing else each year. Everyone. All of us.

I am proud of this entire industry. I get a little ranty about silliness at times, but I am proud of what we have accomplished and what we can produce.

I just worry that perhaps amongst all the happiness, and tasting and eating and back-slapping, there is a vacuum between what we are selling, and those to whom we are selling it. Does the punter in the wine aisle care about the story when they are picking up a bottle for dinner that night, or do they just want a red, with minimal tannin, a whack of alcohol, and some jammy characters?

Because there is nothing wrong with that. And if, as producers, we were to spend more time standing in big box liquor stores watching how people shop for wine, we might see a few more truths about how wine is selected. And sadly? It is rarely selected on the back of a story. It is the familiar wine. Or it is on special. Or it simply is a reliable style, wherein the buyer knows pretty much what the wine will taste like before they buy it (see: NZ Sauv Blanc, Margaret River SSB).

So, do we subscribe to this, and alter our wines to suit? No. Of course we don’t. The beauty of our industry is the quality and diversity on offer. I just wonder on occasions such as Savour whether we are spending all of our time and money spruiking the more specialised styles whilst ignoring the other – somewhat more commercial – side.

Or is this the very best way to sell the concept of Australian wine? Talk about the (insert adjective here: niche, boutique etc) wines, at the higher end, and create aspirational demand? Perhaps. We certainly need something to bolster our perception in the global market. And perhaps talking about smaller producers and alternative styles is the way to do it. I’m not sure however, that the end of the market which is buying is actually reading these things. But perhaps it will get us past more gatekeepers, and spark more interest in the brand that is Australian wine.

Many of the speakers talked of the importance of the story. Being a personality, a legend, something more than a bottle of wine that ticks all the boxes for the end customer. But who is the story for? We are being told it is for the consumer, but in reality? In reality it is for the writers and the gatekeepers, not the consumers. In which case, we might need to tweak the voice we are using, and the story being told.

I wonder if many people know who there stories might be for, and whether they even care? Talk to reviewers and wine writers and they happily admit that press releases and media guff gets disposed off with the packaging. Without a second glance. Gatekeepers – they have heard pretty much every story, and most of them are more interested in the margin a product will deliver. Not that the story won’t resonate, but there are other considerations as well.

No story should exist in a vacuum. Understand the target of the story, and understand that they may be a very different person to the one drinking your wine.

Pitching Australia as interesting for wine is one thing. I hope that Savour accomplished this. Selling Australian wine as an on-premise option is only one – small – part of the story. Being smart – one of the key Savour messages – is imperative.

I guess my question is, who is the audience for this brave new world of Australian wine? Because I am not sure the majority of consumers are that audience. Which is not a bad thing per se. But to ignore them completely…?

Caveat: my business produces niche, high end, limited release wines. We also produce ‘volume propositions’.