The Wine Evangelist

As I remain in a post-exam stupor due to lack of sleep, too much caffeine and far too many hours in front of my computer, I realize I briefly mentioned emerging markets last entry, but I would like to dedicate a bit more time and thought to this critical topic. Not only is writing this blog helping me with exam revision, but hopefully it sheds the smallest, infinitesimal amount of insight onto the subject of emerging markets.

Without question, the most anticipated emerging market is China. With a population well over 1 billion and a quickly developing wine culture, China represents a profitable export market destination with a high value per litre on imported wine. So what is it exactly that classifies China as an emerging wine market? Some of the classifications of emerging markets are:

-A presence of heavy government taxation or regulation. (However, when China joined the WTO, tariffs were drastically reduced creating an economically feasible market for exporters).

-Very rapid growth in per capita wine consumption.

-Per capita consumption is low.

-Wine is still a novel drink and is not embraced as a household good.

-Different consumption trends and habits from mature wine drinking markets.

China, Singapore, Hong Kong. Why do wine exporters seek these markets and why is everyone jockeying for position in these foreign industries? Emerging markets not only provide large profit margins due to the higher than average value put on wine, but they represent a much needed outlet to mitigate the world’s oversupply of wine. If a country as large as China adopts wine as a household good, oversupply would be the least of our worries.

I realize I could continue to ramble on about what to look for in emerging markets and some common mistakes made in approaching emerging markets, but my eyeballs hurt and I am in dire need of a little schnoozums (that’s ‘nap’ for anyone feeling confused or lost). Until next time, take care and be happy.

Cheers,

Lauren

Living and studying in Australia has allowed me to gain incredible insight into the state of Australia’s wine industry; but it doesn’t look good. There seems to be pressure from every direction and it cannot be much longer until something gives.

-Australia is still desperately suffering from an oversupply due to larger than normal harvests in 2007 as well as 2008. This has resulted in not only a declining price for grapes but a severe surplus in wine that is leading to the devaluation of Australian exports. This grape glut is exerting tremendous pressure on the wine industry as a whole as supply drastically exceeds demand.

-The consumer market in Australia has been stagnant for the past few years. Currently, per capita wine consumption is around 22 liters per annum, which is a much higher figure than the US, but the US has shown promising growth in consumption whereas Australian consumption remains unchanged. With an oversupply of wine and with no growth in the consumer market to help absorb some of that surplus, Australia’s wine industry is being hit twice as hard.

-’Wine of Australia’ is in dire need of rebranding. The value ‘critter’ brands (i.e. Yellow Tail, Little Penguin) have flooded international markets and I think it would be safe to say that the majority of Americans associate Australian wine with Yellow Tail. In fact, according to a survey conducted by myself and classmates, over 17% (of 500 American respondents) thought that Yellow Tail was an Australian varietal. Yellow Tail is the US’s largest brand import, but by no means is Yellow Tail a varietal. As a result of the prominence of these ‘critter’ labels in the US, Australia has only 1% of its exports selling at price points of 10 USD and above.

-Another issue that the Australian wine industry faces is the ever increasing number of wineries. As of April 2009, there were 2,320 wineries; over 70% of which were small producers (<7500 cases). If consumption in Australia is not increasing, and Australian exports are decreasing in value, why are so many wineries being established? Not only is each winery’s piece of pie getting smaller, but the pie itself is getting smaller as well.

-Retail consolidation in the UK and the US (Australia’s largest two export destinations) has been making it more difficult to get representation in these foreign markets. It seems that there are more and more wine brands vying for shelf space in an already highly saturated market.

With all this pressure, from every direction, how much longer can this situation last? Something’s gotta give…the question is what?

Well, after all that negativity, there are some good things to say about the Australian wine industry. It is the world’s fourth largest exporter and appears to have good positioning in emerging wine markets such as China and Singapore, where the value per liter on exports is exceptionally high. These emerging markets are expected to experience incredible growth in the next few years and with Australia established as a major exporter, the benefits will be extraordinary.

Lauren Moskovitz

The end of June will mark my first five months living in Adelaide.  That’s five months of making wonderful friends; five months of establishing where the best burger is offered;  five months of constant paper writing (maybe it just seems that way); and five months of drinking nothing but Australian wine with the occasional New Zealand Sauv. Blanc. It has taken five months of consuming Australian wine, but I can now officially declare that I miss my American counter-parts.

The ease of buying an Australian wine in the States at almost any retail outlet is not reciprocated here of American wine in Australia. In fact, finding American wine in Australia is close to impossible. Well, maybe I shouldn’t say that for I have found where I can buy a bottle of Screaming Eagle with the balance of student loans I have reserved for the next year, but somehow logic and reason have convinced me to steer clear of that purchase. Funny, I usually don’t listen to them…

But back to the point. Australia exports two-thirds of their total wine production and is the world’s fourth largest exporter by volume. However, as an importer, Australia is small potatoes. Australia’s share of world wine imports by volume is a measly 0.5%; meaning it only holds 0.5% share of the entire import market. Whereas the US holds 12% of global import market share. Clearly, Australia is a net exporter making it very difficult for this Californian-wine-loving individual to get her hands on anything besides Aussie produced.

And if anyone was curious, the best burger in Adelaide is from The Stag on East Terrace. I can assure you, many many dedicated hours were sacrificed for the purpose of finding the perfect burger. I now maintain an incredible sense of accomplishment for this feat was not easy and resulted in many belly aches and far too much beer. No pain, no gain indeed.

Final exams will be coming up shortly and immediately following, I shall be stateside for a bit…I am already dreaming of that California Pinot…

The photo is from my birthday when it was established that The Stag is a holy place.

Cheers,

Lauren Moskovitz