Marketers find romance gone

WA’S highly regarded wine industry is consolidating into the hands of fewer, bigger players as commercial reality relegates romance to the marketing speel found on the back of a bottle.

More of WA’s increasing grape production is being taken by the leading players, those who have had the capital and the will to expand their production capacity through direct investment.

The result has left many wine producers reassessing lifestyle choices as their romantic cottage industry rapidly evolves into yet another business sector earning export dollars for the State and offering a new training ground for dynamic young graduates.

While the change may be bewildering for some, these small operators have the established labels which the big boys need to take their new volume to the market, and they are willing to pay handsomely for it.

Evans & Tate chief Franklin Tate sits at the head of one of WA’s most corporate wine companies. An early convert to the power of the Margaret River location, his company was the first local company to list on the stock exchange – an event that coincided with a merger to create the State’s second biggest producer.

“There is a lot of pressure on producers to get bigger or get out,” Mr Tate said.

“There are a lot of laws and rules, it is no longer the romantic thing it used to be.”

During the past few weeks, at least $45 million in acquisitions have taken place in Margaret River alone.

Many suggest the true price being paid for some established producers is being held back by those involved in the deals for fear of inflating values in the region.

In addition to the sales, Xanadu is also looking to bring its listing forward, positioning itself better to take part in the coming changes.

Mr Tate believes the level of investment in the region will rise significantly, with the nation’s biggest companies already sniffing around for opportunities to play in what is now regarded as a premium district.

“You have not seen the type of money that could go into Margaret River,” he said.

“There will be some serious investment funds in there yet.

“Mildara needs a presence in WA, eventually they will get one.”

“There is a culling process to happen. That is good for consumers, they will get better value, some of them have been charging crazy prices.”

Both Mr Tate and Cape Mentelle’s marketing manager Robin Birch agree that smaller companies that want to survive, have to work smart and focus their business.

“It is difficult for smaller wineries to compete against more structured wineries,” Ms Birch said.

She believes Margaret River is a classic example of a maturing wine region, with a proliferation of new labels that represent growing efforts by producers to differenciate themselves from rivals and find products that sell.

“It is no longer the case that we can grow demand by just saying we are from Margaret River,” she said.

“I think a lot of small new brands will flounder.”

Part of the issue is the growing gap between grape growers and wine producers, as those that have invested in processing increasingly gain the upper hand on others who have put their money solely in vineyards.

“We get calls every year from growers that have come into the industry because it has been advantageous for tax reasons,” Ms Birch said.

“They are trying to sell their fruit but it’s from young vines and I don’t know what they are going to do.

“I think growers would be well advised to enter into contracts rather than put their fruit into the open market.”

Busselton real estate agent Brian Moulton, of LJ Hooker has rarely seen as much interest in the Margaret River region’s wine industry.

“There is huge interest in labels and established vineyards,” he said.

“There is a lot more overseas and interstate interest than previously, there are quite a few big names floating around at the moment.”

Adam Palmer is someone who would be cheering the changes taking place in the industry.

Mr Palmer acknowledges his role as marketing manager of Voyager Wines places him in a good position to benefit as the investment in industry shifts from largely agricult-ural and industrial processes to a sales and marketing focus.

“The bigger players have to find bigger markets to compete in,” he said.

“The market is there, you look at the US and it is enormous, and Australian wine is immature there. Those guys (big companies) are making big distribution agreements but they have to have the volume and support.”

“It relies on the expertise and skills of the sales and marketing area.”

Mr Palmer said this was where brands would play a big part in helping WA wine crack the premium price brackets where only big reds and shiraz from Australia have managed to establish themselves.

“The problem for new producers in a marketing sense is if they produce a wine with no pedigree, it may be the best wine ever made but unless people discover that, it will sit among every other WA wine. (In that case) the only thing that will distinguish it is price,” he said.

“The big demand was for viticulturalists a few years ago, then it was winemakers. The next area is sales and marketing, I hope.”

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