31/01/2006 - 21:00

Route to market the major challenge for small wineries

31/01/2006 - 21:00

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It’s not all bad news for the smaller producers of Western Australia, but there appears to be a strong case for a change in thinking.

Route to market the major challenge for small wineries

It’s not all bad news for the smaller producers of Western Australia, but there appears to be a strong case for a change in thinking.

Gone are days of the true cottage industry when it was enough to tend your vineyard, make a little wine and man the cellar door.

Survival of fittest during a glut in grapes will be a test of marketing prowess and salesmanship, a fact that has already dawned on many small producers, according to anecdotal evidence from the state’s key growing regions.

Busselton-based real estate agent Brian Moulton from LJ Hooker said there had already been a big shift among smaller wineries in the South West region as they realised they had to get their own product to market.

Mr Moulton said discussions with those in the wine business had changed dramatically from the past, when the issues confronting them revolved around production and horticulture.

“Now when I talk to them all they want to talk about is marketing,” he said.

“Family wineries find that a bit hard; when it comes to marketing it is a tougher business.”

In general, Mr Moulton reported that there was still considerable interest in small wine properties for smaller players wanting to exit the industry.

He said there were still buyers seeking a lifestyle investment. LJ Hooker had sold three properties at around $2 million late last year, though all were in the regions of choice – Margaret River and Pemberton.

Land prices in Margaret River continued to rise, hitting $12,000 to $13,000 a hectare, although this was in contrast to falling values for planted vineyards, which had come off prices as high as $60,000/ha to $80,000/ha to settle back near between $40,000 and $60,000/ha in Margaret River.

In other regions, $30,000/ha was the going rate for vineyards.

Former Evans & Tate executive chairman Franklin Tate has lost none of his straight talking style, even after a horrific 2005 during which he lost executive control of the state’s biggest winemaker.

Despite Evans & Tate’s woes, Mr Tate is recognised as a leading wine marketer from a company that was an earlier adopter of consumer-led wine styles such as its Classic range.

He said the past half a year out of the company had allowed him to reflect on the industry and led him to change his previous view that only big firms could comfortably survive the glut.

“Smaller-focused players can do well,” Mr Tate told WA Business News.

He said to do so, however, they had to learn to sell their own wine.

“We need a lot more good wine salesmen in this industry.”

“There is an acute shortage of people who can do it.

“It is really up to [winery] owners. The notion that the world will beat a path to your door is not just romantic, it is plain silly.

“For the smaller producer with a good enough story there is still potential to sell their product around Australia. Australian consumers do like WA wines.”

However, Howard Cearns a founder of brand and marketing specialist Braincells, adds a word of caution.

The key issue for smaller wineries, he said, would be the distribution side of their marketing strategy, an area where there remained significant uncertainty.

“The task that everybody has at the moment in the wine game at the smaller end is more about the route to market,” Mr Cearns, a founder of beer label Little Creatures, said. “It is not the communications side.”

Mr Cearns’ agency has worked for wine producers including Stella Bella, Alexandra Bridge, Flying Fish Cove, Giant Steps and US wine distributor Old Vines.

“The dynamic of the major retailers and middlemen, the distributors, is there is a lot of flux,” he said.

“Everyone [producers], small or big, is looking at a number of channels. For the smaller players I don’t think that will work.”

Mr Cearns said some patience would be needed to see which way the market went, although there could be some guidance from the UK, which has already led the way, notably at the large retail end where supermarket players have increasingly dominated sales.

“Once that settles down, there will be more ability for small producers to choose their route to market,” he said.

“You then need to be focused on what is the route to market and how to do that best. That is the big challenge at the moment.”

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