Quietly and with stunning speed the Australians have been invading the United States -- with wine. Following a detailed production and marketing plan, and taking dead aim at California's place in the wine market, Australia is about to pass Italy as the No. 1 imported wine in America.
The Australians are leveraging their dramatically lower costs of production to catapult themselves forward at a time when American vintners are struggling to stay afloat in a worldwide glut of wine.
With 90% of the Australian imports to the U.S. priced between $6 and $11 a bottle, this segment of the wine business -- already the most competitive -- is turning into a slugfest. The stage is set for an old-fashioned price war as consumers face an overwhelming number of reasonably priced choices in table wine.
And this is just the beginning of Australia's rise. Kroger Co. wine buyer Graham Lee, who oversees wine sales at 2,488 stores including Southern California's Ralphs division, says that six months ago, his stores didn't have an Australian wine section. But with Aussie wine sales in the U.S. growing by 50% a year, Lee says he is clearing out slower-selling California wines from Gallo and Fetzer to make room for hot brands like Australia's Yellow Tail.
That's a tidy bit of work for a country on the far side of the globe that until the 1970s specialized in low-class, high-alcohol wines and, even 10 years ago, exported only a trickle of its premium varietal wines to the U.S. What they lacked in posh pedigree and experience, the Australians have made up for in moxie, staking their future on an uncompromising premise: delivering better wine cheaper than California.It was a plan born of necessity by ambitious vintners eager to grow beyond what Australia's small population of 19 million people could support.
With an all-for-one unity unheard of in the California wine country, Australian vintners locked arms with each other and the Australian government in the mid-1980s, determined to become major players in the world of wine.
In 1991, they set an audacious goal of increasing exports from $112 million to $622 million by 1998. Reaching that benchmark years early, their next plan called for $1.6 billion in export sales by 2025. Last year, Australia recorded $1.4 billion in wine exports.
"Unity has been our competitive advantage," says Sam Tolley, chief executive of the Australian Wine and Brandy Corp., the government-industry organization responsible for the seemingly contradictory jobs of regulating and marketing Australian wine. "It's a bit of a strange model," Tolley says, but it's not unusual in Australia. "The government has always encouraged exports."
A group effort
That doesn't mean plentiful government subsidies, he says. Rather, the companies came together and voted a tax on themselves to create a government organization to help them grow. As their needs have expanded, Tolley says wine companies have voted to increase those taxes.
Under the leadership of the Australian Wine and Brandy Corp., Australia's vineyard land has more than doubled in the last 10 years. Instead of investing in more of the Semillion favored by Australian drinkers, the corporation encouraged growers to plant Chardonnay. The acreage devoted to Australian Shiraz, another grape the corporation believed would appeal to American drinkers, was increased.
The under-$10-a-bottle wine buyer was the target. In that price range, it was determined that red wines should deliver a mouthful of berries, fruity but not too sweet, and be blended for a consistent, even taste. The white wines should be light on the tannins with the bumps blended away.
Marketing Australian wine has always been a road show. From the earliest days in the mid-1980s when Rosemount was the only Australian brand available in the U.S., wine companies have gone town to town to peddle their wines to those willing to experiment with the unknown. That grass-roots approach continues today.
"The Australians offer good values across the board," says wine industry consultant Jon Fredrikson. At every price point, he says, consumers are finding better quality Australian wines when compared to California's.
Unlike American and European vintners, who believe a wine's taste should reflect the place it is grown, the Australians are proud of their blends, says Kylie Hargreaves, Australia's deputy consul general in Los Angeles. She and other Australians talk about their wine's consistent, "smooth" qualities, flavors that don't vary dramatically by vintage.
"People in the wine industry in Australia sat down with consumers and asked them what they like. And guess what? They like wines a bit sweeter and with less bite," says Jim Watkins, the top U.S. executive with Australian-owned Beringer Blass Wine Estates.
"Words like 'austere' and 'complex' don't even come up" when you talk to consumers, says Tom Burnet, president of the U.S. division of Southcorp, Australia's largest wine company.