Australian Wine in Search of Second Act

Slate takes an insightful look at factors contributing to the sharp downturn suffered by the Australian wine industry which, depending on who’s reporting, has seen exports to the US fall by 15 percent to 26 percent in value during the last year. While a number of a uncontrollable circumstances – fluctuations in the global economy causing inflation in the Australian dollar and unforeseen environmental factors – can’t be dismissed, the most influential player in this current spiral might come down to branding.

Due to the overwhelming success of Yellow Tail - a cheap and flavorful wine with an easily recognizable label – a number of competitors quickly followed with copycats of their own, flooding the market with low end entrants all hailing from Australia, leading to a widespread belief that all Australian wine was mass market and therefore unsophisticated. Which isn’t enough to kill an entire industry – overall sales in this segment are still fairly robust – except that now, Australia’s dominance in the low-cost category is being challenged by producers in countries like Argentina, Chile and South Africa.

At the same time that Australia is losing its advantage on the bargain side of the aisle, a similar issue is developing in their luxury wines, particularly their signature Shirazes. As Australia became known for producing best in class wines in this varietal, more vineyards began to move in this direction in the hopes of cashing in on the trend. This created a lack of diversity in the market that didn’t become apparent until consumers began to turn away from these Australian labels – citing one producer’s bottle being virtually indistinguishable from the next – and started to search for the next big thing elsewhere.

Which means that the industry as a whole finds itself in a difficult spot that will require some intelligent marketing as it attempts to reverse course and alter the public’s perceptions. Leveraging an advantage can certainly increase profits in the short term, but especially given the volatility of today’s markets, one note rarely leads to long term success.

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