Australian producers despair at discounts

  • Thursday 6 February 2003

Australian wine producers are despairing because two out of three bottles sold in the UK are discounted.

Sixty-four percent of Australian wine sold in the country is on offer, revealed industry analysts AC Nielsen yesterday. No other wine producing country suffered this level of discounting on the UK high street.

Jonathan Scott, general manager for the Australian Wine Export Council, said the damage done to the image through discounting is one of the most serious threats faced by the Australian wine industry. 'We have to hope that independent merchants enjoy a resurgence, to help dilute the concentrated power of the supermarkets,' he added.

'Retailers should work with producers to come up with more imaginative incentives to buy as an alternative to price promotions.' He said the drought in Australia and resulting small crop should take the heat out of the situation, since less wine will find its way on to UK shelves in 2003 and 2004.

Many producers feel powerless against the might of the big four supermarkets and some with successful brands said their wines were delisted if they resisted pressure to discount.

When producers do comply, profits can be minimal. A recent successful promotion in Tesco saw wines from one well-known producer flying off the shelves at a sizeable discount, realising a profit of just AUS$1 per case.

Wine consultant and Sainsbury's director Allan Cheesman agreed producers could 'lose control' of brands when they were continually discounted. Jacob's Creek was 'destroyed' by a major retailer's constant promotion, he told decanter.com.

'But at Sainsbury's we have a “medium-low price” strategy. We promote special offers for four weeks. Thoughtful pricing builds brands,' he said.

Michael Hill–Smith MW, of Shaw & Smith, suggested that the best tack to take could be to look elsewhere for outlets. 'Discounting is as high in Australia as it is here,' he said. 'As a result, small and medium–sized producers focus their energies on selling into hotels and restaurants instead. Maybe we'll see the same thing happening in the UK.'

Three quarters of wine bought in the UK is sold through supermarkets. 85m cases of Australian wine are exported to the UK each year, with an average retail price per bottle of £4.35.

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