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As Volume Continues To Slide, Australian Wine Sees Premium Progress

June 15, 2015

While New Zealand wine continues to thrive in the U.S., its close neighbor Australia has seen little let-up in its U.S. struggles. However, the ailing category is seeing a silver lining in the premium tier.

Plagued in recent years by both oversupply issues and a rising domestic currency, Australian shipments to the U.S. slipped 9% to just over 17.8 million cases in 2014. But much like top imported wine player Italy, the category has benefited from trading-up trends, with declines skewing heavily toward Australia’s low-end and bulk segments, and higher-end wines demonstrating gains for the third consecutive year. According to the Australian Grape and Wine Authority, wine exports to the U.S. above A$10 ($8) per liter grew by 3% to 1.6 million liters last year.

With Australia’s value segment still struggling, however, brands such as Deutsch Family Wine & Spirits’ Yellow Tail—the largest imported wine label in the U.S.—have yet to stage a solid rebound. After climbing 0.9% to 8.6 million cases in 2013, the Aussie brand, which plays in the $6-$7 a 750-ml. range, slid 2.9% last year. The company is betting on innovation to help reignite growth, with Deutsch Family CEO Peter Deutsch telling Shanken News Daily late last year that Yellow Tail’s recently-released Sweet Red Roo and Big Bold Red labels are helping to buoy sales.

Treasury Wine Estates’ Lindemans ($4-$8) has followed a similar trajectory, offsetting modest gains in 2012 and 2013 with a 3.3% decline last year. Consequently, Treasury is looking beyond Lindemans to propel U.S. growth, with the company opting to shift focus to its luxury and “masstige” portfolios. “We believe the Australian category evolution is reflective of broader wine category changes—consumers are trading up,” says Barry Sheridan, Treasury Wine Estates’ vice president, marketing in the Americas. Sheridan cites strong performances from the group’s higher-end Penfolds, Wynns and Pepperjack franchises, as well as its recently-launched 19 Crimes brand, which plays in the $10-$14 range. According to Sheridan, 19 Crimes has been an “instant success” for Treasury in the U.S., gaining a following amongst the Millennial male demographic and tripling to more than 100,000 cases last year.

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