Australian Vintage Limited is one of Australia’s largest wine producers and the architect of some of the country’s most recognisable brands, including McGuigan, Tempus Two and Nepenthe.
But despite brand notoriety and years of award-winning winemaking under the belt, some confusion remains around just who Australian Vintage Ltd is. So, Ashley Pini, Publishing Editor or drinks bulletin, sat down with General Manager for Australasia and North America, Cameron Ferguson, to set the record straight.
Eight years on from the McGuigan Simeon Wines transition to Australian Vintage Ltd (or AVL as it is sometimes known), what many people don’t know about the business is that the foundations were built on passionate winemaking families – led by the McGuigans, who have been involved in winemaking since 1869, when Owen McGuigan first started growing grapes in the Hunter Valley.
“Sometimes it’s nice to fly under the radar, but it does get a little perplexing when I meet with the liquor store managers and they stare back at me blankly when I say I’m from Australian Vintage. The minute I say the words ‘McGuigan Wines’, there’s a warm nod of recognition,” said Ferguson.
Ferguson added, “I always talk a little bit about fact and fiction with our customers. Yes, we are a company that was born and bred in the Hunter Valley, but over the years we have become much more than that, and thanks to rapid expansion and rejuvenation we are now one of Australia’s largest – and fastest growing – wine companies.”
A Branded Shift
Australian Vintage’s historical market position can leave you with the perception that the core business is bulk wine with branded wines taking a back seat. Not the case says Ferguson, and a misconception he has come across on a number of occasions.
“Over the past ten years, we have been strategically growing our branded business both domestically and internationally. In the first six months of FY06, branded bottled sales across the entire AVL portfolio represented 39 per cent of total sales. In the first six months of FY16, that number is 82 per cent,” said Ferguson.
There has clearly been a significant increase in contribution to the business from Australian Vintage’s core brands. So what’s driving this change and where is future growth going to come from?
“This is coming across the board, both domestically and through export,” explained Ferguson. “Last year, our core brands grew 18 per cent globally and we expect to see this continue as we push to grow our portfolio above AUD$12. We have particularly seen a branded shift in growth for McGuigan Wines.”
“We resurrected the Black Label range, which has given us three SKUs in the top five selling red wines nationally – our Cabernet Merlot, Merlot and famed Black Label Red. At the same time, we are continuing to move the anchor point of the McGuigan brand upwards through innovation of a premium portfolio, supported by our first major investment in above-the-line activity and some very unique positioning of our brand, which is unconventional for the wine industry.”
Following a successful trial campaign in selective channels last year, the above-the-line activity will appear Australia-wide this coming May, representing the largest investment from the McGuigan brand ever. Why now and how will this help to move the price point up when everyone is feeling price compression?
“All of our brand research shows that McGuigan could exist across all price points. Consumers see McGuigan as a brand that has heritage, quality and trust, so we know that any issues we have aren’t necessarily with the consumer, but those that think McGuigan cannot exist outside of Black Label. We call this the ‘gatekeeper perception’”.
“We have been working hard to change this gatekeeper (trade) perception and the positioning of our business. It’s been a journey for us over a number of years now. A big part of our focus initially was selecting some key leverage points that we knew we could do really well, and the strategy worked. We’ve dynamically broadened what we want to be known for and a big part of this is really opening up our true capability as part of a global, fully integrated wine business, of which step changing innovation and support will continue to play an important part.”
“The introduction of The Philosophy in 2014 – a super-premium Cabernet Sauvignon Shiraz – was also a game changer, giving us our first ever product over AUD$100 and ensuring we had a quality wine at every price point for our customers.”
Lifting the price point of McGuigan through the introduction of The Philosophy and other premium ranges has given a greater value perception for this well-loved and iconic Australian wine brand. Coupled with a raft of gold medals and, in particular, the International Winemaker of the Year Award at the IWSC in London (International Wine and Spirit Competition) in 2009, ‘11 and ‘12, the McGuigan brand took off. Not that it wasn’t already popular, but the timing was particularly good – getting consumers and trade on board for McGuigan wine with a larger price tag. So how did this work outside of the McGuigan brand?
“We purchased Nepenthe wines in 2007, which was significant in terms of helping to shift the gatekeeper perception across the rest of our business. We were no longer just producing quality wines, but we were producing quality, boutique wines out of the Adelaide Hills. Nepenthe is a brand that withstood the ‘avalanche’ of NZ sauvignon blanc and has grown 57 per cent in the last five years. Such is the strength of the brand. As a business we have managed to retain and strengthen that position since its acquisition, and it has had a halo effect on the rest of our business. Nepenthe Ithaca Chardonnay also won ‘Best Chardonnay in the World’ at the IWSC in 2013.”
Looking back on where AVL began, what would you say is the company’s biggest achievement?
“I’d have to say taking our business on a journey from bulk to branded. There is now diversity in our business, and we are incredibly proud of that.”
Ways of Working
When visiting the AVL offices in the backstreets of Balmain, your first challenge is to make sure you can find it. AVL is tucked away in a nondescript building without signage; slotting into the residential buildings opposite, almost camouflaged by its lack of big corporate office identity. Once inside however, it becomes clear that all is possible at AVL, despite appearances. Brick walls house an open, well lit and spacious office. In terms of staffing, the team is not large, rather closely-knit, consisting of dedicated people who care about building their brands.
“One of the key differentiators for Australian Vintage is the fact that we do not have as many human assets as some of our competitors,” acknowledged Ferguson.
“What I mean by that, is that we like to keep things nimble, because it makes for quick decision-making. We can turn around NPD at incredible speed, while still operating within commercial and quality frameworks and keeping in close contact with our customers.”
“At Australian Vintage, no one is bigger than the job and that is demonstrated right from the top down with Neil McGuigan. Neil is without a doubt the hardest working CEO in the industry; he knows most, if not all of our customers intimately and his time in the trade and overseas, living and breathing the brands, far outweighs the time he spends at home,” said Ferguson.
“Though we are one of the largest wine producers in the country, we are also one of the quickest to step away from the corporate image. Ties and suits are a rarity in our office, and we pride ourselves on presenting a relaxed front with our stakeholders.”
Ferguson is confident that this is the way to go - the “right way of working”. Backing up his confidence are the better than expected results, and the vitally important ratings from their customers including the Advantage Survey Report.
“Our goal is to be a top five overall liquor supplier as rated by the Advantage Survey, and we’re not stopping there. We know right now that we’re exceeding this across 80 per cent of our customer base. Everything we do in our company stems from the importance of meeting our customer needs - if you aren’t serving a customer, make sure you are serving someone who is,” Ferguson summarised.
Vision
It is of course a leader’s imperative to have a vision and a clear pathway in terms of growing the business. Ferguson’s vision is clear and defined.
“We have to act and behave relative to the size and scale of the biggest players in the industry, because we know that if we can do this it will have a positive impact on everything in our business.”
“Our vision is to be a wine culture company; to be Australia’s most responsive and efficient producer of quality brands, private and exclusive label wines. And I think we are well on the way to reaching this vision.”
“There’s a lot of talk out there about private label, and as far as we are concerned it’s not a ‘dirty’ word. Understanding the industry demand, we have set up a model that is highly geared to deliver low cost and quality, and that is one thing we pride ourselves on - a high differentiating value versus our competitors,” said Ferguson.
Thinking Global, Looking Forward
While the domestic market continues to be a priority for the AVL business, there is continued focus on developing new and emerging markets, particularly the UK, China and US.
“We have a powerhouse business in the UK, and it hasn’t taken too long to build. McGuigan is the fourth largest global wine brand in the UK market, the number two selling global wine brand in Ireland and has just entered the top 20 alcohol brands by value in the UK, ahead of brands such as Peroni, Baileys and Guinness. This is on the back of 23.2 per cent growth MAT.”
So what of China? Every wine business nowadays talks about the importance of China as a market, yet AVL hasn’t publically focussed on this market until relatively recently as there were other priority markets at the time, such as the UK.
“Whether it is right or wrong, our focus wasn’t on Asia in the beginning. It has really only been the last three years that we’ve committed to growing our footprint in the region. Over the last 12 months, we have been able to establish a strategic partnership with one of China’s largest food companies, and with Australian exports we grew 30 per cent last year.”
The partnership with COFCO Wine & Spirits Co Ltd – part of China’s largest food processing, manufacturer and trader - has AVL as the strategic partner for Australian wine throughout China within the newly established International Wine Division of COFCO.
“Am I totally satisfied with what I’m getting out of China now? Not particularly, but that’s why we have a partner that has one of China’s biggest wine brands (Great Wall Wine) and who knows the landscape intimately. They themselves have recognised that the future of growth in China is going to come from imported wine brands, not local. This insight has helped drive the growth of their separate International Wine Division, and the fact they’re backed by one of the biggest companies in China instils us with nothing but confidence,” said Ferguson.
AVL’s core markets are growing and the plan for China is coming together; the last horizon it would seem is the huge US market - a stage upon which Australian brands have exceeded when the right distribution set up is put together.
“We have a fairly significant business in Canada, which has been there for a number of years and we are outperforming the market there. Year to date we are up about 28 per cent in Canada and that’s well above the Australian category which is in low, single-digit growth. We’re taking a bit of a position where we are talking about the Australian category and the benefit in our business is coming from that, and we have some really good people working that market.”
“We are ready to re-enter the US market after more than a ten-year hiatus due to some contractual arrangements. I’m happy to say that two of our brands will be launched with a major US importer in the next 12 months. With the dollar and the US general view of the Australian wine category starting to shift gear for the better, the time is right to take in Tempus Two this year and McGuigan in 2017.”
Bring a McGuigan
This month sees the launch of the ‘Bring a McGuigan’ above-the-line campaign nationwide; a first for AVL and an investment that is a reflection of their ambition to move McGuigan into the top five brands in the wine category. ‘Bring a McGuigan’ will run from May through to September.
“The last 12 months have proven challenging and exciting for Australian Vintage, with the launch of our first ever above-the-line campaign – ‘Bring a McGuigan’”, Ferguson says.
“Our mission is to be among the top five wine brands in each market that we are in, and we know we’re not going to just get there by being a trading brand.”
“One of the biggest opportunities to address this is consumer awareness; from our product range and quality at every price point message, to how to pronounce the brand name ‘McGuigan’. You’d be amazed how difficult some people find it to pronounce our name, I’ve had ‘McGoogan’, ‘McGeegan’, you name it,” finished Ferguson.
What AVL is aiming for is not your typical style of wine advertising.
“We wanted to engage wine consumers in a more relatable way, breaking the traditional mould and venturing away from the ‘vineyards, grapes and winemakers’ to bring sociability to the wine category. We wanted the campaign to perfectly mirror what the McGuigan brand stands for – fun, authenticity, playfulness and approachability. Check it out!”
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