A radical overhaul of alcohol taxation and innovative packaging design could have a deep and lasting impact on the Australian wine market
Last week, Wine Intelligence’s London office welcomed Australia & New Zealand Country Manager Liz Lee back to the UK. We took the opportunity to catch up and learn more about the Australian market in advance of our upcoming Australia Landscapes 2017 report.
During our programme of trade interviews with Australian wine industry professionals, we heard that changes to wine taxation could have a profound impact. What are your thoughts?
This is a polarising issue, something that is often passionately debated in Australia. At the moment, regulations are quite complex. Wine is taxed one way, while other alcoholic products (beer, cider, spirits) are taxed another; wine tax is based on value and the others are taxed according to their alcohol percentage. This means that producers who produce higher priced wines are getting hit a lot harder than others. The consequences of this can disadvantage entire regions. Take Margaret River for example. This region doesn’t account for a large share of volume in Australia but does account for a sizeable chunk of tax revenue, as producers there sell more premium, more expensive wines.
The proposed change is to bring wine tax in line with other alcohol tax. For small producers making premium wine, the proposed tax changes could prove to be extremely helpful. Beer and spirits producers would also welcome the changes as they feel they are at a competitive disadvantage under the current level of tax.
The challenge is for cask wine producers. Changing the taxation regulations to alcohol percentage would cause huge implications for a lot of producers who make the bulk of their sales from lower priced wine. If you apply the same amount of tax to a 4L cask wine with 13% that costs $12 AUD to a 750ml $30 bottle of wine, the whole landscape of the Australian wine industry would change. It’s certainly a very complicated situation.
The upcoming report also shows some changes in consumer spend and consumption frequency. What do you think is driving these changes?
We’re seeing a trend overall that a lot of Australians are choosing to drink wine a little less frequently but, when they do, they’re willing to spend a little bit more. The food and beverage culture in Australia is strong and I think education around wine is starting to increase too. Anecdotally, I also think that Aussies are happier to ‘treat’ themselves with more everyday luxuries, like spending a few extra dollars on a wine. It’s about making an everyday occasion just a little bit more special.
Our latest Australia Landscapes 2017 report suggests that more well-travelled regular wine drinkers are becoming more involved and experimental in the category. Have any of your travels inspired a new favourite wine?
I guess Australians are still a little behind in terms of their knowledge of international grape varietals and regions, but we are seeing this improve. The bulk of wine consumed in Australia has been produced domestically, with the vast majority of imported wine coming from across the ditch (editor’s note: from New Zealand). But it seems that those who are interested in trying new styles and varietals, once they get going they soon realise there’s a whole new world of wine out there.
For me, my recent travels to Italy really showed me how much I still have to learn. I thought I had a relatively good level of knowledge of Italian wine, but when faced with the extensive wine lists in restaurants I recognised maybe 10% of the wine. Being accustomed to seeing varietals and brand names first, looking at a list divided into regions (and sub-regions!) was a challenge. I spent a week in Chianti, and to be honest at the beginning of the trip I didn’t know what the traditional blend for a Chianti Classico was. By the end of the week I had fallen in love with Sangiovese!
Is there a bright future for alternative packaging and design in Australia?
We’ve talked to various people in the trade and most seem to agree – and I do too – that development of packaging format in design is relatively slow in the wine category. Other alcoholic beverages tend to move at a faster pace. Wine is often more romanticised than categories and I think it carries more of a sense of ‘tradition’. There are bound to be more changes and developments over time and I think Australia is opening up to innovation. When screw-caps were first introduced in Australia there was so much resistance, but today it’s the most accepted form of closure in Australia.