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Wine Diploma

Australia Wine Industry – SWOT Analysis

Australia flag package - Country flags

 

Strengths

  • Customer orientated approach to wine making with wineries open to changing styles and techniques means Australia can innovate quickly when it needs to
  • Recognisable quality brands all over the world and good distribution into independent and national retail distribution provides a strong reliable customer base that can ride out short term trends or fashionable wine offerings
  • Variety labelled wines and clear messaging from now recognised credible family familiar brands give consumers confidence in the wines even when knowledge is limited
  • Flexible Geographical Indicator system means wineries can decide whether to deploy a broader GI and perhaps blend grapes (to perhaps suggest great value) or at the other extreme showcase a winery name and its local town (to suggest outstanding quality)
  • Highly versatile range of wines, able to make almost any style of wine to any quality or volume
  • Access to international expertise (flying winemakers & imported expertise embraced and readily available)
  • Wine Australia is one of the strongest and most dedicated trade bodies in the world.

Weaknesses

  • A significant weakness is water availability and its scarcity in some places which has led to it becoming a precious commodity often essential for irrigation purposes. When water is unavailable, vines can suffer considerable damage and vine stress can go beyond positively enhancing grape growing.  Where irrigation is possible and required, it can be very expensive to install and maintain, as well costly to run.  In tern this pushes up the price of wines made from irrigated vines.
  • Underneath the marketing, bulk wines or wines at lower price points tend to have been chemically adjusted or balanced
  • Bulk wines often show little or no typicity and this means they are not as good as similar priced and positioned wines from other countries such as Chili
  • Some of the largest brands such as Yellow Tail give the country and reputation / credibility issue
  • The geographical zones, regions and sub regions are not always familiar to consumers, and they then become redundant as the consumer has no idea of aging, techniques, quality standards from the simplistic approach to labelling
  • Export is a critical part of the industry and as seen with China markets can collapse.  Dependency on export is risky by nature
  • Large companies can mean small high quality producers are overlooked and or ignored

Opportunities

  • Cool climate areas: Tasmania, Yara Valley, Adelaide Hills can create wines that are of outstanding quality and recognised as being in that category, increasing the reputation and prices of all wines from Australia
  • Many regions are still not recognised by consumers, yet these can make terrific wines.  This gives an opportunity to show and tell more of Australia’s vast typography and geography eg Heathcote for Shiraz…
  • Opportunity to market single vineyards or smaller growing areas to niche audiences who can learn about the specific microclimate and its impact on the wine.  These producers can use digitial marketing and social media to reach and serve a global market
  • Opportunity to reintroduce varieties or source cuttings from other parts of the world and grow new styles and varietal wines, eg Italian wines such as Vermentino
  • Old vines message and Barossa Charter has not been used as a branding vehicle, but there is increasing global interest in old vines and Australia is well placed to capitalise on this
  • Wine Australia has significant grant funding from the government to promote Australian wines globally and out spend of countries with less investment

Threats

  • Climate change is having a major impact in Australia.  A) Increased average day time temperatures are making grapes either grow faster and have less phenolic ripeness when harvested, or not growing at all because the vine is shutting down. B) Extremes in temperature are happening more frequently.  Flash flooding, severe frosts, prolonged periods without rain etc etc can wipe out a crop in 24 hours. C) Bush fires and smoke taint from fires can damage or destroy vines
  • The cost of labour in Australia is rising very quickly and this means in remote areas with unappealing mico climates it is becoming difficult to find and fund the labour resources needed to run a vineyard
  • Australia does make a significant amount of bulk wine.  This part of the market has become saturated and over supply has meant wine has to be sold at cost or sometimes even thrown away
  • Australian wine companies often depend on export markets which are becoming more volatile.  For example there is currently a trade war between China and Australia after a period in which Australia has shifted export focus to this country
  • Australians themselves have an ever growing access to wines from around the world, diluting loyalty and interest in their domestic market.
  • The once innovative wine making techniques and marketing strategies have now been adopted globally to greater or lesser degree.  Australia’s innovations can now be found in competing countries like South Africa, Chili, Argentina, New Zealand as examples.  Even in European countries many of the once innovative approaches to wine making are standard

SWOT Analysis Framework

A key element of understanding wine regions at WSET Level 4 is being able to appraise the relative strengths, weaknesses, opportunities, and threats they may hold.

The SWOT analysis is a relatively well-known evaluation tool used in many business circumstances and beyond. Too often though, the tool is used in an over simplistic and generic way which renders the analysis pretty unhelpful and fairly basic.  A powerful SWOT analysis on the other hand combines useful, personalised insights that are quantified in some way, and then evaluated against the wider operating environment.

Here’s some top tips around how to undertake a really good SWOT

Keep the discipline of recognising that strengths and weaknesses are internal factors, whilst opportunities and threats are external. Do not get them confused or overlapped.

Strengths and weaknesses should be quantified relative to competitors operating in the same environment. For example, if every wine region has a good climate for growing grapes, it is not a strength, its just a fact of life!  How much better is it in terms of yield potential or price per kilo of grapes?  If a wine region is susceptible to hail, how often in the last decade and what is the financial impact on the year’s crop?

Opportunities and threats are external factors which need researching to understand their potential. Opportunities are only opportunities if they can be grasped by the business and are not financially or for any other reason out of reach.  They should be realistically achievable, specific, and quantified by return on investment.  Weaknesses are only weaknesses if they are holding back the businesses’ potential over and above that of competitors.  The lost potential should be quantified and explained.

Strengths should highlight genuine competitive advantage.

Weaknesses should highlight key areas of underperformance relative to the market set.

Threats should show the potential to change the businesses performance in a negative trend.

Opportunities should show business potential that it is realistic to acquire.

The SWOT analysis considers these points in the context of the supply chain and how the business is affected by both it’s suppliers and customers and their markets.  Whilst detailed and insightful, they are also very easy to understand and draw conclusions from.

Over the next few weeks I will be producing my own set of SWOTs for every wine region covered in the WSET Diploma

Here’s my first one, it’s on Burgundy!