Australian Vintage Limited (AVL) has posted its full year results showing a 79 per cent increase in profit to $7.7m, as well as improvements in revenue, cash flow, sales and net debt.
Chief Executive Neil McGuigan told TheShout that this result was a “good step” for the business, which has done “quite well”, that it vindicates the decision to focus on the UK market after the Brexit vote and that the company was confident about what was going to happen in the future.
“What pleases us greatly is the decision we made two years ago when the Brexit vote occurred in the UK,” McGuigan said. “A lot of companies retreated from the UK but the Brits love Australian wine and we decided to do the opposite to a lot of other companies and we actually invested in the market.
“We put more people on, we worked very hard to get exposure in every major supermarket and we also put people on in the UK’s independent division.”
McGuigan also said that the company had some help with exchange rates, which had hurt AVL’s results in recent years.
“The performance of the UK business was better by $5.4m and $1.6m of that was exchange rate. So we’ve had a bit of a kicker with the exchange rate which has helped the business, but we have also increased our sales.
“Our sales were up 25 per cent, McGuigan was up 18 per cent over there, so we’ve done particularly well. But we do have a foreign exchange policy within the business that we adhere to and that de-risks the business, but when the Brexit vote occurred, no-one saw that coming and no-one had enough coverage.”
He added: “We made our commitment in the UK and now we have come out the other end and now we are the third largest global brand by volume in the UK, which we’re very proud of. And in the independents we’ve gone from 21 to 12 and we want to be in the top five.”
While the company has focused on the UK market, and McGuigan said they are there for the long haul over there, he was keen to re-iterate how important the Australian market is to AVL.
“We are working very hard with the independents as well as Woolies and Coles; we’re going to continue to do NPD, and new packaging options, new label options and of course new varietals.
“We’ve got to embrace new consumers, don’t just assume that the new drinkers will simply drink what their parents were drinking. So we’ve released Prosecco under Tempus Two, we’ve got a Grüner Veltliner coming out of Adelaide Hills for Nepenthe, we’ve got Montepulciano, which we’ve planted at our Barossa Valley vineyard under McGuigan. We’re planting Carménère this year as well and of course Malbec.
“Malbec is a variety that we have got a position with in the UK, it has worked very well for us there and we are going to be releasing that in Australia as well.”
Overall AVL reported that sales of McGuigan, Tempus Two and Nepenthe were up 14 per cent, with McGuigan telling TheShout that Tempus Two is “on fire” and “going incredibly well” in Australia.
He added: “McGuigan was basically flat this year, and that was because we had to take a strategic decision on the price point of Black Label. Black Label red is Australia’s number one selling red wine and as a result the range was targeted on price point because it is so successful.
“If you are not going to respect your brand then no-one else is, so we did not want to start that downward spiral on discounting on a brand which is so important to us. So we took a strategic decision and we made sure we didn’t support promotional activity and as a result we’ve got Black Label priced at $9 and $7 on special, which is where it should be.”
In terms of looking to the future and the shift in wants and needs of new consumers and legal age drinkers, McGuigan welcomed the challenge saying: “We are always evolving and always looking for new opportunities and we are filling the NPD pipeline.”