By James Atkinson
Authentic wine brands will move back to the forefront of retail as the current cycle of wine oversupply nears its end, according to Treasury Wine Estates CEO David Dearie.
Following his Amcham speech last week, an audience member asked Dearie whether Treasury's brands are under threat from Australian retailers' increasing reliance on private label wine.
"I think the retailers rightly have taken advantage of the excess supply situation and produced private labels, but I do think that's what they are – they're labels," Dearie responded.
He said the wine business goes through about 15 or 20 year cycles.
"You have eight to 10 years of oversupply, a period of balance, and then eight to 10 years of undersupply."
"As we start to enter in to the global balance of shortage situation, then the supply of private labels to the retailers will slow down and brands will become much more to the forefront," Dearie said.
He said that about 59 per cent of branded bottled wine sales in Australia come from just 20 wine brands.
"Wine brands are incredibly important," Dearie said.
"The retailers here are powerful and it's up to all of us to go out and choose our favourite brands."
Treasury brands are being sold below cost every week and the margin that is possible on these brands does not even cover the operational cost to open a retailers front door in the morning. Private labels or “Labels”are hear to stay in the Independnets and the Chains because they create a point of difference and margin to the pay the bills. The over or under supply of wine will mean that Private Lables will go up or down in price in line with Branded product. Show me how to make 45% GP on Promotion and I will become a Treasury store convert? Even Labels become Brands eventually!
Clearly Drearery has no idea about own labels. For the everyday consumer they cannot pick the difference between a well developed own label and a dying brand!
Own brand will continue to thrive as the retailers make greater margins and still deliver quality to the consumer.
To be honest, I think it should be the other way round, private labels will dominate as there are thousands and thousands of wines coming out everyday and private label is a prefect play for a big retailer to maintain its profits. Wineries are also being forced as they sometimes have no options but to do a private label else its a bigger loss. Unfortunately retailers don’t care about the brand – even if consumer did.
Offcourse, Penfolds will be Penfolds and hats off to brand creation, but if you were to take a new wine – they would prefer a private label exclusive. (unless that brand has a pulling power – it has no value to the retailer)
Declining profits, lower margins where do the head hunters find these CEOs. Those at treasury blame everything but themselves for their lack lustre performance as the rest of the industry grows both brands and profit at their(Treasury) expense
Treasury are box movers,they have destroyed more “Brands” than I have had bottles of red, they cant build them only discount the value and sell the assets to prop up the bottom line They exsist on the only one they cant kill “Penfolds”
Bring back Adsteam”
How arrogant can this company get, This TWE CEO has an arrogance that would make Myers Blush. TWE have destroyed severl top end labels with their blatant disregard for the inteligence of the consumers and not understanding that consumers are becoming much more wine savvy than they were 15 years ago. Private labe is here to stay and will consolidate the commercial wine market and leave many liquor stores to whitle their margins just to stay open, and isn’t that what they want! I understand that the chains and big box are a massive 70% plus plus of the TWE’s business. Eighty percent of their business comes form twenty percent of their brands….