Flaherty spends a lot of time talking about customers. An oversupply of grapes has plagued the industry for the past few years, sending quite a few small wineries out of business. Flaherty says this has led to customers being forgotten.
“One of the things that I think occurs when you’ve got oversupply is that people get to a stage where they’re desperate to move stock. So everyone gives a discount.”
“The issue with wine is that the consumer really loves wine, in Australia and globally. They love the status and sophistication of drinking wine; they love the occasions when you drink wine. But they hate buying it. And we’ve exacerbated that with our discount mentality, and being very confused with how we market our wine to the consumer.”
The outcome of this is that the role of brands has been dissipated over the past 10 years. As the wine glut recedes, Flaherty says the focus for Treasury Wines is to rebuild the value of its brands, which in turn makes things more comprehensible for customers (it’s easier to remember the wine you liked last week if you remember the brand).
The company is doing this through a range of initiatives, including educational initiatives – “people love learning about wine” – and sponsoring events where people drink wine, such as the horse races, with Yellowglen, or the AFL, with its Rosemount brand.
The AFL sponsorship is interesting, because it’s an area more commonly associated with beer sponsorship. Flaherty says beer, wine and cider companies are competing more directly than has ever been the case.
“We’re a bit more fortunate than beer or spirits, in that they target a younger profile than us. As people get older, the ageing population works in our favour.
“The negative of that is that beer, spirit and cider companies all want part of the action. Their consumer base is shrinking. Our challenge is to hold and grow the consumer base that we’ve got.”
Treasury Wines isn’t being defensive, instead taking the fight to its competitors. “For example, in beer, you’ve seen the explosion of mid-strength and low-alcohol beers,” Flaherty says. “Wine has never really entered that space. But we’ve started focusing on a lighter range of wines, which are going fabulously. They’re appealing to a broad cross-section of people who appreciate the ability to moderate, to have that extra glass with a clearer conscious. It’s more in tune with the lifestyles of many people, and what they want to get out of their experience. So we’re tapping into occasions normally reserved for beer with that.
“But on the other hand, you’ve got beers doing things like going fruit-flavoured, which is tapping into our business.”
Helping Treasury Wines compete is its diversification. Unlike most beer or spirits, wine takes years to mature, giving its rivals an advantage. “We can’t just flick a switch and produce more Penfolds Grange Hermitage or Pepperjack [which take 10 and five years to mature respectively],” Flaherty says. “That’s one of the challenges of our business – its fundamentally agricultural nature. We’re subject to the whims of Mother Nature.”
Size makes dealing with such vagaries easier. For example, Flaherty describes last year’s vintage as “terrible” in Australia and the United States, but stellar in New Zealand. This year, Australia and the United States have posted bumper crops, but New Zealand’s vintage, while high-quality, has been low volume, as have the vintages of Treasury’s European wineries.
“We’ve got to work with our business model to mitigate the peaks and troughs. So our size absolutely helps mitigate risk. With a lot of individual brands or businesses with only one winery, they could be wiped out with one hit. We’d be pretty unlucky if all of our regions got hit at the same time.”
Myriam Robin is a reporter for SmartCompany and its sister site LeadingCompany. She has degrees in economics, international studies and journalism. She likes writing about businesses taking risks and doing new things.
