The United States is a mecca for wine importers – which is hardly surprising given that it is the world’s third largest consumer of wine products after France and Italy. However, it is also the world’s fourth largest wine producer, bottling 23,300 hectolitres each year, which is 2,100 hectoliters more than it consumes.
In such a well-supplied and fiercely competitive market, how is a small Australian wine company meant to break through the clutter and win its way into the supermarket trolleys of US consumers?
Wes Ward, Founder of Victorian based Koala Creek, one of Australia’s newest wine exporters, found himself asking that very same question in 2002.
“Wine production is capital intensive. Introducing a new wine to a growing market, such as the US, can be very risky,” says Ward.
“While most wine companies seem to create their products, and then face the dilemma of how to sell it, we wanted to build the demand first, by producing a wine that would specifically appeal to the people we wanted to sell it to.”
Ward is the fourth generation of a family of farmers who have maintained a successful property at Bugla Road, near Swan Hill, since buying the land in 1893. His ancestors were dry-land farmers, but grapevines now grow rapidly on the piece of Mallee soil. Unlike family members before him, Ward had the opportunity to work and study abroad.
“I received a BComm from Latrobe University and then took a job working in finance for Merrill Lynch in Europe. I also spent some time working for the world’s largest perfume manufacturer, International Flavours and Fragrances,” says Ward.
“It was during this time that I gathered an understanding of international marketing and began to see Australian products from a foreigner’s perspective. I could see that in many ways, we were getting it wrong.”
The opportunity to test Ward’s newly acquired knowledge arose in 2002, when he was offered the opportunity to take part in a Victorian Government wine export mission to the United States. Rather than arrive with a business plan existing stock, Ward decided to take a different tack. At the age of thirty, using accumulated savings, Ward arrived with two brands developed specifically for the trip.
“If I was going to pay for the trip to the US, I wanted to bring something new. I also wasn’t entirely sure about what the US importers would want, so I developed two brands and arrived with two bags rather than one.”
To enter the US market, an Australian wine producer requires an importer. The importers job is to work with a distributor, who will then take the product to the retail market.
“The system is a hangover from the prohibition era. While attracting the attention of an importer can be a hard task, the process can also have its benefits, because dealing in the United States is like doing business with 52 separate countries,” says Ward.
The two bags contained a premium table wine and a boutique brand, each developed for a different segment of the US market. The Koala Creek brand was specifically targeted toward female supermarket shoppers.
“The task was to develop a label that would tell a story without being over the top. I didn’t want it to look like a Ken Done design. I wanted a subtle style that would be instantly recognisable as an Australian wine.
“I gave Chris Perks Design a very detailed brief and they created the label.”
While other wine makers were talking up their blends, Ward was focused on his label – a simple Koala print that could be replicated in different colours to suit the wine grape varietal and personality type of each wine he intended to produce.
“Over the course of the mission, I met with three importers. While the other Australian wine companies went hard on quality – which is hard to prove and no different from wine maker claims the world over – I put myself forward as a person who was focused on the consumer first.
“I said, this is really simple, we want to put the product in supermarkets and be bought by female shoppers – and, of course, female shoppers in America like Koalas.
“We wouldn’t need to print labels saying ‘Made in Australia’, because the brand would say that by itself, and we could enjoy Australia’s reputation for quality wines that way.
So what was the outcome?
“The importers were less interested in my boutique brand, because it was post 9/11 and is difficult for an importer at the best of times to take on a new wine brand and develop a whole new story for the marketplace. It is easier for them to go high volume.
“The other Australian winemakers, who only had boutique wines to sell, got the same feedback and experienced limited success on that particular trade mission.
“However, each of the three importers were interested in Koala Creek. Discussions continued over a few months and, ultimately, we signed a deal with Vino Importers.
“We are now stocked in nine US States, predominantly down the eastern seaboard, and are positioning ourselves to enter Missouri and Mississippi as our next step.”
In the last 12 months, the addition of David Heathcote, as General Manager, has brought additional equity and strategic insight to the company.
“David comes from a wine industry background. He is a grape grower and has his own vineyard in King Valley. For me it was important to find external capital because a producer must commit to having a certain level of stock in reserve, which can be an expensive investment.
“Of course we will always have wine in reserve, but, fortunately, the beauty of our business is that it is demand driven. When we have a wine order, say eleven hundred cases, it is only then that we do the bottling run, which gives us a stable and robust model to work with.
“With David, and any equity partner, the most important thing to look for is their ability add value. If that person has a background in your industry, they will also have an instant understanding of the opportunities and risks – matters that would need to be explained, over and over again, to some VC’s.”
What does the future bring for Koala Creek?
“We plan to export to Europe. A geographic currency spread reduces exposure to market and currency fluctuations. Our intention is to have a presence in at least two stable currency zones.
“But the Australian market is a more immediate goal for us. And, surprisingly, market research conducted by Roy Morgan has shown that the brand is received well by local consumers. In fact, the research response was overwhelmingly positive.
“What is rarely said is that there are three important aspects to the wine product: packaging, price and the quality of the wine. You always need great wine, but the blend is only one third of the equation
“I guess from the beginning I knew that if we could brand it well, make great wine and give it a good price, the volume would come.”