Wine Business Study Tour : South Australia

Clare valley has 72 wineries, out of which 22 wineries are rate 5 stars and 6 wines are selected on Langtons website (Wfa.org.au. 2016). Only 1 wine of the valley has been named as outstanding. This shows that 30.6% of the Clare valley’s wineries are top ranked. Relatively speaking, Barossa Valley wineries do not outperform the Clare Valley wineries. However when looking at the classified wines on Langtons, Barossa Valley is more represented. Clare valley has a strong association of the Riesling grape variety, less well known than the Barossa (Branding.winesa.asn.au. 2016). The marketing system is carefully structured, balanced and focussed on a small region. Clare Valley Tourism is the official organisation for Clare Valley region. Clare is the heart of Australian Riesling. By being compared with BGWA, Clare Valley is not focussed on Asian markets. Clare Valley mainly focus on New Zealand and United Kingdom (Winecompanion.com.au. 2016).

Grape profitability

Barossa valley plays the major role in producing the maximum amount of high quality grapes in the country, which amounts 8000 tonnes region high quality compared to Australian high quality 150,000 tonnes. In 2008, 40,300 tonnes region super-premium production compared to Australian total (278,550 tonnes) is 14.5% (Abs.gov.au. 2016). This shows that Barossa valley has 6 times greater share of the national high quality grapes production. Its regional quality index, i.e., the region price relative to national average is 1.68. This proves that the valley has nearly 1-time higher level of price of the redwine grape. With respect to the uneconomic production of grapes, in the region, Barossa amounts up to only 0.3% share.

Clare valley is inferior to the quality of grape production in Australia, when compared with Barossa valley. It produces 1300 tonnes region high quality compared to Australian high quality 150,000 tonnes (Abs.gov.au. 2016). In 2008, 12,084 tonnes region super-premium production compared to Australian total (278,550 tonnes) is 4.3%. The regional quality index for Clare valley is 1.09. Clare Valley has over 200 AUD higher level of price of the white wine grape. Out of the total production of 22800 tonnes, the non premium production of grapes is of 0 tonnes (Abs.gov.au. 2016). Clare Valley’s grape production is the only one that account for 0 percentages all over the South Australia.

Wine tourism

In Barossa valley, there are 150 wineries with around more than 80 cellar doors from big brand names to boutique wines. More than half of the wineries have their own cellar door, where the majority of the cellar doors open for 7 days a week (Barossa. 2016). This is quite beneficial for the guests and tourists in the valley. The building style of the cellar door is ultra modern in nature along with quaint stone cottages. The cottages portray the picture of rich history of the owners. Of about 20 wineries in the valley own their own restaurant, where private events for the members are held (Lereboullet, Beltrando and Bardsley 2013).  In the absence of perfect restaurants, some light food is provided by the wineries to the guests. Various activities are performed in the cellars of Barossa valley that provide the tourists and guests to experience the chance to taste special vintage wine along with wine making process. Visitors can ‘Make Your Own Blend’ then take the wine home. Barossa Valley prefers to provide more educational and interactive wine experiences (Tourism Research Australia 2016).

In Clare valley, there are 48 wineries , with more than 30 cellar doors. Here the wineries prefer to have a velar door. Numbers of cellar door in Barossa Valley are nearly three times than Clare Valley (Clarevalley.com.au. 2016). There is a time limitations for the cellar door open hours. Sales of caller doors could be considered as the main way for wineries and the valley lays more focus ion dominant markets. The Clare Valley is also home to some of the oldest wineries and cellar doors in the state. It is a small country town with a rich and interesting history. 7 wineries in the valley have their own restaurants. There are some popular restaurants in the valley like Sevenhill hotel and Mr. Micks. Some activities that are practiced in the cellars are wine tasting, guided tour and experience of the winemaking process (Prasad 2014).        

Export sales and domestic sales

There are 114 wineries in Barossa valley, among which there are 52 five star wineries and 10 red name five star wineries. Annual production of wine by Barossa valley is 11,817,900 in the year 2016, which accounts for a 22.6% raise than the previous year. In 2016, Total export volume of Barossa valley is of 7.59 million litres with 5% growth in volume compared to 2015. The Average value / litre of 2016 is  FOB16.74 with a recorded Increase of 4.1%. Bottled (Value -FOB) was A$ 62.75 million. The destination markets are China (37% in Vol) USA (15% in Vol), UK (13% in Vol ;) Canada (7% in Vol); NZ (5% in Vol). in domestic markets value of sales in Barossa valley had rose 18.9% in 2016, with a reduction in the price per litre of wine. In 2016, in Barossa, there were 109 exhibitors in the wine show.  Range sizes were 49 small and 29 medium.

With 52 wineries in the place, Clare valley has 23 five start wineries and 3 red name five star wineries. The annual production of wine in this valley is that of 6,617,400 in the year 2016 with an annual increase of 1.26% (Wineaustralia.com. 2016). Barossa valley has twice number of wineries than the Clare valleys and a 1.5 times more annual productivity. This shows that Barossa valley has a stronger annual growth than Clare valley. In 2016 Total export volume of Clare valley is of 3.14 million litres with a 21% growth in volume compared to 2015 (Wineaustralia.com. 2016). This is shown as an increase of 1.18%.Bottled (Value -FOB) A$ 22.15 million. The destination markets are UK (36% in Vol); New Zealand (17% in Vol); China (17%); Canada (10% in Vol) USA (3%) . in domestic markets the sales value had rose by 1.7% with an increase in price to AUD 20.27/litre in the year 2016. Barossa Valley has nearly double the average export price than CV in general.  Barossa Valley has commanded 9.01% of total Australian high priced export wines than Clare Valley (1.78%) (Wineaustralia.com. 2016). Both the valleys have the same top 5 destination markets, but the vol share % in different to these destinations. In 2016, Barossa has a 4.4% higher average price than Clare.

Region wine organization

BGWA hold many wine festivals and events, including wine auctions and wine shows and also shows its e-marketing plans through Facebook and Twitter (Bigi and Bonera 2016). Hence, it could be stated that there are numerous ways to market Barossa valley wines. It has successfully attracted public attentions and increases its exposure. In Barossa Valley Entire website section dedicated to environmental projects that spreads field awareness about environmental issues, Broadcasting environmental best practices and align them with improvements in grape quality. This raises the sustainability of the valley. Barossa’s Next Crop program for young grape growers; BGWA Viticultural Development Officer, Nicki Robins, in partnership with the Barossa VitiTech Group, achieved great results on viticulture projects which thereby supports the capabilities in coordinating and developing targeted workshops (Barossa 2016). These skills would help in the improvement of the products adhered to the valley, thereby showing great business and marketing capabilities.

The strong association of the Riesling grape variety with the Clare Valley is reflected in the widespread recognition of the Riesling Trail. The AWBC export approval database reports that in the year ended August 2008, 4.6 million litres of wine were exported from Clare Valley (Clarevalley.com.au. 2016). This highlights that Clare Valley is a valuable regional identifier. In spite of having such capabilities, Clare valley has no environmental or sustainability project ongoing but has analyzed the results of trials in other regions and possibility to launch a project next year. While Clare Valley struggles to take actions to promote sustainability of their region, Barossa is using several tools to broadcast the importance of sustainability. The BGWA uses its notoriety to convey sustainability concerns (Sadras 2014). In 2012, the Clare Valley Alliance was formed to brand and stimulate the Clare Valley Region. The Alliance is a collective group of representatives from each peek body in Clare (Ryan 2014). It seems to be quite hard to find detail data about Clare Valley business capability on line which makes the valley comparatively less organized than Barossa valley.

Business strategy

The detailed comparative discussion framed above has been able to gather the inefficiencies and opportunities prevailing in the Clare valley. It would be quite beneficial for the valley to frame an extensive business strategy that would help in raising the brand image of the wines made in this valley, thereby raising their standard, stability and revenue structure (David and David 2016). Under the business strategy, two strategies must be followed by the valley that would implement all the functional values thereby illustrating the projected path of business. These two business strategies are branding and sustainability strategy.

Action

Based on the two strategies to be followed by Clare valley, there must be two set of strategies to be framed, as follows:

Branding : the association of Clare valley must promote their brand by portraying the cultures and the differential varieties of wines that are produced in that area. The 5 star rated wines along with the outstanding wines must be highlighted, that would help in gaining popularity among the tourists and raise their urge to visit the valley. The cellars and the associated restaurants must be well framed and furnished with cellar door open for longer hours. This would attract the tourists to the valley in great numbers. Associating the brand with their rich cultures and heritage of the valley can promote an impressive effect regarding the wine of the valley (Seo and Jang 2013). The wines must be carried forward for promoting in various international developed and developing countries through personal website, social sites and exhibition. Wine festivals and events, including wine auctions and wine shows must be promoted in the valley (Quintal, Thomas and Phau 2015). This would help in building the brand image of the industry by promoting them. It is quite important for Clare valley to promote brand awareness of their products in order to raises their popularity.

Sustainability : sustainability of the industry is an important aspect for the long run. This could be done by undertaking various projects related to the sustainability of the valley. As the Barossa valley, Clare valley must also promote the methods of promoting sustainable methods of the environment.

Responsible

Clare valley tourism department along with the history group and the council group of the valley is responsible for raising the brand value of the products of the organization. Promoting and advertising the products to international levels must be done efficiently so that its affects the business in a positive manner (Seuring and Gold 2013).

Raising the sustainability of the organization must be performed by the council department of the valley, which must promote activities in the valley that helps in sustaining the viticulture of the valley.

Resources

To carry forward these activities, resources must be needed by the valley to upgrade their standards and revenue structure. This would help the economical structure of the country as a whole. Hence, the resources for promoting the brand and maintaining the sustainable environment of Clare valley must be done by the government.

Benefits of such activities would be experienced by the families of the wineries by enhancing their income structure, by the valley as a whole and by the wine industry of the country. The benefits associated with this business strategy is far reached and associated with long term goals.

Time frame

The time frame associated with the framing of the strategies mentioned above has been shown in the form of a gantt chart as follows :

Principal Activities

JAN

FEB

MAR

APR

MAY

JUN

JUL

AUG

SEP

OCT

NOV

DEC

Research for the present conditions  of branding

Identification of the sources available

Analyse the market situation.

Frame  the promotional structure

Resources from the government for promotional plans

Promotional activities

Initiate brand awareness process along with introduction of outstanding and 5 star rated wines

Initiate long term projects for sustainable environments

Sales and revenue

Calculation of profit and break even points

Table: Time horizon for research

(Source : As Created By Author)

Expected outcome

With the implementation of branding and sustainability strategy of the Clare valley, there would be a rise in the demand for the wines of the valley in the international level. This would enhance the export sales of the valley. Along with the exports, there would a raise in the number of tourists visiting the place. This would raise the domestic sales of the valley. A well revised revenue structure of Clare valley is expected as an outcome thereby raising the standard of the valley. The sustainability strategy would help in sustaining the surrounding of the valley and promoting long term plans for them. It would maintain the ethical structure of the valley (Christ 2014).

Risk associated with implementation

Risks associated with the branding and the business strategy framed in the section has no great impact that might result in the negative adversaries of the valley. Small risks of promotion going wrong, unable to raise the demand, mismanagement for sustainability projects are associated with the strategies. These risks are minute enough which could be eradicated by following proper implementation of a well structured framework.

Conclusion

A detailed analysis of the differences between the Barossa valley and the Clare valley has been successful in analysing the loopholes, gaps and inefficiencies that prevail in the Clare valley. These inefficiencies must be sorted out with the use of extensive business strategy as illustrated in the section above; this business strategy would help in creating brand value for the products among the customers and improvise the stability of the valley. Successfully oriented and organized plan structures help in promoting the most efficient framework that wards off all the weaknesses of the organization. Clare valley must follow the strategies related to branding and sustainability that would help in raising the business framework of the valley.

Reference

Abs.gov.au. (2016). 1329.0 - Australian Wine and Grape Industry, 2008 (Re-Issue). [online] Available at: https://www.abs.gov.au/AUSSTATS/[email protected]/Lookup/1329.0Explanatory%20Notes12008%20(Re-Issue)?OpenDocument [Accessed 25 Nov. 2016].

Barossa. (2016). Barossa. [online] Available at: https://www.barossa.com/ [Accessed 25 Nov. 2016].

Bigi, A. and Bonera, M., 2016. A Proposed Benchmark Analysis of the Connection Between Wine Production and Destination Perception. In Rediscovering the Essentiality of Marketing (pp. 963-968). Springer International Publishing.

Branding.winesa.asn.au. (2016). South Australian Regional Branding Materials. [online] Available at: https://branding.winesa.asn.au [Accessed 25 Nov. 2016].

Christ, K.L., 2014. Water management accounting and the wine supply chain: Empirical evidence from Australia. The British Accounting Review, 46(4), pp.379-396.

Clarevalley.com.au. (2016). Home | South Australia - Clare Valley Tourism - The Official Clare Valley Website. [online] Available at: https://www.clarevalley.com.au [Accessed 25 Nov. 2016].

Clareview.com.au. (2016). Clare Valley things to do, list of Clare Valley wineries, list of Clare Valley cellar doors, events, wine tasting in the Clare Valley, visit cellar doors, vineyards, Riesling Trail, gourmet weekend. [online] Available at: https://www.clareview.com.au/thingstodo.html [Accessed 25 Nov. 2016].

David, F. and David, F.R., 2016. Strategic Management: A Competitive Advantage Approach, Concepts and Cases.

Fitzsimmons, J. and Fitzsimmons, M., 2013. Service management: Operations, strategy, information technology. McGraw-Hill Higher Education.

Lereboullet, A.L., Beltrando, G. and Bardsley, D.K., 2013. Socio-ecological adaptation to climate change: A comparative case study from the Mediterranean wine industry in France and Australia. Agriculture, ecosystems & environment, 164, pp.273-285.

Prasad, P., 2014. Winter getaways. Management Today, (May 2014), p.40.

Quintal, V.A., Thomas, B. and Phau, I., 2015. Incorporating the winescape into the theory of planned behaviour: Examining ‘new world’wineries. Tourism Management, 46, pp.596-609.

Ryan, M., 2014. Wine: Taylor-made wines from one of one of the industry's first families. Australian Medicine, 26(2), p.42.

Ryan, M., 2015. Wine: O'Leary Walker-the future is Clare. Australian Medicine, 27(8), p.35.

Sadras, V., 2014. Yield of Shiraz in response to warming and late pruning. Australian and New Zealand Grapegrower and Winemaker, (605), p.38.

Seo, S. and Jang, S.S., 2013. The roles of brand equity and branding strategy: a study of restaurant food crises. International Journal of Hospitality Management, 34, pp.192-201.

Seuring, S. and Gold, S., 2013. Sustainability management beyond corporate boundaries: from stakeholders to performance. Journal of Cleaner Production, 56, pp.1-6.

Tourism Research Australia (2016). [online] Available at: https://www.tra.gov.au [Accessed 25 Nov. 2016].

Verdonk, N.R., Wilkinson, K.L. and Bruwer, J., 2015. Importance, use and awareness of South Australian geographical indications. Australian Journal of Grape and Wine Research, 21(3), pp.361-366.

Wfa.org.au. (2016). WFA - Winemakers' Federation of Australia. [online] Available at: https://www.wfa.org.au/ [Accessed 25 Nov. 2016].

Wineaustralia.com. (2016). Australian Winegrape Purchases Price Dispersion Report - Excel Files. [online] Available at: https://www.wineaustralia.com/en/Winefacts%20Landing/Grape%20and%20Wine%20Production/Winegrape%20crush%20and%20prices/Australian%20Winegrape%20Purchases%20Price%20Dispersion%20Report%20-%20excel%20files%202016.aspx?ec_trk=followlist&ec_trk_data=Winegrape+crush+and+prices [Accessed 25 Nov. 2016].

Wineaustralia.com. (2016). Home. [online] Available at: https://www.wineaustralia.com/ [Accessed 25 Nov. 2016].

Winecompanion.com.au. (2016). Australian Wineries & Cellar Doors | Australian Wine Companion. [online] Available at: https://www.winecompanion.com.au/wineries [Accessed 25 Nov. 2016].

Xayavong, V., Radhakrishnan, M. and Kingwell, R., 2013, February. Development Strategies for a Premium Wine Region of Australia: an application of value chain modelling. In 2013 Conference (57th), February 5-8, 2013, Sydney, Australia (No. 152186). Australian Agricultural and Resource Economics Society.