From Neil McGuigan
CEO’s Report — 2015

The recently concluded financial year has been another tough time for the Australian Wine Industry. Over production, unsustainable bulk wine prices (arguably attributed to the continual rorting of the WET rebate) robust competition and adverse climatic conditions have also created a difficult year for AVL (Australian Vintage Ltd). AVL’s decrease in profit is disappointing but can be attributed to two factors:

  1. Higher cost of goods due to the frost affected 2014 vintage.
  2. A lower crop than expected from AVL’s owned vineyards in 2015 that adversely affected SGARA.

AVL’s strategy of driving branded business has not waivered and we are totally committed to this endeavour as this is the only way to ensure an acceptable long term level of return on capital employed. This is the correct strategy but we must remain patient.

Increasing AVL’s branded distribution footprint in Australia and in the UK has proven the correct strategy as well. Having our products available in more outlets and having the number of our products increased in those outlets has helped increase our branded performance.

In the UK the McGuigan brand is now the 4th largest global wine brand in the market (up from sixth place this time last year) and in Australia our brands have continued to out perform the market:

  • McGuigan up 18%
  • Tempus Two up 11%
  • Nepenthe up 25%

As well as our sales performance our wines continue to perform well in the show ring and also with endorsements from independent third parties.

McGuigan Awards

  • International Wine Challenge, London, 2015: 6 Trophies,
    9 Gold; 5 Silver; 18 Bronze.
  • Cowra Wine Show 2015: Trophy Best Single Vineyard Riesling;
    Trophy Best Single Vineyard Dry White Table Wine of Show;
    Trophy Best Riesling of Show.
  • China Wine & Spirits Awards 2015: 7 Double Gold Medals.
  • James Halliday Wine Companion 2016: The Philosophy
    2010 – 97 points.
  • Cairns Wine Show 2015: Trophy Best Chardonnay;
    Trophy Wine of Provenance Shortlist Riesling 2010 – 2014.
  • Winestate Magazine: 5* Shortlist Chardonnay 2013;
    4 ½ * Shortlist Semillon.
  • 4 ½ * Winery: James Halliday Australian.

 

Tempus Two

  • International Wine Challenge 2015: 2 Trophies, 3 Gold, 6 Silver,
    2 Bronze medals.
  • Cowra Wine Show 2015: Best Single Vineyard Chardonnay;
    Ian Armstrong Trophy Best Chardonnay of Show.
  • James Halliday Wine Companion 2016:
    Uno Shiraz 2013 – 95 points.
  • Cairns Wine Show 2015: Champion Wine in Show;
    Champion White Wine in Show.
  • 4 ½ * Winery: James Halliday Australian Wine Companion 2016.
    5 wines scored 90+ points. 8 wines scored 90+ points.

 

Nepenthe Awards

  • Royal Queensland Food & Wine Show 2014: Trophy Best
    Sauvignon Blanc of Show.
  • 5* Winery: James Halliday Australian Wine Companion 2014.
  • James Halliday Wine Companion 2015: Ithaca Chardonnay
    2013 – 95 points.
  • Cairns Wine Show 2015: Best Pinot Noir in Show.
  • Winestate Magazine: 5* Altitude Tempranillo 2013;
    4 ½ * Ithaca Chardonnay 2013.

At the recent 2015 Cowra Wine Show, Australian Vintage Ltd received a number of outstanding awards for the McGuigan and Tempus Two brands which culminated in AVL being awarded the Trophy for the Most Successful Exhibitor of the Show – this is the second successive year AVL has won this award and the third time overall.

The pursuit of excellence continues within the viticultural, winemaking & production areas as we believe if we continue to “make the wine the hero” & “over deliver on quality at each price point” our brands will continue to grow which will ensure the financial success of AVL.
We still continue to engage with the consumers at all levels as we continue to drive visitation to our cellar doors and to grow our branded wine clubs.

Further consumer engagement is highlighted by our promotional programmes that are carried out throughout the world including:

 

McGuigan

  • The launch of the ‘Bring a McGuigan’ advertising campaign –
    across cinema, radio and digital.
  • In New South Wales, following a print campaign in Australia
    and in London to support the outstanding results at the
    International Wine Challenge in London.
  • ‘Win a Fiat Freemont’ Black Label consumer promotion in
    the independent channel.
  • Sponsorship of the St George Illawarra Dragons NRL team,
    and Port Adelaide Power AFL team.
  • Leveraging the brand ambassadorial partnership with UK
    Masterchef host John Torode through a series of consumer
    promotions in the UK, highlighted by ‘win one of five trips
    to Australia to have lunch with John Torode and Neil McGuigan
    in the McGuigan vineyard.’
  • Exclusive ‘Win a Jeep’ promotion conducted nationally in BWS,
    driving 154% uplift in sales.
  • Joint Black Label | Bin Series consumer promotion ‘two for one
    movie tickets for three months’ in the independent channel.
  • Neil McGuigan | John Torode ‘long table Aussie BBQ’ consumer
    promotion across all retailers in the UK.
  • Consumer event schedule in the UK with Tesco Wine Club Fairs
    in Manchester, Bristol, Edinburgh and London.

 

Tempus Two

  • Sponsorship of Mercedes Benz Fashion Week Australia (MBFWA)
    as the Official Wine Partner, increasing nationwide brand awareness.
  • Leveraging of MBFWA sponsorship to partner with Australian design
    duo, Aje, for both media and consumer events.
  • Sponsorship of Portsea Polo and Victorian Polo Club to raise brand
    awareness in Victoria.
  • Varietal Series consumer promotion, buy two bottles of Tempus Two
    and receive a twin pack of stemless wine glasses, in the independent channel.
  • New export label – Tempus Two Silver Series – launched into key markets.
  • Christmas consumer promotion, buy 2 bottles from the Tempus Two
    Varietal Sparkling range and receive a twin pack of flutes, in the
    independent channel.

 

Nepenthe

  • Sponsorship of the AAMI Kooyong Classic tennis in Melbourne.
  • Participation at Noosa Food & Wine Festival, one of Australia’s premier
    food & wine festivals.
  • Launch of Altitude Sparkling Chardonnay Pinot Noir, Altitude Gruner
    Veltliner and Altitude Arneis to continue to drive varietal evolution.

Our strategies for the business have not changed from last year and your board has been very clear that our focus must remain on the following key strategies:

  • Growing and strengthening our distribution channels in the
    China / Asia region, UK and Canada.
  • Building branded sales and profitability both domestically and
    internationally. This includes creating appropriate new products for
    developing and emerging markets.
  • Reviewing and decreasing our cost base.

The wine industry has been tough for many years and during that time AVL has continued to evolve itself into a truly well respected global branded wine company. The recent decrease in the Australian dollar gives us great long term optimism that we will be able to capitalise on the markets where we are already distributed plus open up new opportunities for distribution relationships where we are not significantly represented.

We have a number of exciting new product initiatives still to be launched into the market and more than ever I remain optimistic about the long term future of our company.

 

Our brands have continued to out perform the market.