Australian Vintage Limited (AVL) Marketing Report

Australian Vintage Limited

Australian Vintage Limited is among the leading Australian based wine companies. It has a very strong presence within the wine industry with well-known brands of wine making such as Nepente, Miranda, McGuigan Wines, Passion Pop and Temptus Two. In 2016, the AVL company suffered losses. Therefore, this report was prepared by marketing managers to address issues related to marketing proposals, profit recovery action plans, and profit forecast action plans for the next financial period. The report is divided into three sections: the introduction, providing the foundation for the report; the body, discussing the various proposed strategies and action plans that are proposed; and the conclusion which provides a summary of the entire report.

Marketing strategies

Premiumisation

Bartholomeusz, 2017, cites that there was a more than double increase in Treasury Wines Estates’ earnings in December 2016 from $43.5 million to $87.6 million, this excluding its material items. In addition, the company experienced a 22% net sales revenue increase recording a figure of $1.08 billion. According to Michael Clarke, the chief executive officer, this growth was based on his marketing strategy of “premiumisation” of the Wine portfolio. Stilinovic, 2017 describes “premiumisation” as making luxurious products either more exclusive or more affordable. In essence, it bridges consumption by mass market with luxury thereby providing consumers more access to premium products.

Further, Stilinovic, 2017 postulates that according to Moet & Chandon’s International Director for Commercialization, consumers are interested in three aspects when they buy premium wines: the authenticity and heritage of the brand; the luxurious life embodiment; and the experimentation element. In essence, she identifies that consumers of premiumized beverages still want the taste of luxury in a wide selection of brands that they can choose from. This is the strategy that Treasury wines considered leading to an increase in revenue and profits (Bartholomeusz, 2017).

Shift of strategic focus in the company

The CEO of Treasury wines added that the change in focus of the company from an order-taking-agricultural company to a brand-led marketing organization as well had a hand in increasing the revenue generated by the company. This strategy could as well be applied in the Australian Vintage Limited company where the company could focus on the strategies that lead to more premium brand development in its portfolio.

Increasing project partnerships with other industry players

Treasury Wines Estates were able to create partnerships between Business Chicks, a global women powerhouse and one of its brands, Truvée. This was a strategic move in marketing its wine brand to women by sharing a similar philosophy where women are celebrated for all the roles they play. As a result, the brand was showcased in premium events, conferences, digital channels for Business Chicks and in their Latte publication. AVL can learn from this by increasing its partnership efforts with charitable organisations, causes etc. in order to get the brand visible and in the market (Treasury Wines Estates, 2017).

In another partnership move, Wolf Blass was named the official wine partner for the Rugby League World Cup 2017 seeing it acquiring the wine category pourage rights at all Rugby League 2017 matches played in both Australia and New Zealand. This strategic move will see the brand showcased in the tournament channels and distribution network. With the tournament featuring 14 teams playing in 28 games, in 13 cities, and with an estimated fan population of over 450,000 it is apparent that the brand visibility will be increased for the wine (Treasury Wines Estates, 2017).

Thus, by reconsidering how their brands are placed in the market, AVL can leverage on such opportunities to make it more prominent. The organization needs to leverage on such partnerships to promote and increase its visibility.

Profit Recovery Plans

Acquisition of Other firms

Bartholomeusz, 2017 notes that the CEO of Treasury Wines was able resist exit from the challenged U.S. market and instead, acquired both the US Diageo and UK wine businesses. Acquisitions / take overs and mergers are seen as moves that enable companies to lower their operational costs and increase their performance. In addition, it could be argued that the company was able to increase its market share in the U.S. without having to undertake much effort. Clarke reiterated this by indicating that the move to acquire the two companies enabled it to leverage on the existing base in the U.S. (Bartholomeusz, 2017).

Diversification in marketing the cask business

The annual report by Australian Vintage Limited showed that Australasia / North America packaged segment reduced by $1million due to a $1.9 million reduction in contribution from Australian Cask sales. In order to reverse this and lead to profit recovery, the company ought to consider its marketing initiatives for the wine casks in Australia. A way to alleviate such losses from occurring would be to diversify its market so as to lower risk from dependence on the Australian market only. The figure below shows the reduction in revenue from the cask business (2016 Annual Report, 2017).

figure 1- reduction in net profit due to reduction in cask sales in Australasia / North America

source: AVL-2016-Annual-Report

Increased Marketing and Advertising strategies

In the interim 2017 results by TWE (2017-Interim-Results-Investor-and-Analyst-Presentation-14-February-2017, 2017), the company alluded to increased product packaging redesign and both brand and marketing initiatives as leading to better visibility of the product as shown in the examples below. AVL can learn from this to continually redesign its product offering leading to increased visibility and brand presence.

Refreshed packaging bringing the Sterling Vineyards brand name and proposition to life

Source: 2017 Interim Results Investor and Analyst Presentation 14 February 2017

New advertising campaigns taking ownership of the brand’s enduring values

Source: 2017 Interim Results Investor and Analyst Presentation 14 February 2017

Profit Projection Plans

Diversification of the product portfolio

According to the news press release by Treasury Wines, they indicated that they would increase their regional brands to include a variety of others from areas such as Seppelt, T’Gallant, Heemsker and Saltram and as well, to increase their marketing efforts to the overseas. This is seen as a move to increase their profit projection. By positioning these brands to grow on their own, the company aims to increase the growth value of its products (Treasury Wines Estates, 2017).

In its press release, TWE indicated that they were making plans to introduce Blossom Hill, one of U.K.’s most celebrated wines, into the Australian market. Blossom hill is a multi-million brand and is the leading white wine brand in the U.K. Similarly, Rosé wine is the second most popular red wine in the U.K.

In a similar manner, AVL can leverage on the introduction of world famous brands from other parts of the world in a move to increase its profit projections. By carefully studying the market patterns, AVL can identify products that they can introduce in Australia leading to an increase in their profits.

Conclusion

Despite having faced losses in 2016, Australian Vintage Limited is well placed to increase its profits in the next financial period by developing its potential and learning from other better performing wine producing companies. In regard to marketing strategies, AVL should adopt premiumisation with some if not all of its brands. This will enable customers to have a taste of quality at an affordable cost thereby leading to increase in sales. Partnering with other industries as well has an impact on the marketing capacity of the brand. By considering sports and business partners, the channels for distribution for the product will increase in addition to the visibility and brand association with such partners. AVL should at least consider being the official sponsor of at least one sport event or one business platform. In regard to profit recovery, AVL ought to consider mergers / take overs with other wine producing companies that have a considerable market share. As TWE noted, its acquisition of Diageo and U.K. firms has had a profound impact on its earnings leading to more inventory being sold. AVL should study their current markets and consider such moves with companies that are better placed in terms of market share. Finally, in regard to profit projections, AVL ought to consider diversifying its wine brands to include more brands that are celebrated worldwide. TWE recorded an improvement in earnings with the introduction of Blossom Hill and Rosé, premium white and red wines respectively which are celebrated in the U.K.

References

2016 Annual Report. (2017). 1st ed. [ebook] Australia: Australian Vintage Limited. Available at: http://www.australianvintage.com.au/wp-content/uploads/2016/10/AVL-2016-Annual-Report-Website.pdf [Accessed 20 May 2017].

2017-Interim-Results-Investor-and-Analyst-Presentation-14-February-2017. (2017). 1st ed. [ebook] Available at: https://www.tweglobal.com/~/media/Files/Global/ASX-Announcements/2017/2017-Interim-Results-Investor-and-Analyst-Presentation-14-February-2017.pdf [Accessed 20 May 2017].

Bartholomeusz, S. (2017). Treasury’s strategy bears fruit. [online] Theaustralian.com.au. Available at: http://www.theaustralian.com.au/business/opinion/stephen-bartholomeusz/treasury-wines-strategy-bears-fruit/news-story/9f237eaebc60cf9ea3bb58228b417f3c [Accessed 20 May 2017].

Stilinovic, M. (2017). Forbes Welcome. [online] Forbes.com. Available at: https://www.forbes.com/sites/millystilinovic/2016/06/16/premiumisation-the-most-affluent-retail-trend-of-2016/#1a0292564416 [Accessed 20 May 2017].

Treasury Wines Estates. (2017). Treasury Wine Estates polishes ’Regional Gems’ in next phase of global brand strategy. [online] Available at: https://www.tweglobal.com/media/news/twe-polishes-regional-gems [Accessed 20 May 2017].

Treasury Wines Estates. (2017). Rugby League World Cup 2017 announces Wolf Blass as Official Wine Partner. [online] Available at: https://www.tweglobal.com/media/news/twe-polishes-regional-gems [Accessed 20 May 2017].

Treasury Wines Estates. (2017). Treasury Wine Estates brings UK’s most popular Rosé and white wine brand to Australia. [online] Available at: https://www.tweglobal.com/media/news/twe-polishes-regional-gems [Accessed 20 May 2017].