New data shows just how much of an impact W. J. Deutsch's Australian brand Yellow Tail has on the overall ACNielsen-tracked food stores segment. While Australian imports, excluding Yellow Tail, have grown 49 percent between October 2003 and May 2006, Yellow Tail on its own has grown by 90 percent in the same time frame.

Although the Australian market is healthy with or without Yellow Tail's influence, it would not be the force it is today without the brand. Yellow Tail, which encompasses several different varietals and now includes a higher-priced Reserve line, accounts for 39 percent of the total Australian market in the food store segment. Australian wines account for about 9 percent of all imported wine volume versus a total imported wine sales volume of 20 percent (in the ACNielsen channel).

Total Australian imports claim a volume market share of 9 percent; but if Yellow Tail were to be excluded, this figure would drop to 5 percent. Italian wines, which have a 6 percent market share and a healthy 8 percent growth rate, would be the imported wine leader if Yellow Tail were removed from the equation.

Yellow Tail's success has been well documented. In November 2005, W. J. Deutsch announced that they had sold one million cases of Yellow Tail in a single month, the first varietal wine brand in industry history to accomplish this feat. This was a phenomenal achievement for a brand that hadn't even been introduced until 2001, making its introduction into the U.S. market the most successful wine brand launch in history.

"It's also successful in many other countries, too," noted Jon Fredrikson of Gomberg, Fredrikson & Associates. "It had a wonderful run because it happened to hit the right nerves with consumers. It's a combination of the packaging, the name, the distinctive font they used on the package and the value that it offers consumers. It has grown very rapidly in the UK and Canada; it's very unusual that a brand hits it off well in more than one country and in multiple different channels at the same time. There's a lot in the inherent nature of that name and packaging that really attracts consumers around the world."

The brand's popularity crosses several consumer retail segments. At a recent Channel Blurring Summit hosted by ACNielsen in Napa, California, Danny Brager, vice president client service, beverage alcohol, told attendees that Yellow Tail is the only brand to appear in the top 12 wine brands sold in each of the following channels: grocery, natural grocery, convenience, drug and liquor stores. Grocery and liquor stores combined account for about 75 percent of the dollar sales in off-premise wine channels.

Does Yellow Tail's Success Hurt Higher-Priced Australian Wines?

The success of Yellow Tail has been a bit of a double-edged sword for Australian wines overall. While consumers around the world have been exposed to a quality wine at a good value, there is a concern that American consumers might not accept Australian wine at higher price points.

"I would argue that Yellow Tail has been a wonderful courier or messenger to talk to Americans about wines from Australia, but only at $6 to $8 a bottle," said Peter Click, CEO of Click Wine Group, importers of an array of premium and boutique Australian wine brands (including Jackaroo, 2 up and Dahnwhinnie, as well as brands such as Fat Bastard from France and Bootleg from Italy). "What Yellow Tail has done [in the marketplace] is very positive, but the danger is that Americans perceive Australian wine as homogenized, and it absolutely is not. We have to be careful and diligent, those of us who specialize in high-quality wines with a sense of place, that we are voicing that in the marketplace."

Fredrikson feels that Yellow Tail's impact may be felt more in price category than country of origin. "Yellow Tail has an affect on all wine in that price category. I don't think everyone perceives it as an imported wine. In some cases, they are just buying a wine type or a brand or an image," said Fredrikson. "It has had an impact on Australian imports because it is such a brand leader that characterizes Australian wines for some consumers who recognize it as Australian."

Click emphasized that there is growth potential at higher price points. "[The ultra-premium and luxury segments] are still vibrant categories, though the band of price points that has potential for growth is somewhat narrow," said Click. "If you are above a $20 price point [with Australian wine], its pretty challenging because California is very strong in that band. Even in a narrower $12 to $17 band, there's a lot of growth and potential and marketplace interest in Australia. There is vibrancy in that [segment]. But once you get past the $20 price point, you see it's more challenging for Australia than has been in the past."

Robert Davies, business development manager at the Australian Trade Commission, regards the popularity of Yellow Tail and other mid-priced Australian wines as an opening to promote other wines to American consumers. While he acknowledges that it has sometimes been "hard to find shelf space" for Australian wines priced above $12, those wines that do find their way onto retailer shelves have been successful.

"I think Yellow Tail actually has a positive effect, primarily because it's getting more Americans to drink Australian wines," said Davies. "Yellow Tail gets bashed; but if you look historically in Australia, we used to drink fairly average wine. Yellow Tail got everyone drinking wine, and history has shown when you start getting consumers to drink wine, they will eventually trade up. If we can steer people up and educate them more about the diversity and capability of Australian wines, and to realize that we produce world-class wines, that's success for us. At some point consumers will tire with Yellow Tail,as they do with any brand, and they will experiment and try something else."

Can Yellow Tail Sustain Its Growth?

The sense among Australian wine importers and marketers is that consumers will, as Davies said, eventually become bored with the brand and move on to different wines. W. J. Deutsch has done well in keeping the brand fresh and in the public eye, channeling resources into extensive advertising campaigns and introducing a higher-priced reserve line, but it remains to be seen how long the brand can continue as the category leader.

Several factors exist that may create a situation where consumers do, indeed, move on. First, wine consumers are notoriously disloyal. Secondly, once a brand establishes itself as a leader, it becomes increasingly difficult to sustain that position. Thirdly, some wine industry executives privately believe that Australia's aggressiveness-pushing good but low-priced wines into the market en masse-has destroyed the image of Australian wines in the minds of American consumers.

"Yellow Tail is getting a little stale," said Fredrikson. "Its base is so big, it is hard to maintain that growth. Big brands become targets for many other labels. One of the things that drives the wine business is that people always seek something else, the latest hot brand. [Yellow Tail] is still the largest-selling brand in food stores and has a pretty strong lead over its competitors, though. It's entrenched."

Fredrikson pointed out that European wines, which are in oversupply in some areas, are also experiencing a boost in sales. "This year there's been a dramatic turnaround with wines from Europe, which are all doing very well for a series of reasons," said Fredrikson. "Many of [the countries] have responded from a production and marketing sense, finding more value-oriented wines from less expensive regions. The story of the year so far is about the turnaround in European imports."

Italian, Portuguese, German and Spanish wines have all had double-digit growth in food store channels in the last 12 months while French wine sales have also improved, though not as robustly.

One factor that apparently won't affect Yellow Tail is the Australian grape glut. Click believes that while Yellow Tail will continue to have a good supply of quality fruit because of the glut, most of the excess will be used in new brands. "Other brands are going to be introduced as offshoots of existing brands," said Click. "There's a lot of grapes and at the low end of the market, so you are going to see multiple brand introductions at very competitive price points. Our ongoing view of the world at Click is that there is going to be a global oversupply of wine. Where it comes from year to year will change, but there will always be a surplus somewhere."

Still, Australian wines are the leading imported wines sold in the U.S., a position that is unlikely to change in the near future. The category may be led by Yellow Tail's strong influence, but the strength of other Australian brands like Lindeman's and Little Penguin, both from Foster's Wine Estates Americas, are keeping the Australian brand fresh in the minds of consumers.

Top 12 Wine Brands by Retail Channel
While 18 of the below brands appear only once across all five channels, and others appear two, three and four times, Yellow Tail is the only brand that appears in each of the five retail channels.

Total Grocery

Yellow Tail

Sutter Home

Franzia

Woodbridge

Beringer Cal Coll

Liv Cellars

E&J Twin Valley

K-J Vint Res

Carlo Rossi

Almaden

RM Private Sel

Vendange

Natural Grocery

Frey

Bonny Doon

Bonterra

Rex Goliath

Bogle

Ravenswood

Castle Rock

Yellow Tail

Nevada Wine Guild

Morrow Bay

Niebaum Coppola

Blackstone

Total Convenience

E&J Twin Valley

Turning Leaf

Sutter Home

Woodbridge

Yellow Tail

Livingston Cellars

Beringer Cal Coll

K-J Vint Res

Arbor Mist

Vendange

Boone's Farm

Bella Sera

Total Drug

Franzia

Carlo Rossi

Liv Cellars

Yellow Tail

Sutter Home

Almaden

Peter Vella

Woodbridge

E&J Twin Valley

Beringer Cal Coll

Vendange

K-J Vint Reserve

Combined Liquor

Yellow Tail

Woodbridge

Carlo Rossi

Franzia

Almaden

K-J Vint Reserve

Beringer Cal Coll

Cavit

Sutter Home

Liv Cellars

Santa Margherita

CDB Classics

Source: ACNielsen, Total Wine, 52 weeks ending 07/01/06, SPINS Natural Grocery, 52 weeks ending 05/20/06

Overall Wine Sales Up 9 Percent in July

Wine sales are still continuing to rise in the ACNielsen-tracked supermarket channel. In the 13 weeks ending July 29, 2006, overall wine sales rose by 9 percent and case volume sales again gained 4 percent. However, growth has slowed somewhat from last month when growth was 11 percent and 5 percent, respectively.

However, year-on-year sales have risen 11 percent in the 52 weeks ending July 29 while case volume has also grown by 4 percent, identical to last month. Dollar sales are clearly outpacing case sales yet again, currently by an almost three-to-one margin. Consumers are continuing to buy more wine at higher prices than in 2005.

As always, the "big three" varietals still dominate the retail arena, though all three are down from last month. Chardonnay sales rose 9 percent in the 13 weeks ending July 29. By case volume, Chardonnay was up 6 percent in the July data. Chardonnay is the top-selling varietal in the ACNielsen-tracked marketplace, claiming 26 percent of the market in terms of dollars and 23 percent in terms of case sales.

Cabernet Sauvignon increased sales by 12 percent in the 13 weeks ending in late July. By case volume, Cabernet Sauvignon gained 10 percent in the 13 weeks ending July 29, 2006 over the same period in 2005. Cabernet Sauvignon has a 13 percent share in dollar sales and a 10 percent share in case volume.

Merlot sales are continuing to bounce back after stumbling in late 2005. Merlot sales rose again, by 3 percent in the 13 weeks ending July 29, 2006. In terms of case volume, the varietal also grew 3 percent in the July data. Merlot is the second-largest selling varietal, with 12 percent of market share in dollars and 11 percent in case sales.

The fourth-largest selling varietal, White Zinfandel, is still experiencing a small warm-weather boost, though not nearly to the degree as last month. The varietal rose 1 percent in dollar sales for the 13 weeks ending in late July. However, the varietal dropped 3 percent in case volume in the 13 weeks ending July 29, 2006, though it is a smaller drop than in most recent months. White Zinfandel still holds a market share of 6 percent in dollar sales and 9 percent in case volume.

Domestic wine sales gained 9 percent in the 13 weeks ending July 29, 2006 over the same period in 2005 while imports rose 8 percent in the same time period. In terms of case volume, imports gained 5 percent in July while domestic wine rose 4 percent. wbm