House brands squeeze out Tahbilk
Establishment winemaker Tahbilk has fingered private-label wines and low-cost imported wine for swamping liquor store shelves and reducing the space once given to proprietary brands.
Tahbilk chief executive Alister Purbrick said the growth in house-brand wines was not limited to the major liquor chains owned by Woolworths and Coles, but was also becoming a feature of the large independent banner and supermarket groups.
The other hidden impact, according to Mr Purbrick, was the strength of the Australian dollar, which made imports more competitive.
"So you have got the double whammy of own-brand and imports taking space away from us, up go our promotional slot costs and there is less opportunity for us in any case," he said.
Mr Purbrick said Tahbilk would walk away from uneconomic promotional and discount deals with retailers.
Last year Ross Brown, the former boss of 121-year-old winery Brown Brothers, used an industry function to launch a spray against leading retailers for flooding stores with private-label wines that he said were "hollow", "copycats" and "masquerading as real brands".
The retail squeeze affected Tahbilk's sales for the 2012 financial year, with domestic sales weaker for the 153-year-old winemaker. But the resilience of its popular Tahbilk Wine Club bolstered the bottom line and allowed the family-owned company to post an improved full-year profit.
Revenue for 2011-12 was $13.187 million, down slightly from $13.675 million in the previous year, while pre-tax profit increased to $776,768 from $736,430. However, after accounting for a dividend payment of $113,805, Tahbilk's full-year profit was $51,168 against $235,137 recorded in 2011-12.
"Our wine club generates about 65 per cent of the total Tahbilk branded sales," Mr Purbrick said.
He said the wine club allowed the company to perform well in the face of the strong Australian dollar and collapsing margins.
"There is not a lot of margin in exports, so the best way to describe our exports at the moment is that we have them in a holding pattern. We are not going out aggressively to grow because we can't make margin out of it, but we want to maintain our presence in those markets."
China is still a growth market, as the exchange rate with the yuan is more favourable to exporters such as Tahbilk.