1998 Grange – a smart move or a ‘Rosemount’ strategy?

One of the things that really must annoy the hell out of many Australian wine lovers who read the US and UK wine forums is the availability of 1998 Grange overseas. In the UK it’s still available for £110 (A$260) and in the US people have been purchasing it for US$160 (A$240) a bottle. And what’s more it’s still available freely in some areas, especially the UK. 

On release in Australia it went for $400 to those that were lucky enough to purchase any at this price and was sold out within hours. (I was offered some at that price and declined the offer so it’s not a case of personal sour grapes because I missed out.) It’s now selling for close to $600 in Australia today, assuming you can find it. How has this come about?

We all know that locally, Grange is seen as an icon and the ultimate expression of fine Shiraz and 1998 was a hyped as one of the vintages of the decade. All this and a stack of good journalist ratings resulted in every Australian wine lover and their dog wanting some of the elusive purple liquid gold. Then there are the local “investors” (or wine parasites) who decided that the 1998 Grange may be a good way to make a buck which further fuelled demand and sent it through the stratosphere.

Although there are no concrete figures available to prove it, based on the number of Australia retailers who had substantially reduced allocations of Grange, it appears a vast quantity; a much greater percentage than in previous years, found its way to the US market. From Southcorp’s perspective this was a good tactical move. Robert Parker rated the wine at 99 points so there was a large built up demand in that market. From a strategic view point, Southcorp was desperate to increase its market share in the US and what better way to get the Penfolds brand known there then on the back of Grange.

It is for these reasons that I believe that the Australian market received a smaller share of Grange than in previous years. This lower allocation and unprecedented demand caused the retail price to rocket locally. Demand was so strong that some Grange which was shipped to the UK for retail sale has been purchased by Australian interests (who claim back the UK VAT) and shipped back here for resale.

The result is that we have customers paying more than twice as much for the product as the UK and US customers. This strategy is risky for Southcorp. Firstly; it has alienated a number of loyal Australian Grange customers who have missed out getting the 1998. Secondly a number of retailers of Grange who moved large quantities in the past got tiny allocations and you can bet they won’t forget the way they have been treated.

In addition, when the 1999 is release with a recommended retail of about $400 in Australia it will languish on the shelves and be heavily discounted in much the same manner as the 1997 vintage. As a matter of interest, many retailers have large stocks of 1997 Grange still available that is very slow to move. Southcorp had the advantage of the 99 point Parker rating to help move large stocks of the 1998 vintage but that is unlikely to be the case with the 1999 vintage.

A large percentage of high end wine sales in the US could be construed as a fashion goods business. If it’s in fashion it sells, if it’s out of fashion, retailers and consumers won’t touch it, something that Southcorp in it’s quest to gain market share by using Grange as a short term lever may not have considered.

From Southcorp’s perspective they must hope that the 1998 Grange US market lever will buy them enough flow-on market share to off set the rapid plunge in Grange reputation that will occur in the US when the 1999 is released and it will be worse when the 2000 hits the shelves.

As with so many past decisions made by Southcorp in the early days after the Rosemount merger one can only wonder what3BB'>As with so many past decisions made by Southcorp in the early days after the Rosemount merger one can only wonder what will happen and if it will do them more harm than good.