Sunday, June 10, 2012

Asymmetrical warfare: Ross Brown and private-label wines


"ROSS BROWN, the former boss of the 120-year-old winery Brown Brothers, has attacked [Australia's] leading retailers for flooding their stores with private-label wines, that he said were hollow, copycats and masquerading as real brands..."
Sydney Morning Herald, June 7, 2012
Dear Ross,

We've known each other for a long time - since 1984 I think, when Brown Brothers and Rosemount effectively led the Aussie charge into the UK wine market. Over the years, I've always thought of you as one of the canniest members of the Australian wine industry. You've managed to steer your family company through some pretty choppy waters, you have pioneered wine tourism with an extraordinarily popular destination that's well off most visitors' beaten track, and following in your father's footsteps you've headed a varietal innovation program that is arguably unequalled by any similarly-sized company in the world. And, of course. you helped to launch Australia's First Families of Wine, at whose event you raised the issue of the private-label brands.

You  called the private labels "hollow logs", because, in your words "they masquerade as brands but in fact they are just a label which has none of the values that traditional family wine companies bring to the market''. According to the news report, you went on to say that if private labels were allowed to dominate, traditional wine companies would be disenfranchised, and the future of the Australian industry as a whole would be under threat.

I've been interested in the subject for a while - though not in the context of the domestic Australian market; they are a growing trend across the globe. When we first met, I was a consumer wine writer - for the London Sunday Telegraph - and co-chairman of the then embryonic International Wine Challenge. In those days, like my colleagues, I was obsessed with finding great new wines and especially ones that offered value for money. Some came from companies like yours; some from corporately-owned businesses and some bore supermarket own-labels, though not what we now know of as private labels. Back then, we were more likely to be looking at "Sainsbury's Claret". While, I'm pretty sure that the long-term thinking implied by family ownership is far more ideal for a wine business than anything that involves shareholders obsessed with latest quarterly results, I'm afraid I can't subscribe to it being an absolute good. There are several Bordeaux chateaux I can think of that profitably make much better wine now they are owned by insurance companies, and plenty of family-owned wineries whose quality is annually compromised by concerns over cash flow. So, while it is obviously important to you at Brown brothers, I'm going to leave the family or corporate question for another day.

Far more important is the issue of whether private labels are or are not really brands and whether they threaten your industry. As you  know, Ross, in recent years, I've stopped writing for consumers and running competitions, and moved into producing wine myself - with two partners and a great team of winemakers in southern France - and into a research consultancy called DoILikeIt?, also in partnership, with your old friend Hazel Murphy and Judy Kendrick. This has given me a rather different view of the world from the one I had a decade ago. As a producer, I know what it is like to discuss prices and marketing contributions with big retailers and to see my bottles on shelves at ludicrously high off-promotion and ludicrously low on-promotion prices - and been able to do nothing about it, other than to seek other  routes to market. As a researcher, I've also spent time learning about what ordinary consumers actually know and think about wine. 

Wearing my producer hat, I agree that competing against private labels is what I'd term asymmetric warfare, like a modern soldier  fighting against a suicide bomber. The nicely labelled bottle of Prilab (my just-invented Private Label) goes through none of the hoops to get on the shelf that your wine or mine might, and there's every chance that the contents are a copy of something we went to a lot of trouble and risk to launch ourselves. But, as I regularly have to remind my five-year-old daughter, life isn't fair. Asymmetric warfare goes back to the earliest conflicts when one tribe had bigger clubs than the other: more recently, the Brits had no defence against German V2 rockets; the Japanese had no atom bombs. In the wine business, you at Brown Bros have to compete internationally against the muscle of bigger companies like Gallo and Constellation, but smaller, ill-funded wineries have to match up against you and the distribution strengths you have built up over the years. Back in the 1990s, when everybody loved the UK retail chain Oddbins, any Champagne brand wanting to sell its wine there did so in the knowledge that the staff were incentivized to push Mumm and Perrier-Jouet which both belonged to Seagrams, Oddbins' then owners. Indeed the very survival of Oddbins as the company it was, depended on its success at distributing Seagrams products.

Of course Mumm and Perrier Jouet were not private labels, but nor, in the minds of UK consumers at least, are brands like Ogio and Etienne Dumont. I can't talk about any private labels Coles and Woolworths may be selling in Australia, but we did some research in Britain in which we discovered that more regular wine drinkers recognised an Ogio label from which the name and other text had been removed than could identify labels from Guigal, Louis Jadot and Cloudy Bay that had had similar treatment. Ogio, a Tesco-exclusive, is currently the 16th best-selling brand in the UK. Etienne Dumont, Sainsbury's private label Champagne is either the best or second-best-selling Champagne in the UK, depending when you're counting. Some private labels may be hastily-knocked up, short-lived shelf-fillers; others develop lives of their own and grow into "proper" brands, at least in the eyes of the consumers who buy them

If it looks, quacks and flies like a duck, I'm afraid it probably isn't an owl. Ogio may have begun life as a private label but I can think of a least one big wine company that would rather have it in its portfolio than some of the turkeys (sorry about all these birds) it's struggling to distribute profitably.

Ross, we live in a very changed world. Family ownership and heritage have value, but so does branding and, even more crucially, distribution. Once, companies that owned clothing brands manufactured clothes; Tommy Hilfiger changed all that. One of the youngest brands on the market and without a factory of any kind, it was more valuable (based on its sale for $3bn in 2010 to the owner of Calvin Klein) than long-established French fashion houses. 

One reason why some wine private labels have been so successful is the relative feebleness of the real ones. It would be far, far more difficult to launch a strong private label gin or ale; proper spirits and beer brands are just too strong. So, Ross, I'd humbly (well, not too humbly) suggest that, rather than complain about something that is not going to go away (supermarkets will do what suits them when all is said and done), you'd be better advised to focus on building your own fan base. The nearly 20,000 Facebook Brown Bros followers is not bad, but Gallo's Barefoot Cellars' 350,000 "likes" gives you a slightly higher target to aspire to. Similarly, Brown Brothers deserves more than 2,500 followers on Twitter. Your story - including the family-ownership - deserves to be told, and heard by a far wider number of people. We recently proved the power of social media when we launched WINESTARS, with almost no time and very little budget. I recently learned of a US (non family-owned) company that has built sales of over 1m cases across two new brands, exclusively through social media ("we do everything we can to keep them out of the hands of the traditional critics and media" was the comment).

The wonderful thing about social media, when properly and cannily used, is that it can reverse the balance of power: David's catapult versus Goliath's size.

With my very best wishes



  1. @Scotlanddavid (David Scotland) wrote, via Twitter:
    I so agree. Buyers Own Brands thrive only in absence of good brand owners making things people want at right price

  2. Perhaps we ought to differentiate more clearly between traditional BOB (Tesco Cornflakes) and Private Label (Ogio, Kirkland). Though perhaps premium BOB (Tesco Finest) deserves a category of its own.

  3. From Andrew Caillard (Via Linkedin):

    I agree with your comments completely. I was quite surprised about Ross Brown's comments. However there seems a culture in the wine industry that it is alright to bash up Woolworths et al. Stephen Strachan, the outgoing WineFed CEO, has yet again accused Woolworths of not playing the field fairly with wine producers.

    Woolworths own discarded once-famous brands including Krondorf and Stonyfell. These are now being distributed as private labels through Dan Murphy's etc. It also brings in around 10 million litres of NZ Sauvignon Blanc which is branded under the Amiri and Tangaroa labels. Also Woolworths has established its own Champagne brand called Duperrey which has been hugely successful. All of these wines are brand managed and allocated marketing and advertising budgets. Many have narratives that are equally compelling as family-owned wines.

    The First Families of Australian Wine is a great initiative. It needs to work with its collective strengths, charm and heritage. It potentially has great currency both as a marketing body and as a representative of Australian ultra fine wine. The hollow log comment is quixotic. Where is the wisdom in ignoring the reality of the market place?

  4. From @babelwine (via Twitter)

    1 of the best articles I have read & v-thorough. If not for OZ PL how would they compete with Chile?

    most PL is designed & devel'd by S/Markets as a necessity to capture new lazy quick c'sumers

  5. From Catherine Monahan (via Twitter)

    Not about capturing new lazy customers at all. It's about margin and control of brand

  6. Andrew, Catherine, Babelwine...

    I think Andrew makes some very interesting points about the way that Woolworths, one of Australia's biggest retailers is using genuine brands like Krondorf and Stonyfell as Private Labels. If these brands been properly managed they would never have suffered this fate. Now that they have done so, they undermine Ross Brown's argument about hollow logs.

    I was also interested by Andrew's comment that these labels have marketing and advertising budgets. Should we stand by for Ogio advertising and marketing (beyond Tesco Special Offer ads)? An Ogio Facebook page perhaps?

    1. Ogio does have a Facebook page:
      Hope you will "LIKE" it.

  7. Excellent look at an emotive subject. Gene-power is not enough to sustain brands. There has to be thought and work as well. No brand can safely ignore social media these days.

    1. Thank you Charles. I'm enjoying the responses the post seems to be drawing out.

  8. Anthony Spawton wrote (via Facebook)

    The private label market in Australia is a product of the overproduction and a taxation regime (wet) which applies in !NZ as well as Australia. The early clean skin as the private labels are known used a generic SEA geographic indication so the brand equity of the source region was not undervalued. The trade today uses both quality terminology (premium) and tragically the region of origin. THis piggybacking on the established brand equity built up over decades is being undermined by the private labels. The wine is bought in bulk on the spot market and then bottled by contractors...

  9. Anthony Spawton's comment (cont'd)
    ...If Woolworths is serious about brand building then rather than the region being undervalued the supermarkets should use their own private label brand,a practice that they undertake in their dealings with other product categories. The long term damage is to further commoditise the market as these wine increasingly encroach on the premium category. If brands are used in other industries then usually a royalty is demanded for the double branding. To the winery inclusion of the regional name is an important multiplier as it enhances the perceived value. The costs of establishing a GI is significant and in the case of Coonawarra a fortune. For this investment to be undermined is a tragedy. The familly winemakers are endeavoring to build their own brand equity as a mechanism for the survival of their brand heritage. This situation could only happen in Australia and perhaps a move to a fully fledged DOC system is now the only way to guarantee the future of the premium category .

    1. This comment has been removed by the author.

    2. Anthony, I bow to your knowledge and experience in Australia, but as I say in my post, private label is a growing phenomenon internationally. Ogio and Etienne Dumont have little to do with Australia.

      I'll address the issue of regionality separately in another post.

  10. Anthony Spawton wrote (via Facebook)

    I agree that private brand is growing and I have written about it. I am not concerned with tesco who use their brand as an umbrella, or sainsbury who have had private wine brands for years. Tesco for example has moved downstream to work with wineries to their mutual benefit. I have met some very happy winemakers in ! !NZ and Argentina, spain, who contract to Tesco. NZ packed some !NZ wine in 2litre BIB but sold it as a premium rather than a discount. The local industry is very worried and not just wine as dairy, eggs are also under threat. NZ is really bleeding as its fob is moving south rapidly as this private trade grows. Wine has developed into a branded commodity over time perhaps the first industry to adopt branding. I feel that my approach to brand building especially in the commercial sector turned wine into a fast moving consumer good sold in supermarkets. It achieved results with 66 percent of british homes drinking wine on a regular basis, but perhaps I am also reaping the whirlwind that I helped create.

    1. Anthony, I share your responsibility and arguably guilt. But wine always was a commodity. In France it was sold by the alcoholic degree. Today there are published bulk prices for the main appellations. Rioja at €2 or 3 is a commodity as is most of the wine sold on Germany where the average price is €2 and brands are the exception.
      My point is that the wine industry is not historically good at branding and that the historic focus on regional designation is actually often antithetical to effective branding.

  11. Anthony Spawton wrote (via Facebook)

    the wine sector has been in brand denial for too long. My definition is that it is the encapsulation of the IP of the winery / region/. It is the key to future prosperity as it is the value added component. Just had my masters students do an essay on the relationship between satisfaction and loyalty. It is a fascinating topic when it comes to wine. I will send you some notes based on some empirical studies if you like. If only the industry would realize the emotional attachment that wine engenders
    They would do much more to enhance the delight that consumers have in their relationship,with the product and it's mystique. It is,like no other the accessory to pleasure.

    1. As ever Anthony, you make some fascinating and very cogent points.

  12. Ross Brown wrote (via Linkedin)

    I read your post in response to an article published in the Sydney Morning Herald on June 7, 2012, in which I was quoted discussing private-label wines in the Australian market.
    I would like to start by putting my comments into context. I was speaking as Chairman of Australia’s First Families of Wine (AFFW) at a trade function, where our 12 CEO members were presenting their icon wines to trade and media in Sydney on June 4. The masterclass tasting was all about our ‘icon’ wines, the wines that have put these successful multi-generational family-owned Australian wineries on the map, and allowed these wineries to flourish through the good and testing times the wine industry has experienced over many decades.
    AFFW is all about Australian winemaking history, stories and being custodians of some of the nation’s most revered soil. Combined we have 1200 years of winemaking experience from 16 winemaking regions and over 48 generations of family involvement. We formed in 2009 because we believe we are stronger together than apart and wanted to bring premium Australian wine to the important export markets.
    My discussion with the trade and media on June 4 centred around the comparison of brands and labels, and the exponential retail growth of no-brand labels that have no history, heritage or tradition. This presents itself as a threat to our industry as history and winemaking experience is what helps craft wine and build wine brands long term.
    This in turn led to a call for support from AFFW to the trade and media in the room to support the true Australian brands as it is here there is long term investment in Australian soil, in family involvement, in leadership and innovation. All of this is imperative for the future health of the domestic and export wine business. Successful export wine business can only occur from a strong and healthy domestic wine business, hence the importance of Australian wine brands.
    My reference to no-brand labels as ‘hollow logs’ was to emphasise that the long term future of the Australian wine industry cannot be built on these labels as they do not have the foundations to support this. Therefore we should support the true brands that have invested in the Australian wine industry and are dedicated to bringing the Australian wine message to global markets to help secure its future and longevity.
    There was no reference made to any retailers, but rather the comments were a generic reference to the current status of the wine market and the future threats seen if AFFW members do not drive and communicate and deliver on the difference between brands and labels.

    1. Ross, thanks for your considered reply. I think we are broadly in agreement: I'm a definite fan of AFFW, as I implied in my post, and a fan of what you have achieved at Brown Bros.

      However... I wonder about your "call for support". It seems to me to be emblematic of the wine industry to expect outside bodies to help and suport it (eg calls for schools to teach kids about wine). And to blame outside bodies (government, supermarkets, media) for their failure to do so (why isn't there more wine on TV?; why are supermarkets so horrible to us?).

      In a capitalist system, we all have to row our own boats. Successful brands owe their success to skilful brand management, not to the goodwill of outsiders. If we want more wine on TV, we have to help create an audience for those programmes. If we want retailers to treat our products with respect, we have to create consumer demand.

      Stated brutally, if a retailer's private label (PL) delivers what a consumer wants, in terms of flavour, price and packaging, that consumer is being fairly served.

      It is up to you as family-owned wineries to get the consumer to value your various stories highly enough to make him/her buy your wine rather than the PL.

      Asking for support seems to me to be a fundamental admission of weakness. Play from your strengths; you and the other members of AFFW have plenty to work with.