Wirra Wirra secures landmark deal with largest wine company in US
McLaren Vale’s Wirra Wirra has expanded into the US market in a landmark deal it says could mark the beginnings of a new era for Australian wine exports.
McLaren Vale winery Wirra Wirra has expanded into the lucrative US market in a landmark deal it says could mark the beginnings of a new era for Australian wine exports.
Under an exclusive distribution agreement with wine giant E. & J. Gallo Winery, Wirra Wirra wines will be sold on supermarket shelves and in restaurants across the US, which is re-emerging as one of Australia’s top wine destinations.
California-based E. & J. Gallo is the largest family-owned winery in the world, and the largest wine company in the US, estimated to sell one in every five bottles purchased in its home country.
Wirra Wirra has become the only Australian label in the E. & J. Gallo stable, which includes more than 100 global brands.
Wirra Wirra chief executive Matthew Deller believes the deal could open doors for more local producers.
“Gallo have done an amazing job with Italy and they represent several of the great wineries of Italy like Allegrini, Pieropan, Brancaia, so it would be amazing to see Wirra Wirra spearhead a big category regeneration in the US,” he said.
“It’s been a real challenge for the Australian category in the US since about 2010, after the global economic crisis, and we’ve never really hit our strides again.
“Our hope is that this will be a catalyst for a regeneration of the Australian category in the US, which is the largest wine market in the world and the largest wine importing country in the world.”
E. & J. Gallo’s roots date back to the Prohibition era when Ernest and Julio Gallo grew grapes and sold them to eastern states where home winemaking was allowed.
It has grown to become one of the world’s largest producers and distributors of wine and spirits, generating $5.3bn in annual sales.
Sales of Wirra Wirra wines in the US will initially focus on its Church Block, alongside an exclusive Cabernet Sauvignon that’s been developed for grocery giant Albertsons - owner of the Safeway supermarket chain.
In the wake of the 2020 Chinese tariffs, the US and UK have emerged as the top two destinations for Australian wine, with each country taking about $360m worth in the 12 months to June.
According to Mr Deller, the deal with E. & J. Gallo proves Australian producers are continuing to make inroads in the premium end of the US market after years of shrugging off a reputation for making cheap and cheerful wines.
“Post 2010 it’s really been dominated by under $12 Australian wines, and what we’re seeing now is growth in the $15 to $25 Australian wines in the US market, and we’re seeing massive decline in the sub-$12 Australian wine category,” he said.
“Gallo has access to more data and more analytics than any other wine company in the world and so if they see an opportunity for Australian wine then there’s an opportunity for Australia wine.
“They’ve made it very clear that they’re not interested in bringing a brand and their portfolio
unless it does serious volume.”
As part of its own premiumisation push, Wirra Wirra recently made a multi-million dollar investment in fine wine winemaking equipment to support its “fine wine transformation”.
“Wirra Wirra’s always made fine wine ... but we’re wanting to push even more in that direction,” Mr Deller said.
“We’re stepping up on the intensive management of our own biodynamically farmed vineyards and we’ve invested in world class winery equipment to make wines that can compete with the very finest wines in the world.”
Wirra Wirra sells around 150,000 cases annually, with around 15 per cent exported to countries across Europe, Asia, North America and the Pacific Islands.
Less than 2 per cent of the winery’s sales went to China before tariffs were introduced, and while Mr Deller is hopeful of seeing that market reopen, he doesn’t expect it to return as the dominant force it once was.
“I don’t see China being anywhere near what it was as a market for Australia,” he said.
“The Chinese wine market in total has fallen below 2000 levels and Chinese wine in China has grown considerably in share. It will be a market but it certainly won’t be the market.”
Mr Deller, who took over as chief executive at Wirra Wirra last year, said relationships with E. & J. Gallo developed during his time working for US drinks giant Constellation Brands and New Zealand wine company Indevin were pivotal to securing the latest distribution deal, which was initiated by industry group Wine Australia’s US Market Entry Program and supported by the South Australian government’s Wine Export Recovery and Expansion Program.
Wine Australia’s regional general manager Americas, Aaron Ridgway, said the deal marked a “turning point for Australian wine in the US”.
“This strategic launch by E. & J. Gallo Winery in the Australian category is both visionary and well-timed,” he said.
“Their ability to create and define entire categories over many decades sends an extremely positive message about the viability of Australian wine in higher price segments.”
South Australian Trade Minister Nick Champion said the deal opened the door for more local producers to access the US market.
“The partnership they have forged through the US Market Entry program will streamline distribution and cut through the different import controls and arrangements across the country,” he said.
“The McLaren Vale region is world-class and this is another sign more US retailers are tapping into our state’s rich diversity and variety of wines.”
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