“Consumers in established wine markets worldwide are buying wine less often but spending more per bottle, with Australia also following this trend,” writes wine columnist RICHARD CALVER. 

“PREMIUMIZATION”: what an ugly American term! I was introduced to this mouthful through being asked if I’d ever heard of The Wine Economist, Mike Veseth, who “analyses and interprets today’s global wine markets”.

I read his online March 2023 article entitled “Chutes and Ladders: Wine and the Premiumization Game”. 

The trend that he seeks to isolate is the market trend he detects in the US: “Sales of wine at lower price points have languished or declined. 

The growth zone has shifted to higher and higher price points (which entail lower and lower volumes). The sweet spot in the wine market is a moving target.”

This country’s industry statutory authority, Wine Australia, in its online report on the Australian domestic market reinforced the trend (although the statistics quoted are five years old) where it says: “There is also a trend towards drinking higher-priced wine, with sales above $10 per bottle (off-trade) increasing in 2017 while sales below $10 per bottle declined.”

I followed up with Wine Australia and was directed to a 2019 report that showed consumers continue to pay more per bottle while consuming less frequently, moving from quantity to quality. 

It seems that a combination of increasing concerns about health, the growing variety of higher-priced products available on the market, and alternative forms of packaging where consumers can now buy premium wine in smaller formats are driving the trend. 

I was also referred to a report that shows a 5 per cent decline in the volume of wine sales globally, but a 2 per cent increase for premium and above segments. 

I was also sent a pie chart by Wine Australia that showed for the Australian domestic market in 2022 just over 58 per cent of sales were in the premium wine category. In essence, what is happening is that consumers in established wine markets worldwide are buying wine less often but spending more per bottle when they choose to purchase it, with Australia also following this trend. 

I wondered if this was having an impact at the local level and so I asked the general manager of Walt & Burley, the Kingston Foreshore pub, Danilo Acioli, if he’d noticed this “premiumization” about which I shared my view of its ungainly sound.

“Yes, not a good word, but it’s basically a move to higher-quality wines. In the last few years, we have seen customers demand premium wines. People are interested in good quality. Yes, we have introduced a cellar section to our wine menu where we offer aged wines including a Charles Melton 2003 shiraz, delicious.” 

This trend is confounding when the way in which wine is taxed actually favours the production of lower-cost wines. 

In a 2016 scholarly article about the taxation of alcoholic drinks, Daube and Stafford indicate that the Wine Equalisation Tax (WET) favours wines at lower price points: “The WET is based on the wholesale price of wine, not its alcohol content. The WET is why cask wine can be promoted and sold for as little as 18 cents per standard drink, or $1.80 per litre – cheaper than many bottled waters – contributing only 5 cents per standard drink in tax.” 

They go on to label the WET as a subsidy, “propping up the production of low-value wines”. 

The move to premium wines is therefore doubly remarkable because consumer preferences are already heading in the direction of where those who wish to reform the taxation of wine want to end up: introducing reform with the aim of reducing harm and promoting a lower-risk drinking culture.

Many people want the government to protect the consumer. A much more urgent problem is to protect the consumer from the government.

–Milton Friedman