This post-budget morning the pall hanging over Australian wine is deeper and darker than ever. Today many Australian grape growers and winemakers awoke feeling totally disenchanted that the industry’s attempts to extract funding for growers and makers in need from this year’s Federal Budget were met with deafening silence. I totally understand the emotions that follow when you watch a ray of hope being extinguished before your eyes. Yet there never was a snowball’s chance in Hades that any Australian government, of any persuasion, was going to toss money towards the wine growing and making industry. As I have written several times before, the current situation is so deep and so challenging that there is neither the will nor the ability to save it. No knight on a white charger is about to enter stage left to save Australian wine.
It would be easy, but irrelevant, to indulge in an argument of whether or not the wine industry – or any other industry – is a worthy recipient of public funds (yes, those of you in government – the money you spend is indeed owned by the public) when it gets into trouble. Much of the current trouble does of course stem from the uncontrolled and government-promoted spending during the Howard era as a result of incentives given to Managed Investment Schemes that encouraged the planting of huge swathes of vineyard, the product from which has still to find a lasting market. And let’s not dive down the rabbit hole of how taxation policy has progressively screwed up this industry… But is it logical to expect the same government that helped shape the current situation – as well as exacerbating it by triggering and owning the China tariff debacle – to then throw money at the same problem?
It’s best to face up to where we are with 20:20 clarity and attempt to deal with it. As I wrote earlier, there is nobody coming to save the growers and makers in trouble. And in case you’re thinking they’re exaggerating their problems, think again. It’s not just about riverland growers with no market for their hundreds of hectares of vines; it’s also about the ultra-premium makers who got smashed by the China situation and who can’t see a way to sell their wine in a depressed and totally flat domestic Australian market. And hundreds somewhere in between…
It’s futile to expect that Wine Australia – a perfectly inept government body whose role should be confined to regulation and which receives more than half its income from the industry whose market it is supposed to grow – has either the resources, the ability or indeed the opportunity to help. Like most of the industry bodies themselves – national, state or regional – they’re in a totally impossible position given that their constituencies include businesses whose products range from the FMGC (fast-moving consumer goods) to luxury products and everything in between. These bodies, whose major challenge is to walk the tightrope to appease all their members and funders, would need more than the wisdom of Solomon to do that.
So what can growers and wine producers do if they wish to continue in the wine industry? As far as I can see, and I don’t for a moment pretend to be a business genius or an economist, the answer lies in scale. And there are several ways this might be applied.
Brands need to find a way to scale up or consolidate to meet a critical mass at which it becomes economically viable to fight for a share in the Australian and other markets. This could involve partnerships, joint ventures or simply acquisition. And given that an unprecedented proportion of Australian wine companies are actually up for sale right now, now is the time to act. But this can only work if resulting improvements in efficiency from such consolidation can deliver more volumes of better wines at lower prices. I never suggested it would be easy.
Another way that scale could be utilised is to follow the model set by the Family of Twelve in New Zealand, then followed to the letter by the First Families in Australia. I’d do it slightly differently right now for I’d not contain the numbers of members.
I suggest that wine producers take realistic stock of where they are, what they make, what their profile is and at what price they sell their wines. Then I’d connect with what might become a core group of other similar and sympathetic brand owners around the country, covering as many regions as possible. I’d be careful only to invite those with wines at the same or indeed better quality. The core group could then establish criteria for the expansion of their membership, encouraging other similar makers to join up. The outcome could be a nationwide collaborative network of people and producers with skin in the game (unlike Wine Australia for instance) that could work together to solve problems, share solutions and knowledge, cooperate in joint marketing and activity by promoting via their association (which by then would have a terrific name and brand) and – and this is the big bit – work with governments at all levels to attract funding.
This is what the First Families are particularly good at. Its participants have fostered relationships with local members of parliament at all levels so they can and do present a large, credible and 100% consistent approach towards the marketing of Australian wine. It’s so much easier for government to distribute funding to a group of this nature, because it goes direct to the producers whose plan is clear, positive and united and is not channelled via and expensive and dysfunctional layer of its own. Yes, read Wine Australia for that.
As we have seen, there’s no silver bullet coming from Canberra to save anyone. Last time there was, Wine Australia squandered $50 million in a way that should demand an enquiry. The organisations that are supposed to be representing and supporting Australian winemakers in their hour of need are failing miserably. Why shouldn’t producers bypass them entirely and take matters into their own hands?
After all, it’s their own destiny.
