What is going to happen to the price of wine? It won’t get any cheaper. The domestic Australian wine market is presently so down, so low, that on a value for money basis, quality wine is an absolute steal. The number of wine bargains about today is greater than ever. In healthy economies wine is bought on its reputation, image, label, recommendation and several other intangibles. In recessed times, however, price becomes the most important factor. Doesn’t that infer some sort of relationship between price and quality? The more you pay, the better wine should be. More often than not, that isn’t necessarily so. Just as the large companies are reducing prices, so are the small wineries. None of those labels able to maintain high prices, such Mount Mary, Yarra Yering, Grange Hermitage, Petaluma, Howard Park, Pierro and Mountadam have a large quantity to allocate to the Australian market. Each has established a reputation for the highest quality and each sells today almost as if the recession did not exist. For the rest, it’s another story. Wine is sold at bargain prices for four major reasons. It may be made in such vast volume, like Lindemans Bin 56 Chardonnay, Mildara Jamieson’s Run, Wynns Coonawarra Hermitage or Montana Sauvignon Blanc, that economies of scale can still afford their producer some profit. They may be made by wineries which have an abundance of unfashionable varieties, which would sell for more money in a healthy market, but which have to be priced low to ensure annual turnover of stock. The excellent Rhine Rieslings made by Mitchelton, Tollana and Tisdall possibly fit that bill. Finally, some wines are clearly cheaper than their competition because they are grown, made and bottled without the need to borrow capital. Yarra Ridge, which has paved the way for more moderate Yarra Valley prices, is an obvious example, like the revitalised Waterwheel winery in Bendigo. Finally, in desperation, wine is discounted well below its real value for reasons other than style and quality. Some wines are selling at wholesale level for less than their makers claim it costs them to make. Consumers have clearly decided to buy wine on their assessment of quality, rather than to pay distorted prices because makers were not sufficiently economically alert to keep production costs down. It could be argued that some of the most spectacular price falls of late in Australian wine, such as those of Coldstream Hills and Lindemans Coonawarra, have simply adjusted their prices to what the market perceives their product to be worth. Surely it was no coincidence that each company dropped prices when they had stocks of poor vintages to sell? Perhaps once the Australian wine market becomes more sophisticated, premium wines will be sold at a price related to the quality of vintage, as occurs each year in France. That way consumers would not be trapped with excessive prices for the ordinary years which can follow great ones. Although consumers are drinking less wine, and buying cheaper wine to boot, Australian wine prices have fallen not simply in reaction to our current recession. Following several heavy-yielding years Australian wineries have been full of wine, forcing them to drop prices to clear stocks of back vintages. Demand has fallen in response to modern concerns of alcohol and health and drink driving. The upshot of the industry’s recent brand rationalisation has been that brands have been rearranged to balance large sales portfolios, leaving some in the cold, others to be discontinued. Wine producers and marketers still have a poor understanding of how to promote wines effectively through advertising or public relations, so for many the only means left to compete against others is on the basis of price. You may have noticed the adjustments made by wineries in reaction to the market downturn. Second labels are no longer a rarity, but commonplace. This offers the winemaker the opportunity to put together a wine sold to the consumer with a lower quality expectation. Second labels frequently include early-drinking wines that do not require cellaring, like unwooded or lightly oaked chardonnays; fresh fruity (and to be honest, simple) pinot noirs; light berry-like cabernets and rhine rieslings that don’t need oak anyway. Some wine companies are not adjusting well. They tend to be medium-sized operations too large to sell all their wine at the old prices, and too small to out-gun the large companies in the discount stakes. They end up by selling less popular varieties from lesser regions at the same price as premium varietals, often from ‘name’ regions. Brown Brothers Shiraz is frequently today the same price as Wynns Coonawarra Cabernet Sauvignon. Nothing against the Browns, but the Wynns would win me, every time. So what is ahead? Ultimately the present decline in per capita consumption of Australian wine won’t stand for anything. Although the health and driving issues will remain, this recession must ultimately heal, enabling wine consumption to return to high levels per capita, and for the recent trend of drinking higher quality wine to resume. I would not expect the ‘high water mark’ of over 21 litres per capita to be threatened in the near future, but annual consumption could again approach 20. Export will be the major influence. Presently Australia exports nearly a fifth of all the wine it makes and 1% of all wine exported, a rate growing around 35-40% each year. If production remains at present levels, 50% of Australian wine could be exported by 1995 and more than 80% by 1997! Of course that won’t happen, but those figures reveal that with increased overseas offtake, supply will fall in Australia, enabling prices to increase dramatically. Numbers like that also suggest that unless the country starts planting more vineyards expressly for export, Australia could run out of wine. An investment opportunity indeed! My prediction is that Australians have perhaps another three years to find good to outstanding wines priced at only a fraction of their real worth, for by that time, natural and political disasters notwithstanding, the wine industry will be sufficiently profitable not to prostitute itself and its product in the marketplace as it is currently doing.
