Growing pains, huh? If you set your heart on expanding from 1.5% to 5% of a massive world market by 2025, you’d have to expect them. The wine industry is gearing itself for the next set, the result of a self-imposed condition of temporary over-supply. Over-supply causes wine prices to fall, grape prices to plummet and growers on the open market to gnash their teeth. Winemakers say that’s only fair – at the moment they’re gnashing hard while the growers are milking every bit of mileage out of the current price boom. The upshot is great news for the drinker of Australian wine, according to one of its most highly-credentialled observers and leading participants. Brian Croser is the Executive Chairman of Petaluma Limited, one of our most energetic and high-profile wine companies. He is also a former President of the Winemakers Federation of Australia (WFA) and was the wine industry’s representative nominee on the Federal Government’s Wine Industry Inquiry Committee. You might say he is in touch with the trade. Croser expects that the wine industry’s forthcoming growing pains will drop the prices of quality Australian wine until around the turn of the century. Thereafter, perhaps not so cheap. But as Wayne Goss will tell you, there’s a lot that can happen in four years. According to Croser, the looming over-supply is in part the industry’s own fault, for planting too much too late. ‘Instead of planting more vineyards in 1991 and 1992, while exports of Australian wine were growing at 40% per year, we waited until the present high grape prices and grape shortage’, he says. The trade began planting again in 1993 and, according to Croser, short supply was inevitable after the industry refused to accept it would run out of premium grapes in 1991/92. It’s clear to any drinker of Australian wine that its prices have escalated by around 30% over the last eighteen months. Around 300,000 tonnes of premium Australian grapes presently get sold as bottled wine in our export and domestic markets. A poor crop last year created a premium crop of 315,000 tonnes, but in 1996 Croser says that figure could easily rise to 460,000 tonnes, even to 650, 000 within a few years. With annual sales increases of only 7 million litres (5 million overseas, 2 million domestic) the extra 250,000-300,000 tonnes of premium grapes coming on stream will equates to an extra 18-20 million litres of Australian wine from premium grape varieties that somebody is going to have to drink. Nobody’s going to do that at present prices, so down they will have to fall. By the year 2000, Croser expects the habitual wine cycle of surplus-low prices; shortage-high prices will have rectified itself, resembling the high-price environment confronting the wine industry today. It’s likely that over the next few years Australian wine will again be discounted, so it will again be recognised as the world’s most attractive source of cheaper wine. This is likely to help expand its horizons into new and existing export markets such as Germany and the US. With such an anticipated acceleration into export markets and steady domestic growth, by 2000 Croser expects there to be another quality wine shortage, but this time with the industry established at a far greater scale. ‘We’ve been through it all before’, says Croser, pointing to 1986 when prices were at their highest ever, the surplus in 1991 and the shortage in 1994/95. But is the expected surplus nothing more than a wobble in the escalating growth curve of Australian wine, or could it represent the beginnings of something more sinister? Could the Australian wine industry be taking too great a punt on export? Harvey Steiman is the Editor at Large for one of the world’s leading wine publications, the New York-based Wine Spectator. His job is to travel, taste, eat and write and he has spent enough time in Australia over the last two years to know what’s going on here. ‘It’s always something of a risk to count on export’, he says. ‘Australian wines are simply too tasty for the industry here to be excessively concerned. Publics are fickle, but not so fickle to give up on Australian wine. Australia really does make wines that taste good. That’s rare in the international market, unless you’re paying good money. Even a worldwide depression wouldn’t hurt Australia any more than anyone else.’ It is crucial, says Steiman, for Australia to maintain its present quality levels. It concerns Brian Croser that much of the recent plantings have been in the riverland areas, where quality is not as dependable as the traditional wine areas. It may happen, he suggests, that the average quality of Australian wine from the premium varieties may well decline, exacerbated further by the higher than usual proportion of young vineyards contributing towards the national crop. Advocating more plantings in premium areas, Croser suggests that the ideal time to plant will be in 1997 and 1998, anticipating the regenerated growth in export. ‘Otherwise we might run out of grapes again around 2000 and 2001’, he says. The WFA’s Chief Executive, Ian Sutton, says that it’s more important for the industry to take a longer term view. ‘Although poor vintages have prevented us from reaching our billion dollar export target by 2000, that highly-publicised target of ours has probably drawn more investment into the industry than anything else we have done’, he says. ‘We’ll probably reach that target by 2002 or 2003. Sure there are fluctuations in the short term, but we’re not a short term industry.’ The WFA estimates that it will require around $3 billion of additional investment to achieve its target of 5% world market share by 2025. Sutton views the possible forthcoming availability of more premium varietal wines than ever before and their likely affordability as an opportunity for wine producers to readdress some of the more difficult markets for Australian wine such as Japan and South-East Asia with a ‘wine supply-led drive’ there. Sutton still considers that the UK, the USA and Germany represent the most important opportunities for Australian wine exports. He says that Australia could increase its share of the UK market from 8% to 10% by 2000 and that it wouldn’t take much of an increase in market share in Germany, the world’s largest wine importer, to sell a significant volume of wine there. We’re currently a tiny percentage of Germany’s wine imports, but this market has more potential for us as any other’, he says. Since it is virtually 48 separate markets, the US presents a difficult yet worthwhile opportunity for Australian wine companies, provided they are prepared to invest heavily and see through the hard slog for the ultimate rewards that companies like Southcorp and Rosemount are presently reaping. With its entry to the European Union and the consequent opening up of its wine market, Sutton also expects Sweden to buy significantly more Australian wine. Swedish wine taxes have previously restricted premium wines to luxury status in restaurants, he says, while a major forthcoming report from the Swedish Government underlines a major change in the country’s attitude towards wine consumption, highlighting a dramatic shift in focus in the blame for alcoholic abuse from the products concerned towards consumer responsibility. The Australian wine industry has agreed to initiate an FOB levy on all wine exported to fund its extensive export development programmes. Much of this expenditure, according to Ian Sutton, will address the next crucial step in the development of the profile of Australian wine overseas – the generation of awareness of the qualities and characteristics of the different Australian regions and their wines, and the differences between them. ‘It’s no accident that Wine Australia (the industry’s massive expo at Darling Harbour, Sydney, from June 15-18) is an aggregation of regional displays, highlighting their unique qualities and links with food, lifestyle and culture’, says Sutton. ‘Our strategy is to keep consumers with Australian wine, but to offer them a wider range and variety to sample.’ Something that is proving more popular all the time is Australian shiraz, which was rewarded with an exceptional degree of recognition when Penfolds Grange 1990 was named Wine of the Year by the December 1995 issue of the Wine Spectator. ‘Shiraz is the grape that is making an impact in the US with connoisseurs and collectors. People will pay big bucks for Australian shiraz. It’s a variety that Australia does better than anyone with the possible exception of the Rhone Valley in France’, says Harvey Steiman. ‘Australia can and is selling cabernet sauvignon and chardonnay in the US, but they will never be the wines people associate with Australia. Australian shiraz is distinctive; it has a personality, class and an ability to age – it’s the complete package. You can also drink it young since its tannins are not formidable’, he says. Steiman rates the Henschke reds, which are based around shiraz and cabernet sauvignon, as other benchmarks for Australian winemakers to model their red wines for export to the US on, while he rates the typically crowd-pleasing, fruity, tropical, easy to drink Australian style of chardonnay as a winner in the US for as long as we keep their prices affordable. Adrian Atkinson, principal buyer of Australian and New Zealand wine for the giant British wine retail chain, Oddbins Ltd, agrees, saying: ‘Australians should be making Australian wines, not French. It’s a different country with different grapes, a different philosophy and a different way of life. Our consumers enjoy the more generous, riper Australian style.’ Atkinson says it’s important to remember that our success in the UK is based on up-front fruit and mouthfilling flavours. To lose that up-front drinkability in favour of artificially elegant wines made to compete against the naturally elegant wines of France would be a mistake. ‘But if you can do it in an way that is entirely Australian, that would be great’, he says. There’s little doubt that Australian wine has stepped onto a big-time treadmill of its own making, a bigger game than it’s ever entered before. The investment needed is enormous, the stakes are high and the risks are greater than anyone involved with wine has ever experienced. But, in the cold, hard, sober light of day, I have a confident feeling inside that the Australian wine industry might just achieve the very high targets it has set itself. Breakaway: Ten Hot Tips for the Future in Australian Wine: o Penfolds Grange will shortly be released at over $200 per bottle. Magill Estate Shiraz prices will be the next to rise. o Henschke’s Hill of Grace will shortly fetch over $100 per bottle at release. Mount Edelstone prices will shortly begin to follow suit. o The Italian varieties of pinot grigio, dolcetto and nebbiolo will be the next ‘exotic’ varieties to be planted on a large scale in Australia. o It will soon become much harder to find your favourite Australian wine if its production is less than 5,000 cases. o Commerically -priced chardonnay, cabernet sauvignon and shiraz will get cheaper before they get more expensive again. o Before 2000 there will be a smaller number of ‘medium-sized’ wine companies in Australia, for these are least likely to survive a short-term pricing war. o Early next century New South Wales will be the largest producer of wine grapes in Australia, a status it has not enjoyed since the middle of the last century. o The Australian public will eventually wake up to the fact the unwooded chardonnay is an expensive rip-off next to riesling and semillon. o The blending of Chilean wine into Australian wine casks will shortly cease as prices fall here, while the cheap bottled wine from Chile, South Africa, Italy, Argentina and France will not make any real market impact over the next five years. o Sooner or later, another Federal Government is going to want to squeeze the life out of the Australian wine industry again.
