Good news for some is usually bad news for others. Signs are beginning to appear that Australian wine is becoming harder to find. In other words, what many of us anticipated to be a short-term glut of wine is proving to be just that. So, the good news is that makers of Australian wine might start to make a buck again. The equal and opposite reaction is that those who drink Australian wine might have to pay a little more for it. Large to medium-sized companies are having to spend more to get the bulk wine they need to create the big export blends. Bulk wines of any intrinsic quality are becoming harder to find. Depending who you’re talking to, the over-supply will peter out between six and twelve months from now. The possible takeover by Fosters of Southcorp, which equates to Australia’s iconic (if perhaps undrinkable) beer buying out our even more iconic wine, is however being viewed by many as the single most likely reason for Australian wine prices to head upwards. While this would certainly consolidate a large number of significant domestic brands in perhaps a single portfolio, the reality is that with so many medium-sized producers nipping at their heels and with such a steady consolidation of our local wine retail market into two solid blocs, in my opinion it wouldn’t have much impact on its own. There’s also a great deal of misinformation in the media concerning this possible deal. I have no doubt that the challenge of combining the domestic portfolios of Fosters and Southcorp and making them work together will take the wisdom of Solomon and the patience of Job. We have learned that a Rosemount and a Southcorp would still be selling more wine in total if left to operate as individual businesses. Tack on a Wolf Blass, a Jamiesons Run, a Yarra Ridge and a Yellowglen (sparkling label) to this and you can imagine the challenge it represents. Incidentally, Australia’s corporate watchdog, the Australian Competition and Consumer Commission, is shortly to deliver its verdict on the deal. Most speculation concerns the sparkling wine sector, since the merged business would own a vast majority of the sub-$15 market. Fosters management is firmly convinced that the amalgamation of the Beringer Blass and the Southcorp folios will be significantly easier to manage in export markets. Essentially, this means combining the Wolf Blass brand with a maximum of two of either the Lindemans, Penfolds or Rosemount brands in most major markets. There appears to be good sense in this argument. Whatever happens, there is a growing conviction amongst the majority of serious players in the export side of Australian wine that sooner or later someone is going to have to make more of a return in overseas markets, especially the UK. Volume sales of Australian wine are again increasing steadily in the UK, but at a declining value per litre. Too much Australian wine is sold on promotion in this market. Sooner or later, market share is going to have to equate to profit. Australia’s challenge will be to justify to its markets, the UK especially, why it will be worth spending more money to drink its wine.
