While the good ship Australian wine is in no imminent danger of sinking, the vessel has indeed sprung the odd leak of late. Let’s start with the Pacific Peso, which has pumped on considerable muscle. Buying a mere 56 US cents this time last year, the Australian dollar has topped the 80 cent mark with indications it might head to 85 cents. Similarly, it was buying 35 UK pence and 0.54 Euros a year ago, while today it buys 41 UK pence and 0.62 Euros. Tough, indeed, to make profits on wine when your margins are being slashed by circumstances entirely outside your control. Difficult, also, when your own government chokes your domestic profits with the most punitive wine taxation regime on Planet Earth. While there is no over-supply of good wine in Australia, there is plenty of ordinary wine lying around. Most of this will probably never find a market. There was recently a lot of noise from a group of Margaret River growers complaining that just prior to the 2004 harvest they had still tanks full of the 2003 vintage. They’re hardly alone, since right across the continent small producers have created ordinary to acceptable wines that lack any point of distinction or access to market. Many also lacked a business plan, or anything resembling a marketing strategy. Tough perhaps, but Darwin expressed thoughts about species that couldn’t adapt. The Australian government, which pockets around 25% of the $2 billion Australian wine market, recently recognised this with a $1.5 million program to instill these producers with some marketing savvy: a futile entirely unlikely to reverse the Darwinian processes. Despite the reports, the big companies, however, need a big vintage. The only way to continue to grow is to make and sell more wine. If it has to be sold at reduced margin for a period, so be it. This industry has historically operated on economic cycles of around seven years, and just because it has largely become publicly owned over the last decade, nobody worth listening is suggesting these cycles won’t continue. It’s stating the obvious to suggest that Australian wine is taking a hammering in the media, especially in the UK. Little point in debating the merits of the issue, for that would ignore the challenge in front of Australian wine to improve its status. For historical reasons it has been linked with the supermarket tag, but that’s exclusively a UK phenomenon. Australians are awakening to the need to show the UK buyers, media and public that the links between wine, site and vintage apply just as coherently in this country as they do in Europe. Furthermore, in all honesty, we need to make more world-class wine and ship it to London. Another of the wagons circling Australian wine is another over which it has no control: the weather. In a nutshell, the 1980s were cool, the 1990s getting warmish, and so far the 2000s have been filthy hot; 2002 the only exception. Australia hasn’t had a thoroughly good coast-to-coast vintage since 1998, although for a while it looked like 2004 might become its equal. After a hot December and a mild January, February has been positively hellish across the major warm to hot regions of South Australia, New South Wales and Victoria, which produce the lion’s share of the national harvest. Temperatures at and above the mid to high 40s are cooking grapes and dropping leaves, threatening quality as well as quantity. While the cooler southern regions might still experience top-class vintages, 2004 will not live up to what are even quite recent expectations. But it’s not all bad. Wine exports in 2003 increased by 6% by value against a national decline of manufacturing exports of more than 7%. Wine is now the country’s fourth-largest agricultural exporter by value, behind wheat, beef and wool. Southcorp’s half year results, which suggest the new management is indeed up to the task of turning this company’s fortunes around, provide genuine encouragement to the industry at large. A high-quality 2004 vintage in the quality cooler areas should produce the requisite ammunition to improve its image in certain UK markets. Furthermore, a growing number of committed and capable new producers are putting the runs on the board. While the Australian stride has certainly lost its swagger, I strongly believe it has the ability to adapt and react to the new global circumstances it now faces. It’s done it before, and successfully at that.
