This article was commissioned by the highly respected Australian wine industry magazine Grapegrower & Winemaker and was published in its November 2025 issue
We all know the data by now and it’s not pretty. I don’t know if there is a sector of the Australian wine industry that is doing really well today, other than perhaps those small makers who are both able to sell all their wine without any marketing spend as well as receiving the full WET rebate. Look elsewhere and these are grim times indeed.
Without dwelling on it, here’s a brief recap. Our national wine inventory is about 2 billion litres, more than double what it was before 2020. Our wineries are holding more than 2 years of red wine sales in stock. People talk of an annual glut of around 200 million litres, which might actually be much higher. My guesstimate is that more than 80% (conservatively) of Australian viticultural or winemaking operations would sell out if they could. Most of our big company-owned brands have been stripped for sale or have just been through a sale or amalgamation process
Global wine consumption is declining and consumers are changing their drinking preferences. Most Australian wine regions are under extreme pressure, none more than the growers within our inland river regions.
Our wine retail sector is over-supplied with outlets, especially big box stores. Too many are unprofitable and lack knowledgeable staff. The race to the bottom in price is as inevitable as it is harmful. More outlets are constantly emerging, competing to take sales from others; not to grow the market. The Endeavour experience of vertical integration is not succeeding, and its largest competitor is reducing its range.
How did we get here?
To understand where we go next, we need to figure just how we got here. Back in the day, when Australia made but a small amount of wine, everything we made would sell. If it was no good, we’d just export it. It wasn’t until after the massive plantings of the mid 1990s and onwards that wineries really had to focus on selling into a market that now had the luxury of choice. For the first time since the late 1800s, Australian wineries had begun to make more wine than they could sell domestically. Yet to a large extent, Australian winemakers are still excessively confident that whatever make, they will find a customer for it.
The ongoing crisis has much to do with Federal taxation policy, which has actively shaped the structure, economics and culture of Australian wine. It has helped divide the industry into a premium and export-focused sector, and another which is producing large volumes of lesser and bulk wine.
The MIS tax deductibility for vineyard plantings through the late 1990s and mid 2000s massively increased the plantings of low-cost grapes, driving the over-supply, fashioning a largely unprofitable bulk wine industry and fuelling market distortions, especially in the inland river regions where the most pain is felt today. Many of these vineyards were planted simply for tax deductibility and not for any genuine business case. Wine is now one of the cheapest forms of alcohol in Australia, which is unsustainable given our climate, our market conditions, our cost structures and our distance from large markets.
Next, the transition from state wholesale taxes to the WET led to the implementation of the WET rebate, which even at $350k remains the key business driver for many small wineries and brands. The maintenance of the ad valorem approach to wine taxation has driven up the prices for aspirational wines, while the case for a volumetric tax has largely been shut down by the big producers of cheap wine. This a very serious discussion that’s long overdue.
It’s also worth noting the industry’s ongoing inability or unwillingness to create a system or forum that facilitates meaningful representation for all its participants. These days I often urge those small wineries desperate for an avenue through which to lobby and create market noise to form their own associations. It worked for the ‘First Families’.
There’s a widening disconnect between wine producers and the market expected to buy their wines. An example is the extreme lightening in style of Australian chardonnay, which the market has failed to embrace. In the almost total absence of round, creamy Australian chardonnay, our larger retailers are stocking barely drinkable imported chardonnays en masse to meet this evident demand. So some of the best-selling wines in major outlets exist only to replace styles we have walked away from because we don’t want to make them anymore. And we have a surplus. Go figure.
Since our ‘premium’ industry is too big to rely on domestic sales alone, it depends on overseas buyers. But our isolation from the rest of the world appears to be more than geographic. Australian wine is only rarely glimpsed on top international restaurant lists. Yet, when challenged over their style choices, our makers often argue with misplaced confidence that it’s just a matter of education and that sooner or later Australian drinkers and overseas wine buyers and media will eventually appreciate their unquestioned quality.
However, to a dangerous extent, winemaking decisions are driven by a closed cartel of opinion leaders, wine judges and sommeliers moving as an organised pack and only promoting wines that meet their chosen style or focus. The rest are ignored, just as those opinion leaders and judges who disagree with the views of the pack are marginalised. It’s actually expected within this clique to talk down our greatest white wine, Giaconda Chardonnay, because it represents almost an opposite interpretation of chardonnay to which the cartel preaches to its followers. Yet some winemakers are clearly, if quietly, learning from what Giaconda does so well.
There would be significantly more Australian wine of world class if makers were more focused towards making the best wine possible from their best sites and being less concerned about following the dictats of the clique in order to remain within it. This is not an uncommon view amongst leading overseas wine critics.
How do we move forwards?
Winemakers need to know who their customers are, where they are, what they’re currently drinking and what they’re paying, and how they drink their wine. This applies for domestic as well as export sales. There’s no point in trying to sell someone a wine they’re clearly not likely to enjoy or want to pay the asking price for, wherever they are.
Too many wines are made without a commercial thought. All too often it’s the winemakers in companies who drive decisions regarding which wines are being made and into what style. More than ever before, each label released simply must drive profit. It has also become clear that not enough wine business owners have sufficient industry and product knowledge to counter production-driven SKU or style-related decisions. And it was nearly forty years ago that I first heard – from an accomplished winemaker – that making a wine was nowhere near as hard as selling it.
We have hundreds of wines whose taste, brand and price would lead to overseas success but all too often the production runs are too small to justify the marketing costs necessary to build and maintain healthy export markets. There’s currently an opportunity to consolidate vineyards and brands to create the necessary critical mass to build a serious export brand.
As we are already seeing in those regions under most pressure, market forces are already reducing the area under vine, however not by enough to make much difference to the supply-demand imbalance. There isn’t a logical basis for a government-funded vine pull scheme to accelerate this. Indeed, many of the vineyards in question have already been associated with considerable government support. Support, if it’s being issued, might better be directed to assist those in the process of changing from one form of production to another, or to another business entirely.
Australia needs to reduce the number of times it competes against itself in export wine markets. Time and again a delegation of from a state or a region will be followed by the next state or region, before a national roadshow eventually turns up. While we’re profoundly aware of the differences between our states and regions, emerging markets just don’t get it. This rinse and repeat and the lack of coordination between our export efforts simply confuses potential partners and customers. By the time the fourth or fifth (entirely separate) Australian wine export promotion arrives, they simply don’t turn up. How can we expect them to? The fiscal inefficiency of our current approach is breathtaking. A nationally coordinated effort is needed to promote Australian wine under a single banner under which the individual brands can compete amongst themselves.
Should Wine Australia implement this? Absolutely not. It’s patently impossible for any entity given this responsibility to represent all brands and regions equally – our large number of producers and massive number of regions prevent that. That said, it’s high time the marketing of Australian wine was moved from a government body to competitive free enterprise in a way that enabled industry participants to have more say over what is spent and how. The industry should set the strategy and tactics around its marketing and specialised agencies could compete to implement the tasks required. If they’re not good enough, they get fired.
As suggested earlier, the industry desperately needs a simpler and more logical basis upon which its products and producers are taxed and rebated (if this proves to be the best ongoing approach). The need for change is urgent. It won’t be easy, but the industry needs to create a simple and straightforward taxation policy to take to government.
Change is necessary and inevitable, whether we like the idea or not. While many growers and producers are hanging on in the hope of better times around the corner, it might take longer than they can survive. Large-scale departures are inevitable and those able to dodge the bullet need to learn from it. And most importantly, they need to learn who they’re making wine for and how to build relationships between their customers and their brand.
