It’s April 2002, and after ten years of growth and success that exceeded even the most optimistic expectations, Australian wine is at the crossroads. The simple truth is that for it to continue to stamp itself as the yardstick against which the rest of the wine world is measured, things have to change. Now that more than half Australia’s wine production is exported, there is a potentially dangerous reliance on two major markets. Too much Australian wine is made from over-cropped fruit from young vineyards. Too many Australian vineyards have been planted for the wrong reasons. There is some truth in the claim made by a growing number of international opinion leaders that our wines are simple, straightforward, contrived and over-priced against some of their competition from other countries. There is still a potentially dangerous ‘us and them’ relationship between growers and winemakers. The Australian wine industry operates against an exploitative taxation regime that taxes its own wine more than any other wine producing country. Australians drink less wine than they did a year ago, but while cask wines still account for a little more than half our domestic wine consumption, we’re still slowly shifting our buying preferences upwards. So while our national grape harvest for wine production is steeply rising as unprecedented new plantings come on stream, export is the key to survival and prosperity. There’s nothing wrong with that, for Australia is still enjoying an extended time in the sun in most of its overseas markets. Over the last ten years our wine exports have risen by both volume and value by just over 20% per annum, an astonishing achievement. Australian wine has traditionally boasted the approachability, the track record, the image-building flagships (like Penfolds Grange), the distribution and the value for money. For a while, it also enjoyed having much of the market for non-traditional European wines to itself. Today the competition is considerably hotter, as wines from Chile, South Africa, New Zealand, southern France, Spain, the USA and other traditional European wine producing countries are putting up a much stiffer fight for the same shelf-space. While each of Australia’s four largest wine makers have cemented their overseas success on the development of powerful individual brands like Jacob’s Creek, Rosemount and Lindemans Bin 65 Chardonnay, the time is running out for other Australian producers wishing to join them. Given that around half of Australia’s wine exports are sold in the UK, and just over half of the rest to the US, Australia does need to hedge its bets a lot more effectively by developing other substantial overseas markets. The French have taken a considerable lead in what many rate as our ‘natural’ markets in Asia, where Australian wines are still taking a pasting. Potential customers are realising that if they can’t get the combination of value and quality they want from Australia, there’s a whole range of other potential suppliers. Recently there’s been a detectable air of complacency about Australian wine, as makers would appear to think all they need to do is print ‘Product of Australia’ on their labels for them to walk out the door. Perhaps for a while, but not any more. The competition is better and cheaper than ever before, and they’ve learned how to sell: from us. There is more bulk wine lying unsold in Australian wine cellars at any time since the mid 1980s, when exports first began to climb. You can blame the large number of young vineyards producing their first few crops in Australia for a noticeable decline in quality in the A$10-25 sector. Some pretty average recent seasons in 1999, 2000 and 2001 have hardly helped, and the industry is not exactly confident that 2002 will see any substantial improvement. Keen to maximize yields, growers have pumped their young vineyards with water, with the inevitable result that much of the wine in the price range I mention is excessively thin and insipid. Quite the opposite of the generosity of flavour and richness of mouthfeel that have underpinned Australia’s overseas success to date. Why there are so many new vineyards in the first place, and what is likely to happen to their fruit? Too many vineyards have been established so theri stakeholders can minimize tax. Many are set up with established contracts with wine makers, a large proportion are not. Many are coming to the end of their contracts and will then join the increasingly busy and risky speculative market which sees most winemakers in any Australian winery of medium size and greater flooded with requests each year to see if they want to buy a stray few hundred tonnes of premium cabernet, shiraz, merlot, chardonnay, etc. Growers who depend on the speculative market are forced to ride the constant boom-bust cycle associated with grape prices in Australia. Chardonnay is presently priced beyond its worth because we didn’t plant enough over the last five years to cope with export growth. Cabernet sauvignon is under-priced, especially if it’s from cool areas. Old vine low-yielding shiraz from hot regions like the Barossa Valley and McLaren Vale is fetching telephone numbers. Fifteen years ago this shiraz was being sold in muffins. There’s a widening trend to base a grower’s return on vineyard area rather than tonnage received, which should encourage lower crops of higher quality. Even in these enlightened times, it’s by no means a universal practice. Oddly enough, nature has intervened in 2002 to ensure that very few Australian vineyards indeed will be over-cropped. Poor spring weather around flowering followed by one of the coolest summers on record has caused a dramatic downsizing of the estimated national crop. Provided growers managed their vineyards sufficiently well to be able to take advantage of the little good weather they received, quality might just be exceptional. But at time of writing, growers in most Australian regions are working hard just to keep a brave face. At least the glut of bulk wine has found an antidote, and the danger of a domestic wine surplus has been put on hold for another twelve months. Given that their growers were actually able to turn their fruit into wine, there is a similar logjam in domestic Australian distribution, which sees hundreds of new labels (no exaggeration) and brands unable to find any means of selling their product. Dozens of significant wine ventures have clearly got themselves to this late stage without even the suggestion of a business plan. Even if they do get onto the shelves, many wines priced above $40 per bottle are simply sitting there. The three years of dramatically escalating prices for premium Australian wine in domestic and overseas markets have come to an end. Nobody is spending big on wines they’re unfamiliar with. For any new brand to enter the market successfully, it has to offer more value for money than at any time before Australian wine has a bright future ahead of it, although there’s no doubting it faces growing pains for a number of testing years. Overseas buyers should expect better value for money, as wine makers realise they have to do better to maintain and increase their market shares. Domestic Australian buyers can look forward to at least three years in which the quality-price equation will rebound back solidly into their quarter. Just watch as the big companies rearrange their product folios to introduce new labels of exceptional value. Once they do, everyone else has to follow. Every bottle of Australian wine opened overseas promotes not only Australian wine, but this country itself as a destination. Every bottle employs skilled and unskilled rural labour, and brings income into rural areas that have taken a beating in other areas of agriculture. Australian wine strongly promotes tourism and travel within this country. South Australia virtually relies on it. Yet, for a bottle of wine that retails for $25, the wine producer nets only fifty cents above production, administrative and sales expenses. The Federal Government’s share is a whopping $6.25. In a nutshell, that is the wine industry’s greatest challenge.
