May 25, 2010
Lovers of bargain-priced Australian wine have been warned to drink up while they can after the worst crisis to hit the industry in 50 years has led hundreds of growers to leave the industry.
Grape prices have fallen by more than 30 per cent this year to the lowest in living memory, and an oversupply of grapes due to drought-breaking rains have left 95 million cases of wine sitting unsold in warehouses.
With the global downturn and the resulting strong dollar, export revenues have dropped and grape cultivation has become unprofitable for hundreds of growers. Some have reported receiving an average of just 16p per bottle.
While this is good news for consumers in the short term, the surviving growers are likely to concentrate on producing quality, higher priced brands, leading to fewer supermarket bargains.
"Over time we will see cheap and cheerful wine from Australia drying up in the UK," said Mark McKenzie, the head of Wine Grape Growers Australia (WGGA).
Over the past 15 years, hundreds of investors started up vineyards when export yields were high due to the strong pound. But revenue for this year’s harvest is down more than 75 per cent from the high of 2002.
Hundreds of growers have been forced to give up, and thousands of acres of vines have been removed. Experts have said more must go before the industry can recover.
Mr McKenzie said that the Australian wine industry was at the end of a 15-year boom and that when it returned to a stable footing in three to five years, British consumers would notice the difference on their supermarket shelves.
He said that in the future, the industry would focus on "higher margins and more profitable wines" in the face of growing competition. It would abandon "clean skin" wines — those sold without labels by vineyards to dump excess or unwanted stock in a way that avoids discounting existing brands.
"A lot of new investors in the industry came in during the boom in the 1990s," said Mr McKenzie. "The city money decided to get on the bandwagon very late. Some of these people are finding it difficult to find a profitable market and we have already started into the removal of vineyards."
The crisis is so acute that the WGGA is running seminars across the country’s major wine-growing regions to help vintners decide whether their vines and brands are economically viable.
In the past 18 months, hundreds of growers, mainly from the Murray Darling region in New South Wales and Riverland in South Australia, have decided to give up, and 20,000 acres [8,000 hectares] of vines have been removed.
Mr McKenzie said: "The clean skins are symptomatic of oversupply where supermarket chains can buy material relatively cheaply and put it on the shelves at an attractive price, but I don’t think we will see the same volume once we get things back into balance in the next three to five years."
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