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Aussie vintners at a crossroad
By Rob Taylor |
00:37 UTC+8 January 25, 2009
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Print Edition
Print Edition
FROM a picturesque rise overlooking the hazy distant foothills of Australia's eastern ranges, Bruce March can see a crisis in the country's A$2.4 billion (US$1.6 billion) wine industry with crushing clarity.
March, chief wine maker at Doonkuna Winery, in prize, cool climate vine country north of Canberra, had been looking forward to a bumper 2009 harvest, tripling production capacity last year in anticipation of rocketing China demand for his wine.
But the global financial crisis has exploded that interest, bringing with it a soul-searching for Australia's vignerons, ironically when good rains and a late summer are set to bring one of the best harvests for years.
"We set up to produce all this wine. We spent a lot of money, and then bang, the financial crisis hit us," March said. "Our Chinese importer is hoping for a better next year. Right now we're tightening belts and in survival mode."
The latest export figures are depressing reading for Australia's wine industry, which for decades led the so-called "New World" challenge to wine's traditional French, German and Italian strongholds.
Australia shipped 11 percent less wine by volume and a whopping 18 percent less by value in 2008, delivering the first setback for 15 years, according to government agency the Australian Wine and Brandy Corporation (AWBC). The average liter value of wine sold dropped 7.6 percent to A$3.53.
In key British markets, total value slumped 18 percent, while in the United States exports fell over a cliff, slumping 26 percent. Rare bright spots included Chinese mainland, which imported 32 percent more Australian wine by value, off a low base, as well as Hong Kong (up 17 percent) and Japan (up 4.1 percent).
A few hills distant from Doonkuna, Tim Kirk now sees a reckoning facing the industry in the wake of what even optimistic marketers admit has been an extremely disappointing year.
"We have had massive success with an approach of good wine, good price, cheap and cheerful, sunshine in a bottle. But in some respects that's been the seed of our undoing," Kirk says.
Kirk's Clonakilla winery sits at the boutique end of Australia's wine market and his reds, in particular an award-winning shiraz-viognier, have won international acclaim. But Kirk says Australia has been complacent, believing ground-breaking, cutting-edge production methods developed by the country have seen New World wine supplant the Old.
Quality is there, he says, but the problem, magnified by recession gloom, is a tradition of marketing overseas based on low price, rather than the critical story of Australia's wines.
"Rather than compete on good wine, great price, we need to focus on regionality, on great wine at maybe a good price," said Kirk.
A turbulent run for the Australian dollar, which neared US dollar parity last year before a dramatic depreciation, underscores Australia's need for a strategy other than competing with low-wage rivals in Chile, Argentina and South Africa.
"We got caught in a tailspin of tactical responses to apparent opportunities in (the) market which were usually promotion-driven," said Paul Henry of the AWBC.
The industry is by some estimates 20 percent too large with many newcomers having entered expecting an export bonanza.
That has harmed the image of Australia's overall wine brand, Henry said, making it synonymous with low price in key markets such as Britain, and some parts of North America.
"The real inconvenient truth for Australia is that we are not the best placed in the world to compete on volume or price alone," he says.
"There's a stark realization to come to, which is that our immediate future is going to look very different to our recent past, in which our ability to produce large volumes of compellingly branded easy-drinking wine at a price was dominant and exclusive."
Greg Corra, who ships the top end of Australia's wine to 32 countries from a small farm outside the capital Canberra, agrees the future for Australia's industry now lies in higher quality offerings that still sell despite the recession.
"I only just entered the UK market as the recession hit and demand there is amazingly strong. I've just sold 3,000 cases and another 10,000 cases will likely follow," he says.
But that is small comfort to March, who admits taking advice to try to sell into China at the lowest price possible - a few U.S. dollars a bottle - and hoping to ride the tail of the country's growing wine fascination, moving up the quality later.
March, chief wine maker at Doonkuna Winery, in prize, cool climate vine country north of Canberra, had been looking forward to a bumper 2009 harvest, tripling production capacity last year in anticipation of rocketing China demand for his wine.
But the global financial crisis has exploded that interest, bringing with it a soul-searching for Australia's vignerons, ironically when good rains and a late summer are set to bring one of the best harvests for years.
"We set up to produce all this wine. We spent a lot of money, and then bang, the financial crisis hit us," March said. "Our Chinese importer is hoping for a better next year. Right now we're tightening belts and in survival mode."
The latest export figures are depressing reading for Australia's wine industry, which for decades led the so-called "New World" challenge to wine's traditional French, German and Italian strongholds.
Australia shipped 11 percent less wine by volume and a whopping 18 percent less by value in 2008, delivering the first setback for 15 years, according to government agency the Australian Wine and Brandy Corporation (AWBC). The average liter value of wine sold dropped 7.6 percent to A$3.53.
In key British markets, total value slumped 18 percent, while in the United States exports fell over a cliff, slumping 26 percent. Rare bright spots included Chinese mainland, which imported 32 percent more Australian wine by value, off a low base, as well as Hong Kong (up 17 percent) and Japan (up 4.1 percent).
A few hills distant from Doonkuna, Tim Kirk now sees a reckoning facing the industry in the wake of what even optimistic marketers admit has been an extremely disappointing year.
"We have had massive success with an approach of good wine, good price, cheap and cheerful, sunshine in a bottle. But in some respects that's been the seed of our undoing," Kirk says.
Kirk's Clonakilla winery sits at the boutique end of Australia's wine market and his reds, in particular an award-winning shiraz-viognier, have won international acclaim. But Kirk says Australia has been complacent, believing ground-breaking, cutting-edge production methods developed by the country have seen New World wine supplant the Old.
Quality is there, he says, but the problem, magnified by recession gloom, is a tradition of marketing overseas based on low price, rather than the critical story of Australia's wines.
"Rather than compete on good wine, great price, we need to focus on regionality, on great wine at maybe a good price," said Kirk.
A turbulent run for the Australian dollar, which neared US dollar parity last year before a dramatic depreciation, underscores Australia's need for a strategy other than competing with low-wage rivals in Chile, Argentina and South Africa.
"We got caught in a tailspin of tactical responses to apparent opportunities in (the) market which were usually promotion-driven," said Paul Henry of the AWBC.
The industry is by some estimates 20 percent too large with many newcomers having entered expecting an export bonanza.
That has harmed the image of Australia's overall wine brand, Henry said, making it synonymous with low price in key markets such as Britain, and some parts of North America.
"The real inconvenient truth for Australia is that we are not the best placed in the world to compete on volume or price alone," he says.
"There's a stark realization to come to, which is that our immediate future is going to look very different to our recent past, in which our ability to produce large volumes of compellingly branded easy-drinking wine at a price was dominant and exclusive."
Greg Corra, who ships the top end of Australia's wine to 32 countries from a small farm outside the capital Canberra, agrees the future for Australia's industry now lies in higher quality offerings that still sell despite the recession.
"I only just entered the UK market as the recession hit and demand there is amazingly strong. I've just sold 3,000 cases and another 10,000 cases will likely follow," he says.
But that is small comfort to March, who admits taking advice to try to sell into China at the lowest price possible - a few U.S. dollars a bottle - and hoping to ride the tail of the country's growing wine fascination, moving up the quality later.
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