Doom And Gloom in the Wine Industry - Part 74

Written by Ian Robertson on 17th August 2008

It only took a few smaller vintages in the last two years for everyone to get some positive thinking going. Things are getting better. The wine lake has dried up and supply and demand are back to the sustainable norm.

Well, the recent announcement by Constellation Wines Australia has certainly put paid to that idea. The largest wine company in the world is feeling the pinch, and is taking drastic action. When the company announced it was consolidating its assets (which means selling a lot of them) and that this amounted to something like 350 jobs (20% of the workforce,) 20 vineyards and three production facilities as well as consolidation of production functions such as bottling lines – well, it is not to be sneezed at.

Clearly, a few smaller vintages on the back of the bumper crops of the previous years has not solved all of Australia’s wine problems.

To clearly state the problem – we still have too many people growing grapes, and not enough people buying wine.

Too often the issue is approached from only one point of view – people either look at “grubbing up vines” to reduce the number of growers or “expanding markets” in isolation of each other. Of course in reality, work has to occur on both sides.

Clearly, Australian producers are starting to understand the need to find new markets. Marketers are trying new things with younger drinkers in order to be trendy – steel bottles, wine in a can, billboards proclaiming something about “Liking a Cockatoo” or some such. Most of these strategies are pretty terrible and need a lot of work. I would love to see a really good agency work with a larger producer on a youth oriented campaign that really broke barriers. But, it is the forays into Asia that mark the biggest opportunity. So many people with an emerging middle class shouts out to be met head on – it is the smarter operators who saw this as the future ten years ago who will take first advantage.

However these market tactics do not seem to be providing enough wine drinkers to solve the problem in themselves, and too many wild and crazy investment vehicles aimed at encouraging people to plant grapes have occurred in the past. Thankfully their activities have been curtailed, but there is certainly more the government can do to try and encourage some health in the industry.

Might I suggest that a little relief on the amount of taxation a bottle of wine receives might go a long way to encouraging the industry? (and possibly encourage healthy drinking habits as well if wine becomes a little more competitive with other alcoholic options...is not the type of drinking that governments are desperately trying to curb that of the violent drunk? I have rarely seen a young male running up the street with a crow bar and a half empty bottle of Jacob’s Creek in his hand.)

Seems next to impossible in this day and age of complete wowserism in policies relating to alcohol.

But I digress. As much as it pains me to say it, and brings back terrible memories of what happened in the Barossa in the 70’s and 80’s, vine pulls in areas where mass produced wine lakes are emerging seems like a viable option. Careful analysis of what regions, what varieties and how much needs to occur and specific incentives given to those producers to avoid losing valuable future assets – like many of the Shiraz vines that were pulled in the Barossa all those years ago.

If we make strides in all these areas then maybe, just maybe – we can get back to the glory years of the early part of this decade.