IT would be a grand understatement to say the past 12 to 18 months have been a tough time for our industry.
This is obvious through the amount of discounted wine available while everyone scrambles for their share of the market.
Many larger companies that control 75 per cent of the market are not only selling excess stock at bargain basement prices (or below cost) but their assets too, including vineyards and wineries.
These aren’t just small 10 acre blocks. We’re talking thousands of acres throughout some premium wine regions.
Once the domain of the bigger wine giants, discounting too has unfortunately filtered into the smaller operators, which don’t have the economies of scale to compete – suffice to say, smaller wineries producing less than 300 tonnes of fruit and in many cases, 100 tonnes (6000 cases), are simply struggling to survive.
Several factors have contributed to the great wine demise. The most significant being the over-supply of vineyards planted over the past 10 years.
And, just when we thought exports were a safe option to expand our market, the two biggest players fell into a severe recession. The UK and US markets are stagnant now, but there is hope, particularly in the Asian sector. But our rising dollar is affecting (export) profitability and squeezing margins.
Changing tastes in the domestic market has seen demand for fresh, light and dry white wines – most notably sauvignon blanc from our Kiwi neighbours.
In fact, the biggest selling wine in Australia isn’t our own – but indeed, a New Zealand sauvignon blanc. These wines are produced on a massive scale in a pristine climate ideally suited for sauvignon blanc production.
Despite all of this, things aren’t all doom and gloom in WA as we build a strong representation for our sauvignon blanc blends, particularly with semillon, which is nationally recognised as a WA classic. Lighter style chardonnays are also coming back into their own.
So throughout all of this turmoil, family owned companies – big and small – seem to be weathering the storm reasonably well. Or at least better than the larger publicly-owned corporations where profit is put before creativity or longevity. The benefit of the smaller outfits is greater control in all aspects of the business and it seems, a greater passion for producing quality wine.
As our market becomes better educated in wine appreciation, regions of origin and their suitability to particular grape varieties are starting to matter and it’s not uncommon to hear requests for a Margaret River cabernet sauvignon, a Pemberton sauvignon blanc or a Swan chenin, for example.
We should never underestimate the power of marketing, and in the tougher times, marketing becomes all important, which means a solid marketing plan should exist before a product is released to market (instead of the reverse which usually ends in disaster).
While we’re spoilt for choice with the price-versus-quality equation, the bargains are simply unsustainable and as stocks eventually clear things will equalise. Between now and then though, there will be extraordinary pain.
As an industry we need to keep a keen eye on stock levels and costs, and spend time and money on building brands.
In essence, strong brands with integrity, history and heritage will continue to survive into the future – and inevitably be the saviours in bringing the industry back to the way it was.