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December 10, 2005
On the drive down to Victor Harbour from Adelaide you pass by the McLaren Vale nestled amongst the Mt Lofty Ranges. It has become a significant tourist attraction with up market wineries, gourmet restaurants and stylish cafes. As you continue to drive to, and along, the southern coast of the Fleurieu Peninsula you cannot help but notice the stretches of newly planted vineyards popping up everywhere.
Where's all the wine going? Whose buying it? Whose drinking it?
In the newspapers you read about the wine glut, in the cafes you hear about the grapes being left on the vines, from the environmentalists you hear about the salt and in the business press you read about the large corporates gobbling up the smaller niche players and their declining profit margins.
The signs are clear. The Australian wine industry has gone for commercial grade fruit, short-term profits, large scale industrial production, lots of water and mass market wines in a big way. You would have expected the industry to have built on its strengths by going for long-term sustainability through the export of prestige---good to valuable wines-- based on an ecologically sustainable fine wine culture built around the marked regional differences.
Simon Evans in the Australian Financial Review says the consequences of the former strategy is that the growers are shouldering too much of the financial burdern of oversupply as the corporate wine companies preserve margins by squeezing their suppliers with lower prices and reduced terms. He says
' ...all that does is put free fruit on the market, which some vulture wil pick up. That "vulture" then puts cheap plonk on the market, which adds to the fierce competition on pricing. It's a self-defeating strategy. '
On world markets Australia's commercial wines are not that much different different to those from South Africa and Chile. Australia is but one of the wine producers jostling for position on the shelves of northern hemisphere liquor retailers and supermarket chains. It just happens to be in favour for the moment.
Quality is the way to go for the global market.
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As an insider, I can tell you that the industry is in dire straits.
Way too many people have been sucked into this supposed lifestyle industry, with little knowledge of how to sell the final product.
Basically, for the small end-where I have spent most of my time-the iceberg has already hit, it's just a matter of seeing who manages to get a seat on a lifeboat.
Your point about quality has some validity, but the industry is based on volume. You have 2000 litres of crud, you have to sell it for $20-50 a bottle, you have a million litres of Grange material, you have to sell it for $6 a bottle.
Sadly, the industry reflects the world at large. It is being de-charactered at an increasing rate and the most vulnerable are being crucified by the corporates.