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Key News -October Edition
Comings & goings at AWBC:

Being the peak body of the Australian wine industry the Australian wine and Brandy Corporation naturally comes in for criticism. When they don’t respond fast enough to any given situation they are criticised and when they do respond they are criticised for doing so.

The latest news out of the AWBC should placate those who think AWBC is not doing enough in China and give confidence to those already trading with China. Hong Kong based Lucy Anderson Director Asia is adding two bright people to her team. Ms Willa Yang, Manager – China, and Mr Reno Liu, Market Development Officer, who will be based out of Shanghai and Beijing respectively. Ms Yang will be responsible for leading the China team and delivering a comprehensive range of initiatives that focus on wine education, increased awareness and positive positioning of Australian wine across China. Ms Yang and Mr Liu will join existing Wine Australia team member, Ms Summer Yan, Market Development Officer, who is based in Shanghai.

It’s a smart team and all is looking hot to trot. All that is needed is the co-operation of Australian wine producers and traders who might screw up the market long term for short term gain.

Counteracting this news is the departure of Paul Henry who has resigned from his position of General Manager Market Development at the Australian Wine and Brandy Corporation. After five years in the role the articulate and erudite Paul Henry departs from AWBC. It wouldn’t be TKR if we didn’t question or speculate on the reasoning. It could be straight forward and Henry is simply looking towards the future and his career. It could also involve politicking either amongst the AWBC board or some of the larger levy payers who are fond of pulling strings and manipulation. No matter what spin is used the Australian wine industry is heading towards a difficult 2011; its already looking as if several hundred thousand tonne of grapes will be in surplus hence pain for growers and if the currency remains high then pain for producers as market share is lost. Whoever takes on Henry’s role will have to be extremely smart but then if they are that smart would they want it?

We should be so lucky:

Wine is such a poor relation to other alcoholic drinks this can easily be confirmed on advertising spend. This Christmas Diageo is planning to launch a hazelnut variation of Baileys and will back the launch with a £4.5 million ($7.42 million) through-the-line spend, which in turn is part of a planed £47 million ($77.5 million) spend on promoting Diageo brands this Christmas.

Where Brits won’t be spending:

A Wine & Spirits Trade Association (UK) commissioned survey – YouGov – asked British adults what items of household spending they were likely to cut back on over the next 12 months. The results were as follows:

• 46% said going out for meals
• 40% said going out for entertainment
• 34% said going out for a drink
• 20% said spending on satellite TV subscription
• 18% said they do not expect to cut back spending

The fact that respondents were so willing to cut back on expenses related to eating and drinking out doesn’t bode well for on-premise sales of alcohol. Perhaps this is something that we should be taking serious note of, given that many Australian wineries see on-premise sales of wine as the way forward in the UK.

Keep them in their place:

Since 2005 Murray Valley wine-grape crop value has dropped from $200 million to just $80 million, there is a definite crisis looming. If we accept $200 million was too high, then we should also accept that $80 million is too low. There is little that can be done about the drop of 114,000 tonnes in winery purchases over the past five years – clearly wineries cannot sell the resulting wine. It is pointless for growers to think that there will be an up-turn as all the indications are of declining wine prices, both domestically and abroad.

The lack of foresight demonstrated by producers seems amazing; however, maybe they are basing their expectations on past experience and will therefore just continue to grind the growers (price-wise) into the ground, knowing full well that even if many of them fall by the wayside there will still be enough left to provide whatever allocation of grapes is required.

Simple Maths:

The average national price per tonne of Chardonnay grapes in 2009 was just $337. The 2010 Wine Grape Crush Survey Murray Darling/Swan Hill shows Chardonnay at 49 percent of the total white crop for the region (which is around 20 percent of the total Australian crop). The lowest price paid in the region was $121 tonne, and the highest was $700. The average worked out at $224, indicating that more fruit was sold closer to the lower price than the highest. The Murray Valley Winegrape Growers say the Murray Valley average vineyard cost for the region is $376 tonne. Even if we assume that this figure has been stretched and we take $100 off reducing it to $276, the fact remains that Chardonnay grapes are still being sold below cost of production.

Advanced Maths:

From ‘Your Daily Wine News’ (13th September): 'The 11 category winners for the 2010 Ballarat Wine Show were announced on Friday. Celebrating its 26th year, the event attracted entries from 101 wineries from across Victoria, including between eight and 10 from the Grampians' region. Could between eight and 10 possibly be nine?'



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