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In the closet
Such harsh times in the world of wine at the moment; a great deal has appeared in the media suggesting 20 percent of Australian vineyards needs to be taken out of action to balance oversupply. How accurate is that figure and if actioned will that amount really balance oversupply?
Several people well placed in the Australian industry think 20 percent is conservative. Several suggest closer to 50 percent reduction of vineyard is a truer figure. Unfortunately there is reluctance to come out and break the news. One aspect often neglected is the pressure other wine producing countries put on Australia. It’s a global oversupply problem; Australia is not alone.
Turkish delight
Despite global over production the industry continues to grow. A group of leading UK wine writers have been invited to Turkey as a guest of The Turkish Culture and Tourism Office and Wines of Turkey. Turkey wants to do what Australia has done – lift its profile in the UK, increase exports to the UK and encourage tourism from the UK.
Do as I say, not what I do
The Australian Wine & Brandy Corporation (AWBC), together with the other wine industry national organisations, recently called on the industry to take radical steps to tackle its challenges and get back on a path to sustainable growth. Easier to say then it is to do and none of the organisations has an answer.
Dull game at half time
Overall there is not a lot of good news in the first half 2010 results (ending 31st December 2009) for wine companies, wine investment companies or vineyard trusts. Brand New Vintage, Prince Hill Wines, Coonawarra Australia Property Trust, Dromana Estate Limited, First Opportunity Fund have all declared losses. These are a few ASX listed companies, is there reason to think the unlisted family companies are doing better?
Cork goes flop
With a shrinking wine industry, it comes as no surprise that affiliated businesses are also being impaired. Synthetic cork maker NuKorc has been placed in administration with debts around $4 million.
Leap frog
South Africa is crowing about overtaking the French in the UK market and the French are bemoaning an overall decline in exports of 17 percent to €5.5bn in 2009. A much-used excuse is that consumers are switching to cheaper brands. This is reflected in the latest French figures: by value, Champagne down 28 percent, Bordeaux and Burgundy down around 23 percent each.
Whine about wine
Fosters is doing relativity well with brewing but wine is still giving headaches; Fosters is not alone wine is giving problems all over the planet. Pernod Ricard the world’s second largest alcoholic drinks producer reports still table wine, represented by Jacobs Creek and Montana, were down 6 percent and 4 percent respectively.
Lost bottle
Constellation Brands Australia has shed 40 staff at their Reynella bottling operation, south of Adelaide. Not a surprise move nor should it be a surprise if more jobs go. The reason put forward is the greater shipment of bulk wine for bottling in the UK.
Apart from shipping around twice the amount of wine in bulk for the same price as shipping a container of bottled wine, the environmental angle is a big card to play nowadays and bulk is an ace. In-market bottling is one to watch for the economics it brings to the final retail price and the effect on industry jobs.
Green does not a greenback make
While on subject of the environment a research paper from the USA has revealed that Californian wines made from organically grown grapes do not fetch a premium on the retail shelf if the green credentials are on the label.
The cost of organic almonds is about 18 percent higher than for conventional ones. The cost for organic broccoli is about 15 percent higher than for conventional.
However despite the higher input costs of producing organic wine the retail selling price on average is 13 percent lower then non organic wine or organic wines that do not show their credentials.
Not so cool news
It appears even cool-climate Tasmania may not be immune from wine-industry woes. Graeme Phillips, writing in The Mercury (Tasmania) on 3rd March, says ‘For the first time the grape/wine over-supply is likely to have an effect on the Tasmanian industry.’ Phillips points out two years ago, demand for Tasmanian fruit exceeded production by 500 tonnes. It certainly is a worry if quality Tasmanian fruit is going to waste.
Tony Keys is author of the Key Report a weekly online-newsletter that provides incisive and comprehensive news on the Australian Wine Industry.
His full report can be found at www.thekeyreport.com.au
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