Tiger in the vineyard
Land under vine hasn’t reduced as much as it should for all in the industry to be profitable, yet grape growers and some producers still complain about the lack of profit or unfair competition because grapes are sold at less than the cost of production. A quote from Tiger Airways CEO Andrew David:
“We’re no different to any other industry – when supply exceeds demands, prices come down.”
Other industries also include mining. Fortescue Metals Group has announced that due to the fall in the price of iron ore it is cutting 1000 jobs, and BHP Billiton is putting a hold on investment. One has to ask why grape growers are hanging on. Are the examples above not warning enough?
Aunt Sally spinning
The Salvation Army has released research that it commissioned from Roy Morgan as part of Alcohol Awareness Week. Here’s Major Brad Halse, the Salvation Army’s spokesman for Alcohol Awareness Week:
Alcohol is the most widely used and widely accepted drug in today’s society and yet we know people will often drink harmfully – without even considering the impacts. As a result, the amount of alcohol that is consumed and the effects that this has on children, families and friends, are not always taken into account.
Like in a great deal of research, a number of people were contacted and used as a representation for the nation. In this case a sample of 1509 Australians aged 14 and over was the base. Their answers were used to calculate the views of about 18.4 million people over the age of 14. TKR is not convinced it’s as workable an example as the SA makes out. It’s a call for the wine industry/trade to use academics to do something useful and either confirm or refute the statistics the SA presents. The SA released the following key findings:
• 4.2 million people aged 14 plus (22 per cent) say that they know families where they think that children are not being properly cared for because of someone’s alcohol abuse.
• 2.9 million people aged 14 plus (16 per cent) say that they know families where they think that children may be unsafe because of someone’s alcohol abuse.
• 2.0 million people aged 14 plus (11 per cent) say that in the last 12 months the use of alcohol had “sometimes” caused problems with other family members in their or their extended family.
• Another 2 per cent said “often” and another 1 per cent said “always”, making a total of 2.6 million people (14 per cent) saying that in the last 12 months, in their family or extended family, someone’s use of alcohol had caused problems with other family members.
• 2.1 million people aged 14 plus (11 per cent) say that someone in their family or extended family had been unreliable to family or friends due to alcohol use in the last 12 months.
• 3.1 million (16 per cent) of Australians aged 14 plus indicated that alcohol had caused some form of disruption within their immediate or extended family within the last 12 months.
“Think”, “sometimes” and “some form” are words over which people waver, and when used in a question can point them in a direction that the person conducting or commissioning the research wants the answers to go. The SA has huge respect in Australia but this report indicates a lot of spin and tugging the strings of public relations to swing its way. Let’s not underestimate the damage that alcohol causes but let’s get the facts right to start with.
It’s looking as if Australia will lose its number one UK volume ranking as Italy is catching up fast. Australian volume is down 9 per cent with Italy matching the figure in the other direction, up 9 per cent. Value is a different matter: in the 12 months to July 7, 2012, Australian wine was valued at £1.06 billion ($1.65 billion), with Italian wine worth £865 million. The average bottle price for Australian was £5.02 and Italian £4.42. Although the Australian bottle price is good, it sits behind New Zealand’s £6.28, France’s £5.61 and Argentina’s £5.40.
Wines retailing at less than £5 a bottle are showing the largest decline but that can be accounted for by tax and duty increases. While total volume fell 3 per cent, value increased 3 per cent to £5.3 billion in the 12 months to July 21, 2012
The most popular retail bracket price wise was the £5-£7 wines. Those retailing for more than £7 only accounted for 7 per cent of sales.
Men still drank more red wine than women and women more white than men. The youngsters 18-24 remained the largest consumers of RTD. That same bracket mostly drank out of the home, while those 55 and over drank in the home.
The average monthly spend on alcohol to drink at home was £29 (down from £30 in May 2012), and the average monthly spend on going out was £44 (up from £43 in May 2012).
Red wine drinkers spent more on alcohol to drink at home than any other drinker type (£38 a month); rosé wine drinkers were the smallest spenders (£18 per month), spending less than half the amount that red wine drinkers spent.
The Wine and Spirit Trade Association Market Report draws on data and analysis from Nielsen (off-trade data to end July 2012), CGA Strategy (on-trade data to end March 2012) and the Wilson Drinks Report.
A smart move from UK Wine Australia: setting up a once-a-month club to taste wines blind. The format is to register with Wine Australia, as only 30 places are available, then on the second Monday of the month rock up at Australia House in London and taste a range of 24 wines. Most will be Australian but they are also throwing in the odd foreigner to make it interesting. It’s not compulsory, but three questions can be answered, with the top taster winning a trip to Australia.
Good move...or not
“The Winemakers’ Federation of Australia has called on all winemakers to adopt pregnancy warnings and broader consumer information messages on wine bottles and containers as soon as operationally possible.”
This is a good move that TKR supports fully. It’s a start but it’s far from the end. The further the wine industry can go to establish itself as an industry that is concerned about health and alcohol abuse, the stronger the industry will become.
The brewers and distillers have the money and wine is a poor relation. However, it would be unwise for the WFA and WA to get cosy with the others, as their agenda is different and they would drop wine quickly should it not suit their purpose. Being seen to lead the direction of wine is more important than hanging onto others’ coattails.
Have no doubt the authorities will win the day. Going into battle with them will not result in victory. What we think of as today’s drug problem – involving substances such as heroin and cannabis – has had other incarnations. Opium was a huge problem in the UK until the Pharmacy Act of 1868 brought it under some control. Before then it was to be found in a huge number of patent medicines with no regulation on its quantity, quality or where it was sold.
Opium, as in heroin, is still causing a lot of unrest despite its now illegal and regulated state. Tobacco has moved from the avant garde to the despicable. Alcohol will go the same way. Gambling is managing to keep its head below the parapet at the moment but will no doubt come back into the spotlight in the future. What is unlikely to happen with any of the vices is their full eradication. It’s better the wine industry controls its own demons rather than have them controlled by state or church.
This came from an eminent member of the wine industry regarding health warnings on labels:
The wine industry adopting the pregnancy warnings is fine, but it does mean that the industry is abandoning its promotion of the health aspects of wine.
It also tells the regulators that we agree with the effect all these warning on the labels will have, and they will then legislate for them.
I have no evidence to believe that label warnings have any effect on alcohol abuse.
TKR’s answer: I agree somewhat but there is little benefit to be had in drinking wine apart from pleasure. TKR has for years written about this issue but wineries are more interested in some half-arsed review, dumb show medal or five stars (whatever stars mean).
I doubt there is anyone reading this who hasn’t overindulged from time to time and probably many who have driven when over the limit. The latter is illegal and dangerous: something we all know is true. The former has at the least slowed us down at work the next day, therefore lowering productivity.
It’s time to drop the righteous approach.
TKR posed the question of Australian relationships with China. Is the wine industry using the right approach? Kerry Stokes and James Packer, are warning about Australian attitudes towards China. Joining them ANZ Banking Group CEO Mike Smith, in an article by Lisa Murray in The Financial Review on September 25.
Australia’s “defensive and suspicious” take on its relationship with China was threatening much-needed investment from the Asian economic giant. “We have to understand as Australians that capital goes where it’s welcome.”
Ken Henry also had comment on agricultural sales to the Chinese. Speaking at a forum on Chinese investment, he was reported in The Sydney Morning Herald on September 6 as saying:
I don’t quite know how to say this without offending somebody, but one of the things that strikes me as odd about the discourse on foreign investment is that there has to be a willing seller. I hear often people in the bush are outraged about foreigners buying their land – well, they're the people selling the land. I don't know what form of cognitive dissonance squares that circle, but obviously there's something strange going on.
There is no denying the Chinese market is a good one, but how good will it be once every wine producer on the planet has jumped on the gravy train? The latest company staking a claim is South Africa-based Distell, which has taken a 60 per cent slice of Chinese distributor company CJ Wines & Spirits. There is some irony in the situation, as the leader in cognac sales in China is Pernod Ricard, with Martell. In 2009 Pernod Ricard sold the cognac brand Bisquit to Distell, which now wants to gain greater Chinese market share with the brand.
What’s the problem? Well it isn’t over supply or over reliance on one variety. Nor is it vineyard owners, wine makers or cellar rats. Regional and national organisations are not to blame and it can’t be anything to do with wine writers and bloggers. No the problem for everything that is wrong about the wine industry is the fault of supermarkets.
The latest to have a super-bitch is Stuart Smith the departing chairman of New Zealand Winegrowers. According to Smith 70 per cent of all wine sold in NZ is via the big two
• Countdown / Woolworths / Foodtown / 3 Guys chains / Big Fresh / Price Chopper chains.
• Pak’N Save / New World / Four Square chains.
It’s the standard bitch the power the big guys have forces prices down and they are selling wine at below cost of production. TKR has no doubt some of what Smith says is true but it might be more helpful if he and others of similar status offered suggestions on how to work with supermarkets. If that involves no NZ wine in NZ supermarkets because the price in Timbuktu is better than work harder at the Timbuktu market. It’s also noticeable how people have a bitch when leaving office/job how about doing something whilst in the job?
If one follows Smith’s line of thinking it seems logical that UK supermarket Morrisons push to increase its wine offer from 550 to over 1,000 will fail. If not fail completely it will not contain any NZ wines because NZ producers won’t supply Morrisons with any wine unless they are earning good money out of it. Can’t afford to deal with supermarkets? Don’t deal with them, wineries have a choice.
Steve Strachan knitting
Stephen Strachan, director of Adelaide-based wine industry advisory firm Gaetjens Langley, is to become involved with salvaging the industry body Wine Victoria. It will be like knitting with a dozen needles and 50 balls of wool, with the cat playing with six of them, the dog asleep on another eight and the kids running wild. TKR wishes Steve good luck.
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