10/05/2022 - 17:48

Local producers face global forces

10/05/2022 - 17:48

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WA wineries are preparing to open to the world after avoiding the worst of the global disruption.

Local producers face global forces
Patrick Corbett says visitation to Singlefile has increased. Photo: Nic Duncan

Singlefile Wines welcomed three times the number of visitors to its Denmark vineyard and cellar door in 2021 as it would in a typical year.

The family-owned winery is one of the local producers to benefit from Western Australia’s hard border rules.

While their east coast counterparts had to close due to COVID rules, wineries in this state have remained open for most of the past two years.

The hard border also meant locals had nowhere to holiday except their own backyard.

According to co-founder and managing director Patrick Corbett, visits to Singlefile were up significantly during the past two years when WA’s border was closed.

“Certainly, we have found down in Denmark, the traffic through our cellar door has just been phenomenal, probably three to four times what it usually is last year,” Mr Corbett told Business News.

“This year it is still up but it seems to be returning to somewhere close to average, but it’s still up comparative to pre-COVID.”

The winery has been so busy it has run out of wines for people to taste, he said.

However, now the borders had re-opened, Mr Corbett said he was not sure how it would impact customer behaviour.

“Is there going to be recession because we have had such a good couple years because of COVID and people visiting Denmark, should we be preparing for a tough few years down here, or has there been a whole new audience that’s been introduced to the Great Southern and will continue to buy the wines in the wine stores in Perth?” he asked.

 “Have we made too much, have we not made enough?

“Trying to manage that is the biggest thing on my mind at the moment.”

Other producers, including Fogarty Wine Group, WA’s largest according to Business News’ Data & Insights, reported mixed visitations.

Owned by Peter Fogarty, the group’s local brands include Millbrook Winery, Deep Woods Estate and Evans & Tate.

Mr Fogarty said sales at his Margaret River cellar doors were down, while Millbrook Winery in the Perth Hills had been uncharacteristically busy in the middle of the week during the border closure.

Chief executive of the state’s peak industry body Wines of Western Australia, Larry Jorgensen, said there were going to be fewer Western Australians visiting the regions when people become confident to travel interstate and overseas again.

He said it was important for cellar doors to appeal to interstate and international visitors. “I really think the opportunities are going to be in making sure you are visible to interstate and international visitors as they come in,” Mr Jorgensen told Business News.

“Making certain that they’re aware of your region and your business and [that] there are reasons why they would come and visit you.

“I believe that all that favouritism that has been exhibited to WA products generally is going to be diminished to some extent as people start to travel.”

Other secondary impacts from the pandemic have affected the bigger players in the wine industry.

Mr Fogarty said staff shortages due to people becoming close contacts or contracting COVID-19 during vintage was worrying, to the point where the group closed its cellar door at Deep Woods Estate for a period.

“We have managed to get through vintage, which has been a challenge because you had COVID issues with people being off and you had to keep your processing facilities working,” he said.

The pandemic and the staff shortages it caused have also led to supply chain issues around the world, increasing lead times for wineries on importing bottles, dry goods and the like.

Mr Fogarty, who sells most of his wine through bottle shops, said supply chain disruption had caused difficulties for the business.

He said it had been challenging to import products and transport them across the country.

“There have been very long lead times, so that’s delayed things,” Mr Fogarty told Business News.

“We have had the rail line wash out here, we have had the rail lines and the roads wash out with floods, and then you have logistics companies locked down by COVID … they can’t run their trucks because they don’t have the staff because they are close contacts and they can’t work.

“In a nutshell, it’s been an absolute nightmare in terms of dealing with logistics and getting product from point A to point B.”

Amid the ongoing war in Ukraine, Mr Fogarty said wineries were keeping a close eye on the price of inputs like fertiliser and petrol.

Peter Fogarty owns Fogarty Wine Group: Photo: David Henry

2022 vintage

Wineries reported a solid 2022 vintage that did not drastically change Data & Insights’ rankings of local wine producers.

Mr Fogarty said the recent vintage had provided reasonably good yields and very high-quality grapes.

“We think the quality of the sav blanc and the chardonnay is as good we have seen,” he said.

Two of the state’s largest wine growing regions, Margaret River and the Great Southern, also had to deal with the threat of fire this summer.

Fortunately, the fires occurred before the grapes were fully grown, helping to avoid smoke taint.

This contrasts with producers on the east coast of Australia which were hit with bad weather over summer.

“It’s been more challenging on the east coast of course because the weather has been pretty horrible over there, so I think WA has probably dodged a bullet compared to some of the eastern states areas,” Mr Fogarty said.

He said this could be positive for WA wineries, given the excess of red wine in the national market.

“It’s probably beneficial if we don’t have a great big crop across Australia this year because there is still the issue of the excess reds in the market from China not buying, which is putting a bit of pressure on reds in the marketplace,” Mr Fogarty said.

China introduced restrictions on Australian wine following preliminary findings of an anti-dumping investigation in November 2020.

Five months later, in March 2021, the Chinese government completed its investigation and confirmed tariffs on Australian wine imports, ranging from 116.2 to 218.4 per cent, would remain for five years.

The tariffs did not impact most WA producers, as only a small percentage of local wine is exported to China.

However, some wines that were once sold to China and have not found alternative destinations are now being sold locally.

According to Wine Australia’s latest Export Report, national exports were down 30 per cent to $2.03 billion in the year to December 2021.

Excluding China, total exports from Australia increased by 7 per cent in value and decreased by 6 per cent in volume.

Wines of Western Australia’s Mr Jorgensen said the excess red being sold into the local market could affect WA producers, but most of it was at a different price point so direct competition was unlikely.

While the WA industry’s low export levels shielded it from the impacts of China’s tariffs, there is a renewed push to strengthen exports into other markets.

According to data from Wine Australia, the state’s wine exports, only make up 2 per cent of total wine shipped overseas in 2021.

Wines of Western Australia launched a $6 million program to increase local vineyards’ capacity to export their products to the UK and US, among other markets.

The five-year program, called Wine Industry Export Growth Partnership, started in mid-2021 and was off to a good start, Mr Jorgensen said.

“It’s going well but it’s like an ocean liner, it takes a while to turn the ship in the right direction and pick up speed again,” he said.

The partnership’s headline goal is to boost export value by 50 per cent by 2025, to $117 million.

“The three KPIs are to increase the amount of wine and the value that’s exported, while maintaining or increasing the average value per litres so … you are creating a market position that’s sustainable and increasing the amount you sell at that position,” Mr Jorgensen said.

The program also aims to increase the number of producers achieving export success, a goal targeting smaller wineries.

“That’s where countries and target markets like Singapore, South-East Asia and Japan become more interesting and more relevant, because they are closer and easier to service,” Mr Jorgensen said.

Independently, small Margaret River-based producer Gralyn Estate is taking its first steps towards exporting its product after its Artizan Rare Muscat beat 1,300 entries to be named wine of the year at the London Wine Competition last month.

Owners and winemakers Scott and Annette Baxter said they were hoping to capitalise on the win.

“I think there is a definite opportunity off the back of this great win in London that we will seek distribution in the UK and the US,” Mr Baxter said.

“We are looking to harness this win and discuss a bit further with them about getting our wines into the UK market.”

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