16/12/2003 - 21:00

Wine storm

16/12/2003 - 21:00


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THE Wine Industry Association of Western Australia walked into a storm when it announced that our State had a glut of red wine and that millions of litres were sitting unsold from last vintage.

Wine storm

THE Wine Industry Association of Western Australia walked into a storm when it announced that our State had a glut of red wine and that millions of litres were sitting unsold from last vintage.

Franklin Tate, CEO of Evans & Tate, has pulled his company out of the WIAWA over this matter, much like he refused to maintain his membership of the Australian Winemakers’ Regional Forum in 2000 over differences in tax policy. As a result of that decision he relinquished his position on the 12-member Australian Wine Export Council.

I am led to believe other WA members are equally unimpressed by WIAWA’s comments, and I am reliably informed that at least one other major contributor to the association coffers is considering its membership status.

The issue here is how an industry deals with structural changes and communicates this to the wider public.

To put it in context, the modern Australian wine industry has regularly debated supply issues. I recall when one of the industry’s leaders, Bruce Kemp, then head of Southcorp Wines, issued a warning about red grape shortage.

In 1997 Mr Kemp said: “We are right in the midst of a global red wine shortage that is likely to continue for at least the next 10 years”.

His words came at a time when plantings were already at record levels and set to accelerate. Maybe he helped the industry with his concern, or maybe he didn’t as we see the results of oversupply.

Aren’t there always winners and losers in these situations?

During the past few years, many grape growers and producers have gone bust as a result of misreading the supply and demand curve – but for the Australian industry the rise in production has been quite timely.

Step forward to WA in late 2003 and it’s difficult to see anything different.

Growers and producers at the bottom end of the industry hierarchy have been stumbling towards this trouble for years – and many in the wine business have been warning about the consequences, the opposite of Mr Kemp’s concern, for a long time.

For the past two seasons there have been stocks of wine built up by producers with little or no distribution base or brands.

We’ve seen a lot of these emerge in wine shops as ‘cleanskins’, unlabelled wine selling at rock bottom prices.

What the WIAWA seems to be saying is there is a lot more of this sloshing around than has appeared so far – five million litres to be precise.

That is what has got the industry excited. Many of the big producers believe that this excess – representing a bit more than 10 per cent of the total WA crush – is just part of the market equation.

They reckon that if small producers can’t sell their wares, too bad, their business model is wrong.

They are upset because they are trying to sell their wine overseas and the market there has got wind of this the glut announcement. The concern there is they will attempt to leverage this knowledge to bargain our top producers down.

At first glance this appears to be a classic industry split between the big players dominating the field and the smaller numerical majority.

But, while I can understand a big producer’s dismay at their industry’s stance, I am yet to discover what benefit the smaller producers get from all this conjecture.


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