A Lost Appetite

August 17, 2024 / A Layman's Wine Musings / Leave a comment

Many of the world’s wine regions are facing problems resulting from an oversupply of grapes. For example, last year the French government spent 200 million euros to dispose of surplus wine. In addition to that, Bordeaux region vintners received 57 million euros to destroy 9,500 hectares of grape vines.

In Australia, millions of vines are being destroyed and tens of millions more must be removed to control overproduction. Drastically reduced grape prices are threatening the incomes of growers and wine makers.

Falling consumption of wine worldwide has hit Australia particularly hard as demand shrinks fastest for the cheaper reds that are its biggest product. It had relied on the Chinese market for growth until recent years. Last year there was more than two billion litres of surplus wine in Australia.

Oversupply is not a new phenomenon. In the past the industry has always been able to readjust but going forward it may not be as easy. Past declines were triggered by economic factors such as market crashes, the tech boom, new tax laws and other more specific events that impacted the amount of money people spent and how they prioritized their consumption of wine.

Today the reduction in wine consumption is the result of a change in attitude and lifestyle resulting in people consuming less wine. Campaigns such a “Dry January” and “Sober October” are becoming more and more popular, leading to less wine consumption in the other ten months of the year. As a result, wine drinking has been declining year over year since 2017.

In France, wine consumption has declined significantly, from 150 litres per person per year in 1950, to 40 litres per person in 2022. The French people are no longer insular with just their own culture. Instead, they have adopted influences from other parts of the world and as a result, have substituted some of their wine consumption with other beverage options, such as beer, whiskey and cocktails.

Cuisine is changing as well, which has altered drinking habits. Lighter food choices and finger foods are often replacing traditional multi-course meals. Also, people have been reducing the amount of red meat in their diet. This has resulted in consumers wanting lighter, lower-alcohol wines. The Bordeaux region in particular has been greatly impacted by this, having reduced demand for their full-bodied red wines.

The U.S. market is being impacted as well due to a focus on wellness and a change in lifestyle. Non-alcoholic beverages sales there have increased 20.6 percent from 2021 to 2022.

People are drinking less wine but better wine. Over the past seven years, the U.S. wine industry is seeing growth rates sag in the under $12 category but wines in higher-priced tiers continue to see growth.

This change has also impacted wine sales in Australia where for the first time since the mid-1990s there is an oversupply based on a lack of consumer demand. A main driver of the decline is due to the lack of demand for Australin wine in the U.S.

There are other factors as well affecting Australian wine sales. In March 2021, China imposed a 218 percent tariff on Australian wine in response to Australia requesting an independent investigation as to the origins of COVID-19. China’s decision wreaked havoc on Australia’s wine industry.

The world is also still feeling the effects of the pandemic. From supply chain issues to how people purchase and consume wine was severely impacted. The good news is that there are indications that the wine industry is heading toward a return to normalcy, at least in this regard. Wine consumption remains lower than in 2015 but above what it was in 2021. This is largely due to the reopening of bars and restaurants. The long-term effects remain to be seen.

Depending on soil conditions, some French vintners are now investigating switching to other crops such as corn or wheat. Others are changing vineyards into livestock pastures. Australia is focusing on market expansion and providing wineries with market data so they can determine their best course of action. Not waiting for new markets to open, some growers are turning to citrus and nut trees instead.

One thing for certain is there is currently much uncertainty in the wine industry.

Sláinte mhaith

Red Wine Trouble in “Auz”

October 8, 2022 / A Layman's Wine Musings / Leave a comment

The Riverland wine region is the largest wine producing region in Australia. It stretches west from north of Adelaide along the Murray River from Paringa to Blanchetown. It is home to about 1,000 grape growers who cultivate in excess of 21,000 hectares of vineyards, one third of Australia’s wine production.

Over half of these growers sell their grapes to a multinational company, Accolade Wines. Accolade now has more wine in storage than the Riverland produces in a single vintage, equating to about 400 million litres of excess red wine.

Accolade is offering financial incentives for growers to switch from growing red to white grapes or to leave their vines dormant for the foreseeable future. The incentives are not believed to be sufficient to cover the cost, thus making grape growing unviable.

Elsewhere, in the Murray Valley, it’s estimated that 20,000 tonnes of grapes were left unsold this season. Overall, in Australia, wine exports decreased by 26 per cent in 12 months with no relief in sight. This has been coupled with rising input costs, which have at least doubled in the past year due to the rising cost of chemicals, fertilizer, fuel and labour.

The oversupply of red wine is the result of tariffs on Australian wine being exported to China and global freight issues (see my post from December 31, 2021, on Wine Shipping Delays), which have led to a downturn in red grape prices. This situation is expected to continue for the next few years.

Although switching from growing red grapes to white would remove unwanted red and replace them with varietals like Sauvignon Blanc, Pinot Gris and Prosecco, which currently have much more demand, the transition would not be cheap or completed quickly. It takes anywhere between two and six years to switch from one type of vine to another and for them to start producing the same amount of fruit as before.

Grape growers are calling for government assistance but even that may be too little, too late for some. However, at this point it is most likely that the government would not provide direct financial assistance but instead refer growers to rural small business grants and rural assistance loans.

Some experts are forecasting a generational shift in ownership of vineyards. There has been a recent increase in the number of vineyards being listed for sale. Given the current favourable value of the Australian dollar, it is thought that the real estate market may attract the attention of international investors.

Some vintners are even expected to rip out their vines and plant almonds or other crops.

Having experienced fires, droughts and other effects of climate change over the past few years, Australian vintners continue to live in interesting times. Grape growing is proving not to be a career for the faint of heart.

Sláinte mhaith

Australia’s Wine Regions

December 28, 2019 / A Layman's Wine Musings / Leave a comment

The vineyards of Australia cover 170,000 hectares in different wine regions in New South Wales (NSW), South Australia, Victoria, Western Australia, Tasmania and part of Queensland.

Australia has become the 7th biggest wine producing country having about 1,200 million litres of wine produced each year. With the country’s own consumption representing less than 40% of the production, Australia is the 4th largest wine exporter.

Australia has spent millions of dollars to build a brand around Shiraz (Australia’s word for Syrah). As a result Australia wine production has tripled since 1990. However, despite this success, Australian wines have suffered some serious drawbacks in the media. Wine critics often disregard most Aussie wine as “Critter Wines”, referring to the cute animal designs that adorn many of the wine labels.

Australia’s main grape varietals are Shiraz followed by Chardonnay. The two varieties make up 44% of the total wine production. However, Australia is working toward diversification. The balance of production comes from Cabernet Sauvignon, Merlot, Sauvignon Blanc, Sémillon, Riesling, Viognier, Pinot Noir, Grenache, Sangiovese, Mourvèdre and Pinot Gris.

The Wine Regions

Margaret River (Western Australia) produces Cabernet Sauvignon, Merlot, Sémillon, Sauvignon Blanc, Chenin Blanc, Chardonnay, and Shiraz.

Barossa (South Australia) produces Shiraz.

Coonawara (South Australia) produces Cabernet Sauvignon, Chardonnay, Malbec, and Merlot.

Adelaide Hills (South Australia) produces Chardonnay, Riesling and Pinot Gris.

McLaren Vale (South Australia) produces Shiraz, Cabernet Sauvignon, Merlot and Chardonnay.

Clare Valley (South Australia) produces Chardonnay, Sémillon, and Riesling.

Hunter Valley (New South Wales) produces Sémillon, Chardonnay and Cabernet Sauvignon.

Yarra Valley (Victoria) produces Chardonnay and Pinot Noir.

Rutherglen (Victoria) produces Shiraz and Durif.

Heathcode (Victoria) produces Shiraz and Cabernet Sauvignon.

Mornington Peninsula (Victoria) produces Pinot Gris, Pinot Noir and Chardonnay.

Tasmania produces Riesling and Pinot Noir.

The grape varietals produced in Australia are bolder than the same varietals grown in the northern hemisphere, in places like France, Germany, or Canada. However, if you prefer the bolder spicier flavours, Australian wines may be right for you.

The impact on the wine industry from the wild fires currently raging in Australia remains to be seen. More than 3.4 million hectares of land have already been destroyed. Previously the most land burned during an entire fire season was only 280,000 hectares.

Vines not destroyed by the fires could still be impacted by the smoke. Bushfire smoke can permeate the skin of the grapes as they ripen, causing wine to have an unpleasant smoky characteristic. It is worse in red wine, when the skins are used to create colour.

Experts say it is still too early to determine what the extent of the fires will have on the 2020 harvest.

Grape growers are facing a second problem; record high temperatures which have reached the upper 40’s Celsius. Extreme heat can cause leaves to droop or even drop off, leaving grapes exposed to sunburn. This causes discolouration and affects the flavour profile of the wine.

The effect of heat can be managed provided vineyards still have access to enough water – which they don’t in many areas across South Australia, central and northern Victoria, and NSW.

As we prepare to enter 2020, no one seems to face more challenges than the Australians. I fear that some of the Australian wines the world enjoys today may soon disappear forever. A sobering thought to close out 2019.

Sláinte mhaith