Why Red Wine is getting more expensive and what we can do about it.

In the dim dark days when I was a lad just starting to drink wine, ownership of the wine industry was very diverse. Even the larger players only held a relatively small market share.  The major players where Penfolds, Lindemans and Hardys. There were hundreds of medium-sized wineries like Tyrell’s, Peter Lehmann, Mildara, Orlando, Seppelts, Wolf Blass, and Taylors. There were also many starting out like Rothbury and Maglieri.

Ten years ago Penfolds 389 was about $15.  The next release will be about $30. At the top end, Dalwhinnie Shiraz and Barossa Valley Estate Black Pepper were about $20 eight years ago. Today they are over $50.  So what's causing these increases?

In the last 30 years wine industry ownership has changed enormously.  There have been numerous merges, and takeovers. Players like South Corp and Foster dominate the industry.  During the same time frame, countless new wineries have emerged and many of these wineries are doing great innovative things. New labels are popping up at a rate that boggles of mind. Walk into any large bottle shop and look at the hundreds of labels on display.  Research will show the top four companies own many of these labels. More importantly the top four producers dominate wine production in Australia. 

As competition decreases prices escalate.  Sure the major companies may be competing for market share but they realise that they are mainly competing against themselves. It’s within their interests to ensure they maximise profits, and the market leaders are the ones that set the pricing structure. The smaller wineries don’t have a large effect on the overall market pricing structure.

The second factor is the Australian dollar that is lower than a snake’s belly. Americans can purchase a bottle of our wine costing $20 in OZ for just over $10 US.  As a result, an ever-increasing percentage of our wine is exported.  This reduces the quantity available in Australia so the price rises.

So what can we do about this and more importantly, how do we obtain good value wines.

The first thing is to vote with our wallet.  When we think the price rises are getting out of hand, simply stopped buying that particular wine.  If enough people stop, the marketing managers will have to rethink their strategy.  But that their problem not ours.  Earlier I mentioned the numerous small wineries springing up.  Many of them are producing excellent quality wine that is sold for a price that represents exceptional value for money. 

Hopefully in coming newsletters, some of the writers will review wines that will represent the best quality for the lowest possible price (commonly known as QPR or quality price ratio) for your consideration.  Others will give you tips on wines to avoid because they are either "Plonk" or plain poor value.

Finally the title “why is RED wine getting more expensive”….. why no mention of white? Well that’s because I am known as “The Other Red Bigot” and don’t drink or think about white. (BIG GRIN)

Cheers

Ric (aka TORB)