Old is New

Old is New (Sept 1)

Despite its huge success in overseas markets over the last few decades, there are a number of huge challenges facing the Australian wine industry. If we rest on our laurels, the gains we have made will quickly be lost, which could result in the decimation of the Australian wine industry as we know it.

Australia gained much of its success in the all-important UK market by producing easy-to-drink, fault-free, fruit-forward wines that were generally well priced. This gave us a real advantage over many of the European wines for reasons that are now well understood. Those reasons are now also well understood by our smart competitors who are not sitting on their butts smoking Gauloise cigarettes bitching about how hard times are, they have gotten off their butts (it’s just as well they are not sitting on their butts, especially if they are lit) and are doing something about it.

The global village has caught up to the wine world and whilst the some of the French growers still think the EU owes them a living and are happy to protest about their predicament, much of the industry is starting to fight back.

Olde-worlde dirty winemaking can still be found, but much of it has been swept clean, and it hasn’t been swept under the carpet (mainly cause there aren’t too many carpets in wineries ;) many of the wineries have genuinely cleaned up their act. Many new world practices have been inculcated into the old world wineries by the “flying winemakers” that do a season in the southern hemisphere and then head north and spend some months making wine in the old world. Many young (and even some not so young) winemakers from the old world also head south and do “internships” in places like Australia. The result is a cross fertilisation of knowledge and experience; and not all “fertilisation” is based on manure.

Many readers may be surprised to know that much of the “modern technology” like micro oxidation was invented and first used in the old world. Today, there is a stack of technology that helps the modern winemaker produce better wine. Technology in winemaking is seen as a contentious issue by many serious wine lovers; the reasons for this are many and varied. Much of it has to do with the small artisan winemakers that stress the minimal intervention aspects to help promote their products; especially against the large corporate winemakers. Even most of these small producers use technology and intervention practices in some way; modern yeasts, sulphur dioxide, fermentation cooling techniques, fining etc. To a lesser or greater extent, winemaking is an interventionist practice and if there is no intervention and technology, the end result is vinegar.

For those that believe in minimal intervention, in many cases minimal intervention is the cause of many faults found in wines and by “intervening” these faults can been cleaned up and fixed. The old world winemakers are starting to realise this and many are now producing better wine as result. At the lower cost end of the market, the average consumer doesn’t give a rodents posterior if the wine is made using oak chips or reverse osmosis and has been manufactured in a petroleum refinery-like wine factory; they only care about two factors; it’s inexpensive and it tastes good. This technology and transfer of knowledge is levelling the global wine playing field.

There is definitive change in the wine styles that the majority of consumers want in both the UK and the US markets; our two biggest export markets. The US market is almost an extension of the problems found in the UK market but with a couple of major differences; the most important two being interrelated and in some ways nullifying each other. The first difference is that as a nation, the US is a less sophisticated wine market than the UK. The second is that the cost of producing wine in the US (due in a large part to the cost of land, is much higher than many other new world countries (and without cheap immigrant labour, US wines would be cost prohibitive.) However, as the average wine drinker in the US is less sophisticated and less experienced than their UK wine drinking counterpart, they are also more price sensitive. This is causing huge competition at the bottom end of the market; this in turn is putting downward price pressure on the wines selling just above them.

The large corporate manufacturing operations may be able to compete at this price point but it is a recipe for financial disaster for the small to medium players who may want to get involved at this level. In terms of the export markets, the small players have to aim at the mid range and boutique end of the market if they are to have a chance of survival. The product “Plonk Oztralia” has been incredibly successful but it is that very success that may cause us future export grief in some markets.

It’s great that we have done so well at the bottom end of the market but for the industry to survive, grow and prosper, especially in light of the huge increase in volume we are now producing, we have to do more. Firstly, at the low end, the Europeans will be a very credible threat to us, the Italians are doing good things (besides pasta and pizza) and the French may catch up. In the new world, we will face mounting pressure from South America, South Africa (and even possibly South New Zealand.) Competition at this level will become more and more fierce (especially when the increasing concentration of distribution channels is thrown into the equation) and only the largest and smartest will survive.

There are over 2,000 producers in Australia today and I would guess that about 1900 of them will need to aim squarely at the above A$12 RRP price point for whites and A$15 point for reds. That may not sound like much to the serious wine lover but it needs to be remembered that about 50% of wine (by volume) consumed in Australia today comes out of a plastic bag and an additional significant percentage is sold below the price points mentioned.

In the UK, the market is happy to purchase our cheap and cheerful low cost wine but when it comes to more expensive wines, we no longer have our biggest advantage. At this more serious end, we are competing against the best from all over the world; especially France and Italy, buyers at this level are normally well educated and aren’t impressed with the “sunshine in a bottle” concept that has been so successful at the lower price points.

The volume of wine exports is increasing but the $ per litre is declining, that helps the big makers but does nothing for the large majority of the producers. If you have followed the US wine forums for some time, you will have noticed a gradual but constant decline in the number of topics relating to Australian wine; we are no longer the high end “fashion item” we were a few years ago.

In The US, whether you love him or hate him Robert Parker is the anointed wine guru and as such, has a huge impact on the market. Many of Parkers followers have (relatively) high disposable incomes and will happily buy wines Parker recommends. For those that follow Parker’s Australian recommendations, many of the wines will be of a “certain style”; a style that is not necessarily in keeping with the desired traits of many Australian wine producers and certainly not a style that will be sought after by many of the serious UK wine lovers, although there are naturally some exceptions.

The result is that at the higher price points, we have two different markets looking at two differing styles which makes things even more difficult for producers.

The small to medium producers are the future of high-quality, (artisan if you like) wines for the Australian wine industry. The big players will continue to play a large part in that market but the largest part of their focus will be at the lower cost end because that’s where the bulk of the market remains.

We have a disparate array of producers turning out a huge variety of styles but competing at the top end of the market and lifting our share of it will not be easy. It may all be sunshine in a bottle at the low end, but there are clouds in the rarefied atmosphere. Unfortunately bad weather does not discriminate when it hits and it can and does hit anywhere.