AUSTRALIA: Headed for big things once more

21 January 2010 By db staff writer

“standfirst”>Much like the dinosaurs, it once seemed that Australia would stride the wine world unhindered forever – but how times have changed. Ken Gargett examines what the category must do to regain its former dominance.

If H. G. Wells had ever perfected his time machine and we had thechance to visit the age of dinosaurs, it must have surely seemed asthough they would rule the Earth forever.

Similarly, anyone witnessing the extraordinary rise and rise of Australian wine in recent decades must have thought that the good times would never end. That they have come to a grinding halt is common knowledge. Brian Croser, one of Australia’s most highly respected winemakers (Petaluma and Tapanappa), judges, educators, administrators and pretty much anything else in the wine industry one would care to name, recently equated the “branded commodity producers” (BCPs) that had been so successful since the mid-1980s to those now extinct dinosaurs.

He sees the fact that they are no longer competitive as one of the key reasons that had caused Australia to “lose our position in the market. The fallout we are seeing is the dinosaur’s last groans”. And while Croser sees light at the end of the tunnel, he does believe that “the corpse will smell for a while”.

The Aussie wine industry has gone much the same way as their once invincible cricketers and their beloved Wallabies rugby side. Put simply, it is no longer the force it once was.

There are many reasons. Problems with the economy; chronic water shortages; drought; a massive wine glut estimated by some to be as much as 100 million cases and likely to grow; climate change; Kiwi Sauvignon Blanc; taxation; increased competition and competency of competitors; a reassessment of appropriate varieties; perceived mismanagement in the large producers (the BCPs of which Croser is so dismissive, though if one looked at the stellar rise of a producer like Yellowtail, then it is hardly endemic); further rationalisations and mergers; the anti-alcohol movement allegedly inspired by health concerns, conveniently neglecting the many documented benefits of moderate wine consumption; a perception in many international markets that wine under screwcap, as the vast majority of Aussie wines are, is of lesser quality; the strong Aussie dollar; figures revealing exports increasing in volume but retreating in value; a perception that offshore markets are not prepared to pay a fair amount for our wines (Neil Pike of the Clare Valley winery, Pikes, which has just celebrated its 25th anniversary, puts it simply – “the Poms don’t want to pay for good wine”, though cellars full of expensive Bordeaux and Burgundy would provide an argument to the contrary); climate change and the increasing incidence of extreme weather conditions leading to events like bushfires and floods; the transfer of technology and expertise to competitors; and for many, the issue that has prevented Australian wine from reaching the next level, the perception that apart from Grange, Australia simply can’t make great or iconic wine.

All change
Some of these are beyond anyone’s control, others can be easily addressed, some are cyclical and others are going to take an almighty effort from many facets of the industry working together. Of course, there is still a great quantity of Australian wine being sold and drunk around the world, so the almost daily proclamations of doom and gloom in the media seem a little excessive.

Most Aussies have no doubt that their cricketers will rise again (the Wallabies are a different matter), just as most in the industry believe that Australian wine will again be one of the dominant forces across the globe. But things will change. Just as they will never again have Warne, McGrath, Gilchrist or Hayden, so too will the wine industry not see the likes of Foster’s, Constellation/Hardy’s and Pernod Ricard/Jacob’s Creek, at least not in the same form.

Several senior figures in the wine industry were happy to comment as long as identities were not revealed (they might feel that the BCPs are on the wane but they still have to do business with them). One saw a forthcoming increase in bankruptcies at all levels across the industry and noted that “large companies were masters at buying at the top of the market and selling at the bottom”. Another saw the wine industry as the “classic economic engine room proving that price and value are not always synonymous”.

Yet another believes that the industry is chock-a-block with “compelled sellers constrained by the straitjacket of time” and that the only offers they are receiving are from bargain hunters who don’t believe that their low ball punts have a hope of success and have been stunned to find that many have been accepted.

There is a consensus that of the 169,000 hectares of vineyard planted, about 40,000 are excess to requirements. Some of these will be abandoned. Anecdotal suggestions indicate that the 1,400 growers in the Riverland have now dropped back to around 900. Foster’s is reputedly offering around 8,000 hectares for sale, though not all of this is what one might define as core vineyard. One source suggested that, three years ago, they declined an offer of $55,000 (£30,290) a hectare for the famous 71ha Robertson’s Well vineyard from northern Coonawarra.

The vineyard has now been sold, reputedly for $17,500/ha. The famous old Roxburgh vineyard that made the controversial Rosemount Chardonnay has been sold to BHP and will now form part of their mining enterprises. Other vineyards told by Challenger are destined for diary farming, something inconceivable in recent years as it was seen as an unprofitable industry.

Most of the BCPs were hardly falling over themselves to be interviewed for this piece, however Sheralee Davies, group public relations manager for Constellation, acknowledged the “challenging time” facing the industry and that the “concept of toughing out the difficult times in anticipation of a return to the good old days is simply not an option”.

The Constellation response to managing these challenges includes “‘right-sizing’ the industry’s grape supply base as well as leveraging Australia’s capacity for innovation and regional diversity in order to compete” and “revising our channel mix, ensuring we are listening to and working closely with both trade customers and consumers and developing export markets”.

Granted this is corporate-speak but Davies also noted practical steps such as installing “subsurface irrigation across 66ha of our Riverland vineyards, estimated to result in water savings of 20-30%, and trialling Mediterranean varieties”. She also alluded to “an ambitious sparkling programme, the culmination of more than 15 years development”, which should be worth watching as they have the advantage of the highly talented Ed Carr as head of sparkling winemaking and have been at the forefront of the push to develop Tasmanian fruit. Many think that in time, Tasmania will prove the site of the finest sparkling vineyards on earth, outside Champagne itself.

Regionality and terroir
Perhaps a little ironically, as it comes from one of the BCPs, but this leads us to the concept of regionality and iconic wines and it is this issue which is causing enormous angst and frustration. Everyone has a view and most paint the BCPs as having failed to do enough to promote Australia’s great wines, the wines of regionality, terroir and even single vineyards.

Croser does not hold back. “The missed opportunity is huge. There is light at the end of the tunnel but we can’t talk about that until those fighting against it go out of business. And they will.”

Industry bodies are usually lumped in with the BCPs. The feeling is very much that the funding and such a high percentage of the industry is associated with the BCPs and that the little producer is at best ignored. Bill Downie, a boutique Pinot Noir producer based in Victoria and one of Australia’s rising stars, sees industry bodies as often opposing his interests by their unwavering support for large makers. He does not see their goals aligning with his and is happy to do his own thing.

Ken Helm, from mid-sized producer Helm Wines, and founder of the International Riesling Competition, acknowledges strength in the industry but, “the export marketing of these attributes is not keeping up and the world is basically unaware of the regional gems that Australia has to offer. A perfect example is Riesling which is one of Australia’s great wines, and the second biggest producer outside Germany. Wine regions in Western Australia, South Australia, Tasmania, Canberra and Victoria produce some of the best Rieslings in the world – a fact which is virtually unknown outside Australia.”

These are, of course, basically dry wines and a world away in style from the Germans but anyone attending the Pikes 25th tasting could hardly argue against this. Unfortunately, Riesling is a difficult sell, and not just offshore. This is magnified by the oceans of Kiwi Sauvignon Blanc dominating the Australian market.

That the large producers have failed to promote Australia as a fine wine producer, or at the very least, contributed to the perception that it is a hot country which does nothing but blockbuster Shiraz, would probably only be disputed by the large producers, but there is nothing to be gained by the blame game, although one suspects that if things don’t change soon, it could get nasty. Croser argues: “The bridge we need to cross is the bridge of perception.” He notes the need to convince offshore markets that Australia “is a diverse country that can produce wines of finesse and style equal to those from France. And we can”. He sees the move to alternative varieties as a “sideshow”, believing Australia can produce wines to match Bordeaux and Burgundy. Coming from anyone else, one might have reservations but Croser is familiar with the “dedication of the small producer to terroir”. When asked if the industry is in danger of disintegrating, his response is “absolutely not”.

As he notes, Australia has 72 defined regions and 23 of these are cooler or as cool as Bordeaux. At the moment, the entire state of Tasmania is considered a single region, whereas in time, it will surely be divided into a number of cool climate areas.

What is the future for regionality in Australia? Much will depend on the attitude of the larger producers and whether they fight to continue to promote “bottled sunshine” or Brand Australia, but it seems inevitable, if the industry is to prosper, let alone survive, that the focus will shift to the better wines that represent terroir and single vineyards.

Last word to Croser on the regions he sees as those that will convince the world, in 10 or possibly 50 years time, that Australia is truly able to produce wines ranking with the finest on the planet, which also reveals his view on the coming effects of climate change.

He nominates Tasmania for sparkling, Chardonnay and Pinot Noir; Margaret River for Cabernet/ Merlot and added Coonawarra for Cabernet “hopefully”; possibly McLaren Vale Shiraz “but not Barossa Shiraz” and certainly not the Hunter Valley; Shiraz/ Viognier from Central Victoria; possibly Cabernet and Merlot from Eden Valley and also Riesling, though not Clare Riesling (interesting, given he has done so well with Petaluma Riesling); Pinot Noir and Chardonnay from Portland and the Grampians in Victoria; Shiraz and Riesling from Denmark and Mt Barker in the west; and he is especially positive about Kangaroo Island off the south coast of South Australia, which is predicted to be less affected by climate change than almost anywhere else.

We might never again see dinosaurs but Aussie wine has a lot more life left in it. db

Ken Garrett, January 2010