Australia’s best wines?

There is something different this week in the blog, as it becomes personal, and I talk about my favorite Australian wines.

Australia's best red wine

I am sometimes asked what wines I like (eg. Some personal anecdotes). Well, I can tell you what is unequivocally my favourite red wine. It is the Wynns Coonawarra Estate Coonawarra Cabernet sauvignon.

As the name suggests, it originates in the Coonawarra region of south-eastern South Australia, and it is 100% Cabernet. The 2017 vintage is shown in this picture. You can see why it is sometimes called Black Label.

My wife and I had this particular bottle a couple of weeks ago, and it was absolutely superb (as I expected).

I am so glad that I can buy each new vintage when it is released, and that I can afford it. The current release is the 2022, and it costs less than $AUD40 ($USD25). Get yourself a bottle, and put it away for at least 5 years.

You can read a relatively recent retrospective tasting here: Wynns Coonawarra Cabernet – 60 vintages tasted (“Wynns makes one of the world’s best, and best value, cabernets”).

Note also that the region is currently celebrating 130 years of Coonawarra wine.

Australia's best white wine

I can now tell you what is unequivocally my favourite white wine. It is the Tahbilk Marsanne. (Note: it used to be called Chateau Tahbilk, back in the old days.)

It originates in the Nagambie Lakes region of central Victoria, and it is 100% Marsanne (from the largest holding in the world). The 2018 vintage is shown in this picture. One of the things I like about the wine is that it lasts forever, and therefore the winery has a first release of the wines at vintage, but also has a Museum Release, at 7 years or so of age. The latter will keep for at least another decade.

My wife and I had this particular bottle a few weeks ago, and it was absolutely superb (as I expected).

I am so glad that I can buy each new vintage when it is released, and also when the museum release appears, and that I can afford both of them. The current release is the 2023, and it costs less than $AUD25 ($USD15). The current Museum Release is the 2018, and it costs less than $AUD30 ($USD20).

You can read a retrospective tasting here: Tahbilk — retrospective tasting highlights unique wine style. We actually visited the winery a couple of weeks ago, and had the usual small tasting.

Australia’s domestic wine market

Australia is currently the 12th largest wine market by volume in the world (but the 5th largest wine exporter in the world, as discussed last week: Australia’s wine export situation). So, I thought that it might be interesting to have a quick look at some of their actual statistics. This can be done using the Wine Australia: Australian wine sector at a glance.

Below, I have compiled the data for the past four reports.

The volume and value of the wine in the market went down and then up again during that time. This only partly reflects the decreasing pattern in global wine consumption (Global wine consumption really is at its lowest for a very long time), and Australia’s decreasing production. Also, Australia has been up to 10th largest global market, although it is now 12th.

The amount of imported wine in the domestic market was about 1/5th, but decreased at the end. So, the global market does make a considerable contribution to the Australian market.

The top-selling still wine varieties in the off-trade market by value varied considerably across the 4 years. Shiraz was, not unexpectedly, at the top for most of the years, with about 1/5th of the market. Two white varieties have been next during that time, with Sauvignon blanc being replaced as second by Chardonnay. Cabernet sauvignon has had about 1/10th of the market, although it was missing early on. Pinot noir was another popular variety, as was Pinot grigio.

Australia’s wine export situation

Australia is currently the 5th largest wine exporter in the world (and also the 5th largest wine producer in the world). So, I thought that it might be interesting to have a quick look at some of their actual statistics. This can be done using the Wine Australia: Australian wine sector at a glance.

Below, I have compiled the data for the past four reports.

The volume and value of the exports have continually decreased during that time, by 11%. Wine production has also decreased during that time (not shown). This presumably simply reflects the decreasing pattern in global wine consumption (Global wine consumption is at its lowest for a long time).

The balance of the Australian exports among the three wine types maintained red wines as the predominant type, but its dominance has decreased, by 10%.

The balance among the countries being exported to has changed considerably. The United States and United Kingdom have remained about 1/6th each, with Canada about half of that.

The biggest change has been for China, and thus also for Hong Kong (a special administrative region of China). For 2 years there was a major China-Australia trade kerfuffle, resulting from terrible bilateral relations. This was (China-Australia slump continues to deepen):

tied to the Australian government’s backing of an international inquiry into the origins of COVID-19 in April 2020 ... Beijing hit back against Canberra with a slew of restrictions and tariffs targeting Australian exports of barley, coal, cotton, lobster, meat, timber, and wine. In kind, Canberra also imposed tariffs on Chinese aluminium, paper, and steel.

So, mainland China disappeared off the Australia wine export stats, although it was to some extent replaced by Hong Kong. Singapore moved up into 5th place, but dropped back when China–Australia relationships improved from 2023. Mind you, China is still a difficult wine market, for everyone (China’s wine market: Recent shocks, long-term prospects).

The world’s most expensive Australian wines?

The world is full of expensive wines, which are often treated as more for investment than for consumption. Each year, Wine Searcher publishes lists of them from certain regions and of certain alcohol types. In this post I thought that I might look at some of the lists over the past decade, from one particular wine-producing region: Australia.

Obviously, these wines do not come anywhere near close to the prices of the top Burgundies or Bordeaux wines, but they do represent top wines of a more affordable class for the rest of us.

Each yearly list of 10 wines covers “The World’s Most Expensive Australian Wines on Wine-Searcher”. [Note: only 9 wines were listed for 2014.] The criteria for inclusion over the years have generally been: “a wine must have been produced over five consecutive vintages and have a minimum of 20 different offers in our search engine.”

The lists available to date are for the years: 2014, 2016, 2018, 2021, 2022, 2023, and 2024.

Obviously, the prices have varied greatly over that decade (as discussed below), but this does not obviate a study of which wines made it into the list for each year. These wines are shown in this next figure, with one row per wine and one column per year (click to enlarge).

There are 25 wines in this list, which indicates a fair turnover between years. Indeed, 10 of the wines appeared in only one year each. Furthermore, only one wine made it into all of the lists: Penfold’s Grange Bin 95 (label above). This is no great surprise, as Penfolds deliberately created this wine, in 1951, to be Australia’s best, and it is usually treated as its most collectable wine (see the history in Wikipedia).

You will also note that all 25 of the wines are red, mostly based on the Shiraz grape (18 of them). Australia does make some very nice white wines, as I can personally attest; but apparently the buyers of expensive wines are not prepared to put their money on them. ** Australia also makes some very nice red wines based on grapes other than Shiraz; but this particular grape certainly makes wines unlike those elsewhere in the world — and this is presumably what the investors in expensive wines are looking for.

Similarly, 16 of the wines are specifically from grapes grown in the Barossa Valley, north-east of Adelaide in South Australia. This was originally Australia’s best-known wine-making region, and so this success is perhaps no great surprise — it is a warm region that makes very powerful wines. However, there are many other regions that make equally good wines, but of a completely different style, notably with more elegance than power. McLaren Vale and Eden Valley are both somewhat near Adelaide, and both appear twice in the list of wines. The Clare Valley, Gippsland, and Heathcote are much further away, and each appears once — the latter two are from the state of Victoria, not South Australia. No wines from the state of New South Wales appear on the lists, which state also has some well-known wine-making regions (eg. the Hunter Valley, with Tyrrell’s Vat 1 Sémillon), nor does Western Australia appear.

As far as the wine prices are concerned, obviously they have increased in each yearly list. The average prices of the 10 [or 9] wines in each year are:

    2014    $397
    2016    $474
    2018    $581*
    2021    $561
    2022    $624
    2023    $644
    2024    $713

That is, Australia's most expensive wine prices increased by an average of 80% over the decade. Not bad for a financial investment.

It remains only to compare the bottle prices to the assessed wine quality scores (out of 100). We do not expect much of a correlation, and we do indeed not find one. The data are shown in the figure above. ***

The three lowest scores do have the lowest prices, but the highest price has a middling score. Otherwise the data form a blob, with a statistical correlation only = 0.216. As we all suspect, the price of investment-grade wine has little to do with the quality as assessed by ordinary wine drinkers.

As a follow-up to this post, I might do a future post comparing all of the Wine Searcher 2024 lists for different regions and wine styles.

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* Minus the Para “port”.

** The label below is from the wine my wife and I had last night with dinner. The 26-year-old wine from the Clare Valley, with its screw cap, has a label that notes: “Red loamy soils over limestone or schist produce wines of great flavour, crisp acid and longevity ... This riesling displays an intense floral bouquet with limey, citrus fruit flavours on the palate and clean crisp finish. It has the pedigree to age gracefully for many years, yet retain its youthful freshness.” All of this was emphatically true. I am so glad that I bought this wine! (It is currently still available in my local liquor store.) The dessert wine to follow was Gramp's 2013 Botrytis Semillon, which was also excellent.

*** The price data have been standardized to allow for the increasing average price across the years.

The Australian wine industry is officially considered to be in crisis

The Australian wine industry is periodically considered to be in crisis. For example, a couple of decades ago we had this: Big trouble Down Under: crisis in Australian wine, when 3 years of rising harvests from 2004—2006 left Australia awash in bulk wine. These situations usually result in what is called a “vine pull scheme”, in which some vine farmers depart the industry.

Well, Australia is now considered to be in another such crisis, which has been reported for a year or so (eg. in 2023: Australian wine is in crisis; here’s why). This has resulted in the production of a recent official report, which is worth looking at here.

Over the past few months there have been repeated articles, from around the world, about the situation specifically in Australia; for example:

• It’s all change for Australian wine in 2024
• Australian farmers rip out millions of vines amid wine glut
• The world has too much wine, and Australian farmers are ripping up vines
• The future of the Australian wine sector
• The world is drinking less wine, and decades-old vines are being torn up

So, people are taking it seriously, and are attributing it, at least in part, to a global wine-industry problem. However, the Australian situation itself is being addressed by appeals for federal and state government reaction, from various industry groups; for example: First Families call for help ‘to save a wine industry in crisis’.

The Australia’s First Families of Wine (a group of premium wine producers) has described the situation thus:

The global wine oversupply, high interest rates, rising operational costs due to high inflation, previously imposed Chinese tariffs, environmental challenges and a market suppressed by cost-of-living pressures, both domestically and in critical export markets, have wreaked havoc on the wine industry which is now in crisis.

Many winery owners are communicating that this period is the most challenging period they have ever faced. Even more challenging than the mid-1980s when the now-infamous vine pull scheme was introduced.

The most concerning symptom is an enormous surplus of unsold bulk red wine, with Wine Australia reporting that red wine stock levels are now at 2.77 times current annual sales forecast. Under current conditions it will take many years to clear the industry’s red wine surplus.

To ensure long-term sustainability, the sad reality is that inland and other regional red grape producing vineyards need to be removed, and the industry needs to be drastically downsized by 25—30%. We call on the Federal Government to provide assistance in the form of supporting an environmentally-friendly exit from the industry for grape-growers that need it.

There have been various other discussions of the situation (eg. A retailer’s view of the Australian wine industry crisis), including detailed discussions from long-term industry commentators (eg. The discussions Australian wine needs to have — An independent and informed assessment of Australian wine’s present and future). These are well worth reading.

The response from Wine Australia, the official national industry body, was, in early May this year, to commission a report as a contribution to the federal-ministerial Viticulture and Wine Sector Working Group and thereby to the national government’s One Grape & Wine Sector Plan. This report (by Emeritus Professor Kym Anderson, founding Executive Director of the Wine Economics Research Centre) was published on 18 July (Australia’s Wine Industry Crisis and Ways Forward: An Independent Review).

Everyone interested should consult the report directly, but I will summarize a few points here, by way of introduction.

The table of contents summarizes what is happening:

1. Introduction
2. Anatomy of the current boom-slump cycle
3. Contributions of recent demand trends and shocks
4. Contributions of recent supply trends and shocks
5. Options for reducing the current over-supply of red wine stocks
6. Nudging the industry toward a sustainable supply-demand balance
7. Ways forward: actions needed by producers and governments

Note that chapter 5 explicitly points to red-wine over-supply as the principal characteristic of the current crisis, notably from the large irrigated areas of inland Australia that produce the generic box wines for which Australia is [in]famous. The suggested actions are therefore targeted at reducing this particular over-supply, and getting back into a better balance between future supply and demand.

The meat of the discussion is in chapter 6. Note that the wine industry is to be “nudged” forward, rather than forced or dragged. The six options listed are obvious ones, some of which have been tried before. Interestingly, the author notes: “The results of the 1986 vine-pull subsidy program were not viewed favourably in retrospect, even from within the industry.” However, the European Union has offered subsidies this year to pull out vines in Bordeaux, which is proceeding (Bordeaux vineyard ‘grubbing up’ scheme hampered by weather), although growers in California’s Central Valley are doing it on their own (The 50,000 acre dilemma: California's grape growers and the state’s biggest wineries grapple with overages).

The optimism is in chapter 7 of the report. However, the author does not pull any punches, and notes:

A crisis is often the best and sometimes the only time to bring about unpopular but necessary changes that in the past have been kicked down the road, because it was perceived that they would harm a significant subset of stakeholders. The industry itself needs to own the problems it faces, and step up its leadership in finding appropriate and workable solutions.

Needless to say, actions by producers, industry organizations, and governments require agreeing at the outset on market prospects under various scenarios. The report lists 14 characteristics of such scenarios, from various perspectives. In particular: “While government enthusiasm for supporting structural adjustment [within the wine industry] has been lacking, it is more likely to materialize if the industry takes a lead.”

So, the bottom line is that the industry needs to react, with actions not just proposals, before any government reaction can be expected. It is the industry that has the crisis, not the governments.

Actually, some of the most interesting information in the document is in the background appendices (which are always an important part of all of Kym Anderson’s reports).

The availability of older wine vintages in Sweden?

I live in Sweden, where the local retail chain for alcohol products is owned by the government. The European Union (EU) officially discourages monopolies, but actually bans only commercial ones, not government-owned ones. The Nordic countries have long had government ownership of alcohol sales, and for a good reason, as I have discussed before (Why are there wine monopolies in Scandinavia?). However, the only alcohol monopoly left in the EU is Systembolaget, in Sweden, although Vinmonopolet continues to operate in Norway (which is not part of the EU). *

The objection to government monopolies is usually that they “manifestly cause waste and inefficiency, while denying consumers the range of price and service options they desire”. I have previously argued that this is not true for Systembolaget: (i) I have pointed out that, as the third biggest alcohol retailer in the world, Systembolaget provides me with a wide range of wines of all styles and origins (Wine monopolies, and the availability of wine), and (ii) decent wine is less expensive in Sweden compared to most other places, and sometimes cheaper even than in its homeland (Why is wine often cheaper in Sweden than elsewhere?). Also, Systembolaget was recently voted among the most trusted institutions in Sweden, with 71% of the respondents having high confidence (Most trusted institutions/companies in Sweden in 2023).

It therefore seems to be an obvious extension of this topic to ask about the availability of older vintages of wines, as well as simply the current release from any given winery. Price is not everything, in the wine world. So, what I will do here is look at the availability of older vintages of Australian wine (because that is where I come from), currently in bottles in Systembolaget. As an aside, Systembolaget reports that boxes represent roughly 60% of wine sales, rather than bottles. [This retailer is known to the locals as “Systemet” = The System.]

The table below shows the results of my searching in the database. These are all of the Australian wines at least 5 years since vintage. I have shown the Swedish (SEK) price for each wine. Note that US$ 1 ≈ 10 SEK, which makes the conversion easy. The prices are usually not discounted after initial release, but sometimes it does happen, presumably to clear the stock. For example, the Paulett Chardonnay was recently reduced to 99sek.

I should point out that most of these wines were originally released as the current vintage release, and they have simply gone unsold by the importer / distributor. This does not matter in practice, provided that the wines have been stored suitably. According to what I can find out online, all of these wines should still be quite drinkable, as indicated in the third column of the table (best years in which to drink).

This looks to me like a reasonable selection (two dozen); and provided that the wines are still drinkable it is worthwhile. However, people used to specialist wine shops might find that this selection is nothing to write home about, especially in countries like the USA, where specialty retail is expected, and Australia (eg. Wynns Black Label hits purple patch). However, for the Swedish national retail chain, where almost all of the alcohol sold is budget stuff for everyday drinking (the classic “wines for the table not the cellar”), it is as good as I would expect. These wines have effectively been in a cellar (the importer) for several years, and they can be in a cellar (mine) for a few more yet.

These wines are rarely actually in any of the retail stores, but are still in the importer / distributor warehouse. ** They can be ordered through the Systembolaget online order system, and arrive a few days later at my local store, where I collect (and pay for) them.

It has been suggested to me that these wines might be specific inventory that went unsold during the Covid19 pandemic. However, to me this seems unlikely, as it is customers not restaurants ordering through Systembolaget, and they could continue to order exactly as usual all during the pandemic slowdown.

On a disappointing note, I recently ordered three of these wines, and in one case I was substituted the 2018 vintage instead of the 2016 — on a brighter note, I got a 30% discount.

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* Small-scale farm-producer sales of alcohol are to be allowed in Sweden by 2025, according to the government. Yay!

** A recent survey indicated that, for younger people, Cost of shipping, Customer service, and Communication about order status are more important than Wide variety of choices.

Is Australia likely to recover from the devastating loss of the China wine market?

I come from Australia, where in the 2000s the wine industry literally rode upon the camel’s back of the Chinese wine consumption market. Sadly, this market collapsed in late 2020, when the Chinese government retaliated in response to one of Australia’s senior politicians suggesting publicly that China should be officially investigated about the origin of the SARS-CoV2 virus (and the ensuing Covid19 global pandemic). The Chinese were never investigated, but Australian wine was slapped with an onerous import tariff (as high as 218%), making the wine uncompetitive in China.

This went on for several years, during which the Australian wine industry suffered badly from the loss of one of its biggest export markets (How China is devastating Australia’s billion-dollar wine industry). The Chinese tax was removed in March this year (China lifts penalties on Australian wine after more than three years), and it is therefore of interest to see how things are faring now.

Back in 2019, before all of this occurred, I innocently asked in a blog post: Will the slowdown in the Chinese wine market catch up with Australia and Chile? China had, at that time, been the world’s fastest-growing wine market, being then ranked as the number 2 still-wine consumer by value and number 5 by volume. Given the small size of Chinese wine production, this made China a significant import market, worldwide.

Australia had had considerable success at targeting this market, as I showed in that blog post. Therefore, the effective loss of this market was a devastating blow to the Australian wine industry.

However, in a later (2021) post I noted that there had already been a decrease in wine consumption in China dating from 2016 (So, why has China gone off the boil?), and a decrease in production that had started in 2012. China thus downgraded from been the second largest wine market in the world; and so Australia was already losing a large market anyway.

Furthermore, earlier this year, in another blog post (The demise of the Australian wine industry? Part 2), I noted that there has been a downturn in the global wine industry, with an over-supply of wine; and Australia’s situation with China is at least simply a part of this broader issue. So, the anticipated return of the Chinese market as a destination for Australian wine may not be the hoped-for panacea.

Indeed, the changed China wine market was analyzed in 2023 by Kym Anderson (What’s happened to the wine market in China? Journal of Wine Economics 18:173-183). He produced the graph below, and commented:

Coinciding with COVID has been the imposition of punitive tariffs on China’s wine imports from Australia since the end of 2020. While that has had a large impact on Australian producers, on its own it is estimated to have reduced China’s total wine imports by less than 1%, because China was able to, and did, source more wine from other wine-exporting countries. So if Australia were to be able to claw back its 2018–2020 share of China's wine imports (one-quarter by volume, a little over one-third by value), that would amount to an export increase of not 130 ML or U.S.$750 million per year but perhaps only half those amounts.

So, things have changed in China, with a smaller market, established players, and emerging trends. For Australia, we now seem to have (What are Chinese wine importers seeking in Australian wines in post-tariff era?):

The most notable difference from three years ago is wineries’ current emphasis on securing reliable, long-term partnerships over merely chasing volume. This marks a more rational approach in today’s dealings. When asked about the support they anticipate from Australian wineries, wine merchants expressed a desire for marketing assistance, including winery tours, tasting events, and exhibitions. Recently, the South Australian government has launched a AU$1.85 million support scheme to help wineries to re-enter China. AU$600,000 of the grant was earmarked for two-way market activations and support.

So, the current 2024 situation (Australian wine pours back into China as tariff-free shipments surge to over US$10 million in April) appears to be:

China imported over US$10 million of wine from Australia in April, up from US$126,000 a year earlier, after it lifted punitive imports tariffs at the end of March. This represents a roughly eighty-fold increase, according to Chinese customs data. Imports by volume, meanwhile, increased more than seven-fold year on year to 462,518 litres (813,918 pints). As a result, Australia’s share of China’s wine imports rose from 1.45 per cent in March to 10.52 per cent last month, making it the third largest wine supplier after France and Chile.

This is certainly good news. However, at the same time, Jeremy Oliver, the Aussie wine critic most active in China, explains the post-tariff market:

“So the tariffs came in when Australia was selling (depending on which numbers you read) something like between $1.4 and $1.5 billion of wine to China per annum, and our next biggest export market at the time would have been the US at about $3.33 million, so [it was] nearly four times the size of our next biggest export market” said Jeremy Oliver, one of Australia’s leading wine critics. “My guesstimate based on a whole series of rational assumptions: we might be able to get that market back to about $250/$300 million or thereabouts; nothing like the $1.4/$1.5 billion,” he said.

Indeed, if we look at the new market in China (Here are China’s 50 top wine importers), in terms of companies, we have:

In the first five months of the year, the total number of bottled wine importers had contracted to 4,175. Among them, only a handful are identified as large wine importers with import value exceeding US$10 million. The bulk of China’s wine imports is driven by medium- and small-sized companies. Wine companies importing less than US$10 million per year represent more than 82.3% of the country’s total imports. Furthermore, small companies importing between US$1 million and US$5 million, account for more than half of the total imports — 52.4% to be exact, according to the association.

So, the current practical response to the global wine situation is still that Australian farmers rip out millions of vines amid wine glut:

Millions of vines are being destroyed in Australia and tens of millions more must be pulled up to rein in overproduction that has crushed grape prices and threatens the livelihoods 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, and in China, the market it has relied on for growth until recent years. Red wine has suffered the most. In regions like Griffith, prices of the grapes going into it fell to an average of A$304 ($200) a ton last year, the lowest in decades and down from A$659 in 2020, data from industry body Wine Australia show. “It feels like an era is ending”, said Andrew Calabria, a third-generation vineyard owner and wine maker at Calabria Wines.

Sadly, the Australian government does not fund growers to exit an industry (Inland wine grape growers seek government support to exit industry with dignity amid wine glut), as opposed to the support package they have announced (described below). *

That is, the Good Old Days are definitely gone. Indeed, just for irony: China threatens retaliatory tariffs on EU wine amid trade disputes. What goes around comes around again.

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* The Australian government has announced a new support package for the Australian wine industry; and it has been claimed that 350 Australian wine producers and businesses have re-established exports to China since the tariffs were removed (Exports to China surge $86 million as government reveals support package). This is the optimistic point of view, which I am suggesting here may not be too realistic in the long term.

The demise of the Australian wine industry? Part 2

In last week’s post, I provided an introduction to my previous discussions of the Australian wine industry (The demise of the Australian wine industry? Part 1). Please check out that post before proceeding here, if you need context. Here, I provide a comprehensive summary of the current situation.

The main issue in this week’s post is that the Australian wine industry is repeatedly presented in the media as currently being in a dire position. This situation is, in many ways, real; but the entire world’s wine industry has a somewhat similar problem, so there is not much that is actually unique about Australia. Furthermore, the Australian position is often attributed particularly to a trade spat with China (How Chinese tariffs soured Australia’s wine industry); and it is true that this spat exists, but resolving it may not be the panacea that the Australians seem to be expecting.

The essential problem is an over-supply of wine from within Australia itself. This is shown in the above infographic, from the Australian wine: Production, Sales and Inventory Report (by Wine Australia). Australian wine production is predicated upon exporting a large proportion of the product — as shown in the graphs at the very bottom of this post, consumption plateaued in 2010 but production did not. *

This origins of this situation have been discussed by several people. For example, according to  Pia Piggott, an Associate Analyst at Rabobank, there are three factors behind this (Australia’s wine swimming pool):

1. The 218% tariff imposed on Australian wine by China in 2021, widely seen as retaliation for Australian criticisms (a government minister suggested that China should be formally investigated about the origin of the SARS-CoV2 virus). Until then, China had been one of Australia’s most significant export markets, with sales reaching A$1.2 billion in the year to January 2020.
2. The logistical bottlenecks caused by the Covid-19 pandemic. As shipping prices increased four- and then five-fold, ships began to bypass Australia in favour of shorter, higher-value routes. Many Australian wineries could not fulfill export orders, and lost their customers, leaving the Australians with too much wine.
3. Australia has recently had record production. For example, the 2021 vintage was the largest vintage on record — a 36% year-on-year increase.

To visualize this situation simply, one useful measure is the national stock-to-sales ratio, which is a measure of how many years’ worth of sales is held in inventory. This is shown in the next graph (from Australia’s wine inventory at historic high despite steady sales and reduced production). Currently, the value is 2.57 for red wines, which is 45 per cent above the 10-year average of 1.77. The latter figure equates to having just under 2 years’ worth of sales in stock, so that the current level is >2.5  years’ worth of stock. The situation for whites is somewhat better than for reds, with the stock-to-sales ratio at 1.49 (much closer to its long-term average of 1.35).

So, the current situation has been developing for quite some time. Nevertheless, the Australian wine industry does urgently need to deal with how to get rid of its wine lake. The obvious way is exports. Sadly, this is precisely what is not working, as shown in the next infographic, from the Wine Australia Export Report (see: Export results reflect challenging global trends). Two countries dominate the picture. The United Kingdom takes 36% of the total export volume and 19% of total export value, while the USA takes 22% of volume and 19% of value; and both of these figures are currently down considerably. ** All of the lower price points have decreased in export sales, although >$10 has increased (ie. Australian wine exports are moving up-market, by default!).

Needless to say, the Australian grape farmers are unhappy with the situation. For example, the farmers have argued that they are being paid below the cost of production for their grapes, and in some cases they have chosen to dump their grapes or let them rot on the vines, rather than be paid below cost prices for harvesting them (Riverland wine grape growers drive tractors through Renmark in protest against low prices). Their key demands of the government include making wine grape prices more sustainable, and improving support from the industry and government for growers. To this end, the Riverland grape growers call for moratorium on vine plantings to ease red wine oversupply crisis; and the government has just now appointed a task force (Wine taskforce to spotlight glut as industry reaches crisis point).

So, it seems that the Australian wine industry is set to shrink, considerably. The most recent report from Australia’s Agricultural and Resource Economics Bureau (ABARES) predicts that, by the 2027—28 harvest, Australian wine-grape production will have fallen to 1.2 million tonnes, down from a peak of over 2 million in 2021 (Forecasting wine: current storm clouds unlikely to budge).

However, the issue seems to me to be that Australia’s situation is simply part of a general downturn in the wine industry, globally. For example, the number of regular wine drinkers in Australia is falling overall, and the under-34 segment has shown the sharpest decrease, which is part of a global trend (Wine leaves a bad taste for younger drinkers). Similar problems have recently been discussed for France, the modern “home” of the wine industry (France no longer defines global wine culture. Can it adapt?), and their farmer reactions have also been similar (‘Emergency’ €80m promised to French winegrowers amid farmer protests). The USA is no better off (More bad news: Sipsource report pulls no punches), and neither is the UK (UK wine sales decreased by 10 million bottles in the build-up to Christmas). Indeed, the US growers have gone one better than the Australians (Growers scrap vineyards as market dims).

Over-supply is therefore actually a global problem. This overall topic has been discussed elsewhere, so I will not repeat it here:

• Wine, globalization, and the end of history
• Why are so many wine regions dealing with oversupply?
• Can the wine industry’s crisis be stopped?

The bottom line here is that the anticipated return of the Chinese market as a destination for Australian wine (China wine tariff result by end of March) may not be the hoped-for panacea (Australian wine makers bet on expected China reopening with big shipments). After all, there has been a downward trend in Chinese wine consumption since 2018, as shown in the next graph (Chinese wine drinkers — unlikely to solve Australia's export woes); and wine imports have followed suit (Chinese wine market falls off cliff). A return of the China export market will therefore presumably not be a great boon. ***

So, to summarize, we can safely say that the Australian wine industry is facing a crisis (It’s all change for Australian wine in 2024):

1. Revenues in the sector, which directly employs more than 18,000 people, have declined at a combined annal rate of -6.3% over the past five years, and stood at an estimated AU$6.3 billion at the end of last year.
2. The AU$1.3 billion-per-year China export market collapsed when Beijing slapped tariffs on Australian wine in late 2020; and while China is expected to soon remove — or at least modify — those impositions, the industry faces a much-changed global condition.
3. Globally, consumers have moved away from commodity bottles in favour of premium priced labels, and Wine Australia calculates that the industry has surplus stocks of more than 2 million wine bottles.
4. At the same time, home market demand has been declining for the past 4 years in Australia, and is forecast to reach 445 million litres this year, compared with a 10-year average of 480 million litres. Prices have increased only marginally since 2019.

This does not necessarily prophecy the demise of that industry, but things clearly have to change, sooner rather than later (Can Thor save Australian Wine?). The industry either needs to shrink, or some pretty big new markets need to be found.

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* Australian wine consumption plateaued in 2010, and has even dropped recently; on the other hand, production has varied dramatically year by year, at about twice the level of consumption (the graphs here are from: Focus OIV 2023: Evolution of world wine production and consumption by colour).

** It is worth noting here that Australian wine exports to the USA have been declining since 2007, as shown by this linked AAWE graph.

*** So, the Spaniards should not be so keen, either (Can Spanish wine producers spread their wings in China?).

The demise of the Australian wine industry? Part 1

I grew up in Australia, and got interested in wine in the late 1970s (see: Some personal anecdotes). The wine industry had boomed in the late 1960s and early 1970s, and there was a vibrant industry for me to be interested in, along with a lot of other people. My local bottle shop (or liquor store / off-licence) started doing free tastings on Thursday evenings (late-night shopping night), and this grew into special organized (paid) tastings on weekends. There were also plenty of vineyards to visit (also for free!), as shown on this map.

So, it is very sad for me to hear about the current troubled state of the Australian wine industry — a country that is currently being disturbed by the global wine-industry downturn. It has not got to the end yet, but globally things are clearly going downhill in many ways, for the wine industry, as shown in this first graph.

However, the Australian wine industry has had its ups and downs before, as I have written about in previous posts, and as shown in the next graph (of Australian wine exports). At the end of this post is a categorized list of my previous posts about Australia. After this week’s look at the past, next week, in Part 2, I will summarize the current state of affairs, according to the media.

As you can see, the previous export trend has generally been upwards, exactly as you would expect from any producer gradually establishing itself on the global stage. However, there were occasional multiple-year downturns along the way. In particular, there was a distinct downturn from 2005—2013, occasioned by a saturation of the world market for cheap Australian wine (as discussed in my post: The rise, rise, fall and rise of Australian wine). Since then, the Australian focus has moved more towards the middle of the global market, with much better financial results.

Well, the upturn in export value over the past decade (ie. since 2013) has recently turned into a downturn again, with obvious consequences for the Australian wine industry as a whole. I will discuss this next week. Predictions of the demise are premature, but problems clearly exist.

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Previous posts, in time order (within groups):

Vineyards

• Why lionize winemakers but not viticulturists?
• Welcome to the wine regions of Australia
• Mapping an entire continent's vineyards

Wineries

• Classification of the cellaring wines of Australia
• The Real top wineries of Australia

Companies

• Yellow Tail and Casella Wines
• Keeping the family wine business is often hard
• Australia's biggest wine companies
• Why beer companies should never buy wine companies

Wine price

• Exponential increase in wine prices (1980-2000)
• Wine prices 2000-2020

Wines / marketing

• What are Australia's most collected wines?
• Younger U.S. consumers prefer Australasian wine
• Introducing the "Responsible Alcohol Marketing Scheme"
• Australia versus New Zealand wine exports
• Australia and New Zealand wine comparisons
• How did Australian beer slobs become wine drinkers?
• This is how Australians market wine (you may be surprised)

Exports

• Getting the question right
• The rise, rise, fall and rise of Australian wine
• Australian bulk wine exports are economically inefficient
• Can you tell the difference between Australia and New Zealand (wine)?

This is how Australians market wine (you may be surprised)

Greetings of the season:
God jul! Merry Christmas. Joyeux noël. Fröhe Weihnachten. Feliz Navidad. Buon Natale!

Each country has its own way of marketing wine to its populace. That is, there are commercial, cultural and legal arrangements that facilitate and encourage the transfer of wine from the producers to the customers. These arrangements can differ greatly between countries.

Here, I will look briefly at how the Australians appear to do it, within Australia itself.

The main arrangement is via wine brands, of course. That is, wine is aggregated into volumes that are then marketed under a single name, or label. This is the most common arrangement around the world. The wine producers sometimes create the brands themselves, and thus sell the wine direct to the customers, or they sell the wine to intermediaries, called retailers, who then sell the wine to the consumers.

However, one aspect of the Australian system does seem to differ quite considerably from many other countries. How many of these wine brands are owned by huge conglomerations? That is, there are many wine brands on the retail shelves, but not quite so many companies standing behind those brands.

The web site that contains the most detailed summary of this situation for Australia is: Who makes my wine? It was put online by The Real Review back in February 2018, and was most recently updated in December 2023. This lists which companies dominate wine retailing in Australia, and for which the ownership of their brands is often not publicly disclosed. The Real Review data are summarized below.

There are, of course, wine conglomerates in Australia, who have simply purchased other wine companies. This is widespread throughout the world, as discussed at: The 10 largest wine companies in the world. The biggest of these conglomerates in Australia are shown in this first table. The largest of these, Treasury Wine Estates, is only the fifth largest wine company globally, so there is nothing particularly out of line here.

However, it addition, within Australia there are supermarket conglomerates who are (mostly) inventing wine brands out of thin air. The biggest three collections of these are shown in the second table. Note the massive number of brands (aka “bulk-shipped retailer own-labels”), compared to the first table.

Also, note that the Endeavour Group (formerly called Woolworths supermarkets) actually owns a whole series of acquired “independent” liquor retail outlets, including: Dan Murphy’s, BWS, Langton’s, Cellarmasters, Pinnacle Drinks, Jimmy Brings, and Shorty’s Liquor — these retailers may look different on the outside, but they are all pretty much the same in terms of content,

So, four times as many brands are marketed in Australia by large supermarkets than are marketed by large wine companies. Indeed, back in 2016, Tyson Stelzer (Who makes my wine?) noted that:

The growth in supermarket “Buyer’s Own Brand” wines in Australia has been substantial, estimated to have mushroomed from five percent a decade ago to between 16 and 25 percent of the market today.

Do any other countries market wine in this manner? We are told that US-style marketing is being adopted elsewhere (French winemakers adopt US-style marketing to halt falling sales), and this consists of: “In Anglo-Saxon countries, they ask what the consumer wants first.” However, trying to market the Australian supermarket wines elsewhere is not a viable proposition (Australian wine is in crisis — here’s why).

Mind you, the increase in size of the Australian wine conglomerations is likely to continue for the foreseeable future, as it also will for the other world mega-companies (Consolidation moves):

Consolidation is nothing new for the wine industry, but the pace of change has accelerated in recent years as interest rates have risen, costs of labor and supplies have jumped, and demand for wine has softened.

Treasury Wine Estates, for example, is buying a substantial vineyard area in New Zealand (Treasury’s New Zealand vineyard expansion); and it has recently made United States acquisitions (The 10 most important M&A deals in drinks in 2023) — these are intended to “strengthen its global portfolio”.

Note:
The Real Review site listed above is a large update of the original Who makes my wine? site (pictured here). It first appeared in the Wayback Machine on November 28, 2010. It listed “100 or so” wines for Coles and Woolworths supermarkets. It was archived last on October 4, 2015, but was gone from the web by January 10, 2016. The domain was later resurrected, and it was first archived by the Wayback Machine on February 26, 2021. I last accessed it in December 2023, when 81 brands were listed. For each wine, it has a pretty good description of the Australian Wine Regions.

Can you tell the difference between Australia and New Zealand (wine)?

Last week, I made a few observations about the relative behavior of Australians and New Zealanders, with respect to alcohol consumption. For example, the New Zealanders were reported to drink more often, but the Australians were more likely to get drunk, and then regret this outcome.

This comparison is relevant, because, in general, there is actually not all that much cultural difference between the two countries, at least compared to other English-speaking countries, such as Canada, South Africa, and the United Kingdom, plus the United States of America. However, in the wine world there are considerable differences, which I will look at here.

As an aside, back at the beginning of the last century, when Australia was being federated, to shake off the unwanted British yoke (officially, January 1 1901), the New Zealanders were offered the golden opportunity to become a state of Australia. They declined. This was unforgivable; and it has not yet been forgiven, even after a century. There is nothing better for Australians than beating the New Zealanders at any given sporting event, for example.

Therefore, it really rankles when we expat Australians read a report like this:

Little known. Since 2016, the U.S. has imported more wine from New Zealand than from Australia (by value) --  and the gap has been growing. In 2021, imports from NZL were 88% higher than those from AUS.

This is illustrated in the following graph (from the AAWE). New Zealand wine exports to the USA have been continually on the increase in value since 1992, while the Australian export values peaked in 2007, and have continually decreased since then. The point of equal US import value was in 2016.

This raises several questions. First: What is wrong with those Americans? After all, they are clearly wrong! Can’t they tell New Zealand wine from Australian wine? Surely not!! *

A second question relates to wine volume, as opposed to value. After all, the NZ increase may simply be that they are charging more for their wines. I will not go into this one here, but will, instead, look at another question: some declining Australian export values to other countries.

The obvious country, in this regard, is China. It has been noted that:

Australia exports wine to over 100 markets, but in 2020 the top 5 markets (Canada, China, Hong Kong, United Kingdom and United States) accounted for 75% of total wine export volume and 77% of export revenue. China was the largest in value terms, accounting for 33% of export revenue and ranking third in volume (after United Kingdom and United States) at 13%.

Well, all of that changed. This next graph shows the value of Australian wine exports to China plus the rest of the world, since 2002 (from Winetitles Media). Note that it indicates that Australian wine export value peaked at the end of 2007 (just as we saw for the USA, above), then declined until mid 2013, increasing again thereafter. It also shows that the largest component of the latter increase was exports specifically to China — so, that is where Australian wine went after the post-2007 declines.

The China exports peaked in 2020 and then (quite literally) crashed in 2021. Part of this decline has been a general decrease in wine consumption in China. This is illustrated by the AAWE graph showing that “from its peak in 2017, China’s wine consumption has decreased by more than 45%”. That is a pretty serious reduction.

However, the main reason for the vinous disaster has been the Chinese claim that the Australians had been dumping wine in China — ie. insisting that in order to receive this particular wine then the Chinese importer also had to buy this other wine as well (whether they wanted to or not). This has lead the Chinese to impose import tariffs of more than 200% on all Australian wine, in retaliation. **

Hence the crash, when combined with declining consumption. However, even in 2021 Australia still managed to be 5th in the value of wine imports in China, although 7th in volume (China’s wine imports 2021), after falling from a clear 1st place (see the table below).

It is therefore sad to note that: New Zealand wine export value hits all-time high. [Expletive deleted.]

A final question is: What are Australians doing about this? It has been noted that: Australia’s wine stock levels rise following 12 months of challenging global conditions; as loss of sales has not been compensated by reduced production. Indeed, the current vintage definitely has problems (Vintage 2023 not business as usual), concerning:

how winegrape growers can prepare for changes to their income when faced with oversupply issues, increases in shipping and freight costs, the ongoing impact of China’s wine trade tariff, and market values dropping, particularly with Shiraz and Cabernet sauvignon varieties.

Which winemaker would you rather be, just at the moment: an Australian or a New Zealander?

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*  In case Californians are wondering where their water has gone in the past few years, they should check out the reports of unusual floods that have occurred in south-eastern Australia during exactly that same period of time; and then think about the clockwise flows of air around the edge of the northern Pacific Ocean. A drought does not mean that the water has disappeared, but instead that it has gone somewhere else.

**  The alleged dumping was merely a point of political discussion, until an idiotic Australian politician suggested (in public) that China should be officially investigated about the origin of the current SARS-CoV-2 pandemic. Almost immediately, the tariffs were announced by an offended Chinese government. Indeed, no-one had suggested that the USA should be investigated about the origin of the H1N1 influenza pandemic of 2009, nor the so-called Spanish Flu of 1918 (the biggest pandemic on record); so why finger the Chinese this time? (Both flu viruses arose in Kansas,)

How did Australian beer slobs become wine drinkers?

Writing about a single country may seem like a bit of a restricted viewpoint, but in this case the example may contain interesting ideas for the wine industry at large. Wine is currently consumed by a greater percentage of Australians than is beer (46% versus 36%, according to a Roy Morgan poll), and Australia is in the Top Ten for wine consumption (according to the OIV). Believe me, this was not always so!

When I was young (in the 1970s), young people in Australia did not drink wine. They drank beer — wine was snobby / snooty / elitist, and the cheap stuff was undrinkable. These days, wine is quite respectable, and Australia is a leading global wine producer (and quite proud of having some of the oldest grapevines in the world). This is a pretty serious change. I am not going to try to explain this change, but it does seem to me that a number of relevant factors have been involved, and I will look at some of them here.

The archetypal, cliché, Australian male of the 1960s and 1970s, often referred to as Norm, was like this (Let sleeping Norms lie):

He slumped on a lounge chair, gazing at the TV over an enormous beer gut, tinny [beer can] in his hand ... He was an unapologetic middle-aged slob, who resisted all entreaties to exercise. “I’m an all-round sportsman,” said Norm, but he was referring to the games he watched on the small screen, not to actually playing sport.

This situation got so bad that, in the mid 1970s, a cartoon character Norm (pictured above) became the anti-hero of TV ads for an official government Life. Be In It health campaign. He drew laughs, for sure, but also embarrassed gasps of recognition across Australia.

This, then, was one of the major changes — being a beer slob was no longer an aspirational lifestyle. The re-evaluation of what a healthy lifestyle actually meant, in practice, created a climate that the wine industry could (and did) take advantage of. After all, one drinks less wine than beer, and not usually while slumped in front of a TV. So, wine was presented as part of the new aspirational lifestyle.

Another background change was the recognition of cultural diversity. Other countries have lots of migrants, sure, but Australia is in a very different situation because of the large percentage of them (as opposed to a large number). According to government statistics, at least 40% of the people are either migrants themselves (c. 25%) or their parents were. That is, the “language of the home” (as opposed to school or workplace) may not be English (or the Australian version of it). So, that cliché “ocker” Australian image (eg. Crocodile Dundee), so beloved of the foreign media, misses a lot of the reality. This blatantly obvious ethnic situation was ignored under the previous British cultural dominance. *

I am happy to say that my generation was the one that started to change this. We Baby Boomers were the first ones to explicitly have a government minister for “ethnic affairs” (the flamboyant and unforgettable Al Grasby), and (much later) one for “Aboriginal affairs”. Things have continued to improve since those formal recognitions of the state of affairs in multi-cultural Australia. More recently, of course, there has been interest in other forms of cultural diversity, such as gender and sexual equality, in addition to this ethnic diversity.

For the wine industry, the recognition of ethnic diversity was a veritable boon, because many of these migrants came from countries where wine was a normal part of the culture. The importance of this cannot be overstated (as shown in the graph below). Once you recognize the people, you also recognize their cultural heritage, and this then becomes part of your own contemporary culture. Drinking wine was no longer snobby, but was instead now perfectly normal; and the subsequent TV and print ads produced by the wine industry reflected this.

Naturally, Australian Millennials are rightly carrying on the work. It does seem possible, to me, that this may have something to do with the recent observation that these Millennials are apparently also drinking wine (Australian), unlike their contemporaries elsewhere (Australian millennials drive wine consumption post-pandemic).

There is, of course, no purpose to changing the culture if there is no-one to lead the way towards something new, in this case wine. This is where Len Evans comes in. The adjective always used to describe him was “ebullient”, and it fitted perfectly. Len was your classic “man of the people”, and he loved to communicate the enjoyment of wine. I have described his many, many (lasting) effects on the Australian wine industry in my post on The Len Evans effect, so I won't repeat them here.

Of course, this is not to say that there was no-one else involved, because there were plenty of other prominent people in the Australian wine industry. The most notable of these was James Halliday, especially through his roles as writer and educator. His approach was more up-market than that of Len Evans, but no less important, once a person got started on their interest in wine. His James Halliday’s Australian Wine Guide (1986) was invaluable to me.

Rear L to R - James Halliday, Peter Hoj, Philip Laffer; front L to R - Len Evans, Hazel Murphy and Wolf Blass.

Lastly, we should not overlook the inestimable concept of bag-in-box wine, or Cask Wine, as Australians know it. This classic wine presentation had its 50th birthday quite a few years ago (The wine cask turns 50), having been pioneered in Australia in 1965 (1965 — Cask wine invented).

There are many aspects to this practical invention, from storing open wine without spoilage, to portability for parties, to its eminent recyclability (being a plastic bladder in a cardboard box, not glass) (The wine innovation that deserves more attention). There is much current discussion of putting wine in cans, instead of bottles (Wine in cans in 2020), but this long-standing method should have just as much appeal for environmentally conscientious wine consumers (Wine packaging in the modern world is not (yet) sustainable).

The point here is that Millennials have made it clear that they care about their future, and the wine industry must join them. Innovative packaging helped change Australian drinking culture back in the 1970s, and there is a need for this to happen again now, globally. The best stuff comes in bottles, we all know that! You don’t lay down a cellar full of “Chateau Cardboard” (as we also called it in Australia); and, so, the bag-in-box packaging has not been used for the best-quality wines. Presumably the same will be true for cans — cellaring “a 12-pack of wine” will not be the same as laying down “a case of wine”. This must change; and it may already be doing so (Is a boxed wine revolution on its way?).

The advertisers can do it. Back in the 1970s, the most successful Australian brand of bladder wines, Orlando Coolabah (launched in 1973), had a series of television ads based on the slogan: “Where do you hide your Coolabah?” (see Australia Remember When). It showed examples such as hiding your wine cask behind a large pot plant, so that the other party-goers could not get their hands on the good stuff. This is still firmly embedded in my memory, over 50 years later, so there is no reason to expect current advertisers to be any less successful.

Conclusion

This may all sound pretty extreme, since I have covered a change in an entire national culture, with many aspects to it. However, isn't that what the wine industry is currently faced with? If Millennials are not happy with the current wine culture, then the future must also involve a cultural change, one way or the other (The wine industry is asking the wrong question).

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*  In Australia, the most murky past is therefore not being a migrant! My own murkiness thereby comes from the fact that 7 of my 8 great grandparents were all born in Australia, which makes me pretty rare. The 8th one, by the way, was the Scotsman who brought in the Morrison name. Through one lineage, I can actually trace myself back to the Second Fleet, which was the second lot of British boats to invade, in 1790. Should I be proud of this?