Australian winemakers desperate to secure French oak barrels

Mary Hamilton, of Hugh Hamilton Wines, has had to order French oak barrels early to guarantee supply. Picture: Kelly Barnes

The nation’s $45bn wine industry is scrambling to secure French oak barrels out of Europe in time for next year’s vintage as big disruptions across the global supply chain caused by Covid-19 play havoc with shipping schedules and the price of barrels skyrocket.

The price of French oak barrels, highly prized by Australian winemakers for adding layers of flavour and complexity to their premium and luxury wines, has risen by more than a third since the pandemic emerged to cost more than $2000 each.

Exacerbating the cost pressures are lengthy delays out of Europe, storms that have destroyed oak trees and a lack of shipping containers that has forced many winemakers from the Barossa to the Hunter to order their French oak barrels more than six months in advance to secure their orders.

Added to higher prices for shipping, freight and packaging, it is squeezing the margins for winemakers at a time when they have also been shut out of the Chinese market amid resistance from the key retail chains to wave through price increases.

“We have to make orders for French oak barrels a couple of months earlier than we normally would have because there are supply chain issues, and a lot of freight has been really held up over the last 18 months so I think freight on everything has become a bit of an issue,” Mary Hamilton, the boss of 180 year-old Hugh Hamilton Wines, from her family’s winery in South Australia.

“It means things that had a predictable schedule around them are not as predictable anymore. We were paying something like $1500 for a fine French oak barrel in 2018 and I reckon that is now $2000 for one barrel, it’s very expensive.”

The price of French oak barrels has risen by more than a third since the pandemic emerged to cost more than $2000 each.

Ms Hamilton, whose winery is in McLaren Vale, said the only buffer on the rush to secure oak barrels were recent low vintages, caused by droughts or bushfires, which left some winemakers with excess barrels heading into Covid-19. However, much better growing conditions pointing to bigger vintages combined with supply constraints from Europe meant the rush was now on to secure more barrels.

“2021 for us has been a big vintage, that has taken up whatever surplus barrels we had, and it will be an issue now from a supply issue and from a cost point of view,” Ms Hamilton said.

John Geber, owner of Barossa winemaker Chateau Tanunda, described the situation in Australia, with Covid-19 lockdowns and trade tensions with China, as a “horrific” set of events, and said he too was ordering barrels

“It is this whole bloody supply chain thing which is a nightmare,” Mr Geber said. “The cost of shipping, packaging and freight is horrific, some of it has gone up in price two or three times. We order bottles that are very special, a proprietary bottle, from China and just the shipping costs now is adding about 20 per cent premium from what we normally buy.”

Australian Grape and Wine chief executive Tony Battaglene said securing oak barrels was difficult. “It is difficult to get and even more difficult to get on a boat and the price of freight is really starting to cause problems … and when margins are tight it makes a big difference and there is a big concern – I don’t know what we can do about it,” he said.

Chateau Tanunda owner John Geber. Picture Matt Turner.

“Certainly with the French oak barrels the issue is compounded because we have had additional biosecurity issues put on oak and that means they needed to be ordered early anyway. That has compounded it and the shipping delays too, with a couple of shipping lines saying they won’t come out of Europe to Australia and New Zealand.”

Taylors Wines managing director Mitchell Taylor said he had ordered French oak barrels for his Clare Valley winery six months in advance to secure his shipments in the face of major disruptions to the global supply chain.

“We are certainly having to get our (barrel) orders in very quickly because the shipping is haywire around the globe. Normally we staged our oak in two parts through the year but because this year the shipping schedules are so uncertain we had to bring forward the majority of our oak purchases by about six months to make sure they get here.”

Mr Taylor confirmed French oak barrel prices had been rising steadily, made worse by movements in the Australian dollar.

The barrels are used for some of the nation’s most loved red and white wines.

“They are very important, some of the finest grain, at the very top end of the luxury wine scale and we do use quite a bit of American oak also and that goes particularly well with Australian shiraz, but the fine grain French oak barrels do particularly well with wines of more structure such as cabernet sauvignon.”