The commercial struggle of vineyards
The wine trade has always been a celebrated if precarious business but recent numbers suggest that while the latest year wasn’t exactly a corker, it was still an improvement on darker times in the past.
It has been 40 years since a smiling Len Evans led the revolution which saw wine drinking become fashionable for Australians and exports, principally to the US and UK, surge.
The glory days came to an abrupt halt around a decade ago as corporate takeovers of family run vineyards and thousands of hobby-farm sized entrants combined to create a glut of wine on the local and export markets.
Treasury Estate’s 2013 decision to dump 35 million litres of wine it couldn’t sell in the US epitomised the problem and it was the large producers across the Murray-Darling basin who bore the brunt. Following last year’s vintage, Murray Valley Wine Grape Growers’ Mark McKenzie summed up the state of the industry, telling the media inland producers were facing a full blown crisis due to oversupply and falling prices.
But since the middle of 2014 some signs began turning to the positive. Australian Bureau of Statistics (ABS) data shows domestic sales of wine in 2013-14 at 457 thousand litres, up 1% on the year.
Inland producers faced crisis in 2013 due to oversupply and falling prices.
That may not look like an industry in fight-back mode but this comes at the same time as a surge in sales of cider, up 14% in 2014 to $1 billion. Cider has found popularity in the young female demographic, long a key market for the wine industry, but its surge has come at the expense of beer sales, not wine.
Looking ahead, Australian Grape and Wine Authority Chair Brian Walsh announced a 5 year industry plan saying, “We believe our two strategic priorities should be to increase demand and the premium paid for Australian wine and to increase the sector’s competitiveness.”
Planning for recovery though is one thing, pulling land values up with the industry is proving another.
Colliers International Director Tim Altschwager says there have been more transactions over the last 6 months; usually local players taking advantage of relatively low prices to up their stakes.
“Land values for vineyards have been bouncing along the bottom for some time now and while no-one is factoring in a short term jump, this period may prove a good opportunity for speculative players looking to lock in assets while the market is down,” Altschwager says.
“There have been some good aspects recently, particularly the lower dollar and the signing of a free trade agreement with China. We are also seeing overseas producers using this time to secure output for their distribution abroad.”
For vineyards close to capital cities, another path to profitability has been found, not in the major retailing chains but with the close association between wine and a relaxing weekend spent with friends.
Small to mid-sized wineries are taking advantage of their scenic settings to heavily promote on-site entertainment, including weddings and wine tours, cashing in on the day trip market’s thirst for tastings and cellar door sales.
People associate wine with relaxing on the weekend with friends.
That’s now expanded to experience-based events as diverse as Asian cooking classes, family days, arts and craft festivals; even Murder Mystery dinners. And across estates in the Hunter Valley, Mornington Peninsula and Barossa Valley, a host of ageing music stars are serenading day trippers this summer, including Paul Simon and Sting, Roxette, The Eagles and Billy Idol.
For picturesque wineries close to their market, a day amongst the vines appears to be the key to a bountiful future but for the large inland producers, the impact of the great wine glut looks set to linger for a while yet.
