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Figures & Feelings - The Bulk Of The Story

Friday, December 01, 2017
The October 10, Issue 80 of the Weekly Marketing Bulletin from Wine Australia, “A detailed look at Australia’s wine supply and demand” started by saying: Australian wine production has outstripped sales over the last two years, which has seen Australian wine stocks build.” The inference of this article being that we are still producing more wine than we need to. You can read the full article at: www.wineaustralia.com/news/market-bulletin/issue-80?utm_source=Wine+Australia+weekly+market+bulletins&utm_campaign=d04755ceed-Weekly_market_bulletin_10_october_2017&utm_medium=email&utm_term=0_a9be1dd865-d04755ceed-211303329

These are the clinical figures. However, if one looks a little deeper the situation is quite a bit rosier, for Australian producers.

For a start, 2017 was a larger than average vintage in Australia, so the on-going surplus is lower than it would seem at first. Very rarely do we have sequential bumper crops.

Secondly, using Wine Australia’s figures, exports to Asia, and China in particular, have been constantly rising over the last few years – at a time when a number of Aussie growers have been ripping vines out of the ground. The FTAs (Free Trade Agreements) with Korea, Japan and China are well and truly kicking in, so as to make our wines more competitive (especially against Chile, who have the jump on us) and more affordable to the drinkers in these countries.

Thirdly, and most importantly, vintage 2017 was a ‘significant challenge’ to a great many of the worlds wine producing countries. Starting in February with the wild fires in Chile, which slightly curtailed their production, then followed a series of ‘perfect storms’ across Europe – hail storms, flash floods, and believe it or not, raging fires. The end result is that France had its smallest vintage since 1945, Italy is down and so is Spain. We also saw the wild fires in California and add to this the fact that Argentina (one of the top 10 wine producers) has had two bad vintages in a row, 2016 and 2017. So that all in all, across the globe it was: “vitis – annus horribilis” in terms of production volume. All doom & gloom!

On the other side of the coin, an article headed “Price Rises on the Horizon” in Issue 184 (Nov 2017) of The Drinks Business, by Rupert Millar, puts down a very good case to say that this shortfall will drive up the currently low prices of bulk wine (at least in the short term) and nudge wine drinkers towards higher priced wines. This concept was re-enforced to me recently when I was in Amsterdam at the “World Bulk Wine Exhibition” on behalf of WBM magazine. There the mood of sellers was (according to some regular attendees that I spoke to) the most positive and up beat they had seen in the nine years that this impressive bulk wine exhibition/meet has been going. During discussions, several exhibitors (including a couple of Aussies) said that there was higher than usual interest in their wines this year. Mind you the standard of the wines being exhibited was amazing. So much so, that many of the wines I tried would fit comfortably (when labelled) in the AUD15+ a bottle category, with a few sensational examples fitting in to the over AUD25-30 category.

So what does this all mean? Well, potentially good news if you are an Aussie winery. Now is the time to push/drive/start your exports to Asia, as over the next 12-18 months many of our main rivals will not be able to deliver the volumes that the Asian market needs/demands. My advice would be: EXPORT, EXPORT, EXPORT!

However, if you are an Aussie wine drinker, it will probably mean that the price of your favourite tipple could well rise when the vintage 2017 is released, especially in the reds. So I have the feeling that you should stock up NOW!! Cheers!

NOTE: As I have been overseas until very recently (attending wine shows in Hong Kong and Amsterdam), unfortunately there is no “This Weeks Wine Review” included in this Blog. Normal reviews will commence next week as I have received quite a line-up of interesting wines!