Over-production a death knell for quality wine

 The Australian wine industry's over-production should sound a warning for the New Zealand industry, says New Zealand Winegrowers CEO PHILIP GREGAN.

The news out of Australia recently was absolutely compelling reading for every New Zealand grape grower and winemaker. If you have not read it then you must!

Among the comments from an article by Chris Snow in the Herald Sun reporting on the Wine Industry Outlook Conference in Sydney were the following:

"Australia's wine industry appears set for a major shakeup amid growing pressure from leading winemakers to slash production and cut the total number of wineries.

"The push for industry reform involves calls for a 60 percent cut to producer numbers and to trim actual wine production by 20 percent within a decade.

"Winemakers are concerned the average Australian harvest is now about 1.9 million tonnes while demand is running at less than 1.5 million tonnes.

"John Grant, president of Constellation Wines Australia, said this meant that this year's surplus of 476 million litres of wine at June 30 the equivalent of about 680,000 tonnes of grapes would get `longer and longer'.

"And finally and perhaps unbelievably: `An immediate production cut was not likely despite the need for down-sizing,' Lawrie Stanford, manager, information and analysis with the Australian Wine and Brandy Corporation said. He said the 2009 crop would be similar to the 2008 harvest of 1.93 million tonnes."

So the Australian wine industry knows that it is producing too much wine (it has a structural surplus) but still intends in 2009 to produce more than it needs!

And they know this action will lead them into ever deeper trouble! Where is the logic or common sense in that?

Are there lessons to be learned from our Australian counterparts? I think there are. What might those lessons be?

First, be market led do not get ahead of the market.

It is clear that in Australia vineyard planting has got ahead of market demand. That a structural surplus is to be avoided at all costs is clear to any casual observer of the Australian industry in recent times. There is a lesson there.

Second, don't harvest more grapes as an industry than you need. Harvesting grapes in excess of demand for wine is a road to trouble. It will depress wine prices and winery profitability and hence the ability to invest in marketing. That has serious long-term negative consequences for all industry participants, growers included.

Third, wineries and growers must talk to each other. As we have said ad nauseum in recent months, communication between wineries and growers is one of the key components of ensuring we do not end up in the position described in the Australian media. The most unequivocal way to communicate is, of course, through a contract.

One matter growers and wineries should be discussing is the growing financial/economic crisis.

Nobody knows quite how that is going to impact the industry, but you can bet there will be some effect on New Zealand wine.

Increased uncertainty, growing unemployment, and recessions in all our major markets that surely will have an impact of some kind.

Fourth, let's concentrate on quality, not quantity. That is the foundation on which the industry is based and it is the only path to a prosperous and profitable future for growers and wineries.

With that in mind, the recent Marlborough Winegrowers workshop on yields and quality was very well timed. The message from the workshop presenters Dr Mike Trought et al was clear: lower yields equal earlier ripening and better quality. Or perhaps that should be put another way excessive yields may mean the grapes never ripen in the first place.

Finally, let's not believe too much of our own press.

Yes, the industry has been very successful but this has been achieved through a lot of hard work, a big investment of capital, a good shot of innovation and more than a drop or two of luck let's not get complacent.

So there are some valuable lessons to be learned from our Australian colleagues. But let's not just learn them. Rather, we must put actions into place to ensure that we do not end up in the same place that the Australian industry has actually act on the information, don't just nod sagely.

The unbelievable aspect about the Herald Sun article is not that there is a surplus of grapes and wine in Australia, but that many in the industry still seem determined to harvest more grapes than are actually required. If we just talk and do not act, then it is abundantly clear the challenges become ever bigger, and the solutions ever tougher.

So let's learn and act on the valuable lessons Australia is in the unfortunate position of providing us all at the moment. If we can do that, 2009 can be a prosperous year for us all.