Our wines need to step up in class

NOT many Australians would see too much wine as a problem. But the wine glut is causing our wineries to reassess the future.

The Winemakers' Federation of Australia estimates that this year we produced 40 million surplus cases of wine. Many vineyards have had to weigh up whether it's even worth picking the grapes this year. The prices for wine grapes have fallen so dramatically that a successful crop does not necessarily deliver a profit.

In the 1980s the government response to an oversupply of wine was to pay growers to pull out vines. In the years that followed, as soon as the industry became more profitable, vines went back in. It's not an approach I intend to repeat.

Farmers will pull out vines based on their own bank balance rather than whether the vine is superfluous. People in the industry will readily concede the wrong vines were pulled out. It also changes future risk management. If the taxpayer underwrites the grower every time the market behaves unexpectedly, then growing wine grapes shifts from being a farm business to zero-risk gambling.

Special tax treatment through deductions for city-based hobby farmers, coupled with certain managed investment schemes, which were more focused on taxation than harvest, have helped see a return to oversupply.

Growers know their own land. I won't tell them what to plant and I certainly won't tell them what to pull out.

The wine oversupply has been exacerbated by the competition we face. When we moved aggressively into the British and American markets, there were sanctions against South Africa because of apartheid. Britain had sanctions against Argentina because of the Falklands War. The US was rejecting Chilean wine because of the dictatorship of Augusto Pinochet.

Then Australian wine sales expanded throughout the world. This was on the back of the Paul Hogan "shrimp on the barbie" ads, which helped promote us as suppliers of produce that was cheeky, fun and affordable.

According to the Australian Wine and Brandy Corporation, in the mid-1980s we were a net importer of wine but today our wine export industry is the fourth-largest in the world. AWBC figures show we now send 2.5 million bottles overseas every day, worth about $2.8 billion annually.

However, we are now losing market share principally because of increased competition from New Zealand, Chile, Argentina and South Africa.

The world's understanding of Australian wine must shift from high-volume to high-quality. We need to rebrand our wines from a fun to a fine product. Ironically, the job has been made harder by our previous success. Shoppers expect Australian wines will never be expensive.

If we can change consumer perception, the high-quality product is available. Australia's mid-range-to-premium wines stand tall against the best labels in the world. Names such as Grange, Hill of Grace, or Wolf Blass Platinum Label are only the opening pages to the many chapters of Australian premium wine.

Today at the Sydney Opera House, 12 of the most celebrated family names in Australian wine will launch a global marketing initiative: Australia's First Families of Wine.

Inaugural chairman Alister Purbrick of the Tahbilk winery, puts it best when he says: "While as family winemakers we all value our independence, we do share a common vision: that Australian wine can take on the world's best and win."

The opportunity to aggressively expand our sales of premium wine is on our doorstep. Throughout Asia many thousands of people are shifting to western styles of wine. Wine is an acquired taste. We must be on the ground, marketing our produce.

Earlier this year in Shanghai, Australian wine writer Jeremy Oliver launched his Enjoying Australian Wine book. I broke the rule of never launching a book you haven't read and recommended the text, which is published in Mandarin.

The Australian government has also reached formal agreements with the government of China and the administration of Hong Kong to facilitate better access for Australian wine into China. Hong Kong intends to be the wine hub for Asia and Australia must occupy as large a part of that market as possible.

The way we market wine will be enhanced by the way we market Australia in the lead-up to the massive World Expo next year in Shanghai.

Good wine creates an occasion. We need to shift from high volume to high value. That way the best occasions around the world can have Australia at the table.