Grape glut threatens vineyards

 Vineywards in Coonawarra could be replaced with grazing land as the national grape glut continues to bite.

Constellation Wines has announced it will close Padthaway's $20m Stonehaven winery, cellar door and function centre next month after a buyer could not be found for the site amid the gloomy outlook for the sector.

Wine Grape Growers Australia executive director Mark McKenzie told The Border Watch the news was another example expansion of vineyards over recent years outstripped demand for wine.

Meanwhile, major Coonawarra winery The Poplars remains on the market, but news could soon be revealed some Fosters vineyards in the region have sold.

But that transaction could have come at a cost for the giant.

Landmark Naracoorte's Cameron Grundy said he could not comment publicly, but Fosters' decision to put 1500ha of Limestone Coast vineyards on the market had led to sale activity.

He said announcements could be expected after an annual general meeting before the end of the month.

Mr Grundy said prices for vineyard land were down on the boom times of five years ago, but the South East would not be hit as hard as other areas, such as the Riverland.

Colliers International Adelaide agent Tim Altschwager said he did not expect delays to the sale of Stonehaven to affect the sale of The Poplars, which was a top asset in one of the world's best wine regions.

"The market is down overall anyway and the industry is finding it tough, there is no doubt about that," he said.

"But there is quite a bit of interest and we will sell it."

While wineries may still be valuable, vineyards are clearly on the slide, with Australia's largest agricultural investor, Great Southern, running out of money at the end of last month for maintenance of 750ha of South Australian vineyards after being in receivership since May.

The Dohnt vineyard Great Southern managed in Coonawarra is believed to be in poor condition without water or ongoing maintenance.

Meanwhile, the closure of the 12,000 tonne capacity Stonehaven winery on November 27 is expected to affect contractors, suppliers and other businesses.

Spokesperson Sheralee Davies said the 12 remaining staff would be offered full redundancy packages after employment levels had been as high as 30 during peak vintage activity at the winery, which opened 11 years ago.

The winery was listed for sale as part of a restructure in August, 2008, along with 550ha of vineyards, including three in Padthaway, two in Wrattonbully and two in Coonawarra, one of which has sold.

Mr McKenzie said boom times in wine over the past 15 years prompted unsustainable growth and up to 40,000ha of vines had to be cut nationally to relieve the problem.

"Coonawarra is not immune - there has been very significant expansion there in the last decade," he said.

Mr McKenzie said the strength of Coonawarra would keep its core industry alive, but the entire region would be affected by over-supply issues.

He said a government-supported industry program may be needed to encourage growers, especially those without contracts, to leave the industry, which would mean millions of dollars in investment had been wasted.

"It is not in the industry's interest to think it can turn around otherwise," he said, adding some South East producers had already abandoned vineyards.

"If we allow market forces to crush the industry it is likely to be longer and bloodier than if there is a coordinated plan in partnership with government."

Coonawarra Grapegrowers Association president Stuart Sharman said the region could sustain its success by holding its focus on premium wines and was enjoying a "cracker" season with great soil moisture and rainfall.

But he said the oversupply issue would hurt, particularly for growers without contracts.

"There will be some in that category who will need to make hard decisions on whether they remain in the industry or quit," he said, explaining some grape prices, like the past two years, would be below production costs.

"I have certainly seen smaller uncontracted growers choosing not to prune vineyards and mothball them, but we're also seeing others removing non-desired varieties and replacing them - so there is still reinvestment adding strength to the district."

The gloomy outlook has not stopped Penola's Steven Raidis launching his own cellar door and label, which will be officially opened next month as he continues to also be active in the family's labour hire business.

"I think there is still room in the market for small boutique labels like ourselves and that we can deliver a higher quality product at the same or lower price as the big boys," he said.

"There is doom and gloom right now, but we're not a company that wants to be here two years - we hope to be here the rest of our lives - everything has a cycle, even though now is not the easiest time to enter the market."