The future of Australia wine
I would be rich if I had a twenty baht bill for each person who asked me when the price of Australian wine in Thailand will come down now that the TAFTA free trade agreement has come into effect. Unfortunately, the reality for Australian wine, like all imported wine here, is that prices will probably never come down.
I don’t know of any importers who Customs clear Australian wine under TAFTA; It is preferred to clear under WTO as Thailand is a signatory and the system is better understood by the officials in Bangkok. Like Monty Hall of the legendary game show Let’s Make a Deal, wine importers struggle, bargain and banter to get wine through Customs at prices consumers can afford. In so doing, some are even reputed to push the envelope if you get my meaning.
The question ought to be why Australian wineries want export to Thailand at all. What, with this country’s shockingly high taxes, fuzzy regulatory environment and small, over saturated market already crowded with hundreds of brands, why bother when China and Japan a few more days by ship than Bangkok. Thailand seems, in comparison, like an expensive distraction on the course to profits. And while everyone’s attention is focused on the London shopping expeditions of our fugitive former prime minister the government is busy pushing through another excise tax increase on wine.
I suppose the answer to why sell here at all is that during the past five to ten years there has been an copious oversupply of Australian wine searching out the world for markets to help soak up the irrational exuberance of Australian grape growers. Consumers have enjoyed an abundant supply of attractively priced, exciting and boldly flavored Australian wine but like the teak loggers and whalers of bygone eras, the days of good times for wine that once seemed inexhaustible and which was taken for granted is about to come to an end.
Australian grape growers experienced the first year of serious drought in 2003 and drought has continued each successive vintage since then until the present moment. The drought and resulting water shortage will shrink Australia’s 2008 grape crop by 50% to about 800,000 tons compared with 1.9m tons in an average year.
As a winemaker in California, back in the 1980s I participated in several research trials at the University of California looking into the effect of prolonged drought on grapevines. While the ability of vines to continue producing fruit in the absence of water is heavily dependent upon the age of the vine and the physical properties of the soil, in general after three to four years of severe drought grape vines begin to go to meet their maker. Thus, I would expect that the decline in Australian grape yields will accelerate not only from the lack of rainfall but from the resulting damage to the health of the vines.
The early stage of a crisis is in full swing and market effects of the drought are already evident within Australia, with winemakers of necessity trucking fruit and juice from cooler regions like Western Australia to the main wine regions of the south despite the high cost of fuel and transport. The inexpensive but delicious Australian wines we have taken for granted in the past are about to become a lot more expensive as these costs work their way through the marketplace.
Much of the water rights formerly used for producing rice and other cash crops in Australia were converted to grape growing years ago in a speculative frenzy. Now, with the economic slowdown and era of high interest rates, access to loans to continue borrowing money to buy water for grapes is pretty much over. Basically, Australia grape growers have only two options: continue going into debt as long as they can or get out
Aside from high prices and lower output, one can expect to see fewer appellation wines as a result of the need to blend across regions. This implies that the first wines to wither in the market will be the more famous wines with the pedigree appellations. My advice to consumers who are aficionados of Australian wines is to seek out age worthy appellation wines already trading in the market as their sticker price and scarcity will only worsen as allocations of new vintages no longer make their way to secondary markets of Thailand.
It will take a decade before grapes can be planted in new, cooler regions of Australia can come to market; if they are planted there at all. In the mean time, with the baht poised to weaken and excise taxes on wine set to increase at the same time the cost of Australia wine is poised to rise and become more scarce, consumers should expect a sudden shortage of affordable quality Australian wine sometime within the next one to two years.
Historically, big corporations never really have done very well with wine and never seem to learn from their mistakes. Expect to see upheaval in the corporate world of winemaking, with brands like Penfolds that are owned by drinks giants (Fosters) being divested from the parent corporation in order to shore up balance sheets. This will only further worsen the supply shortage, at least in the short term.
When the Shiraz hits the fan the most likely response by consumers will be to begin looking around for alternatives and demand can be expected to shift to wine producing countries like Chile to make up the shortfall of Australia wine. But Chile is just a drop in the wine ocean compared to Australia. If the French are smart they like to claim to be they will make a serious effort to produce wine in a modern style that people want to drink because it is the French who are sitting on a wine surplus and stand to gain the most from Australia’s loss. I don’t have much hope that French winemaking aristocracy will sacrifice its austere stylistic Chauvinism on the altar of popular taste any time soon though, so my message is if you love Australian wine, buy it now.