Winemakers call for vines to be ripped out as sector in crisis from grape oversupply, inflation and cost of living

The $45bn Australian wine industry is in a state of crisis, with a handful of iconic family wineries making the astonishing call for vines to be ripped out of the ground.

Alister Purbrick with a glass of his product at his family’s Tahbilk winery. Picture: Jay Town

Australia’s oldest family owned wineries, including d’Arenberg, Yalumba, Tahbilk and Henschke, have slammed the federal government’s budget for its failure to address the current crisis in the wine industry caused by rising costs, high interest rates and depressed consumer demand due to cost of living pressures.

Chief among their concerns is the huge oversupply of red wine now weighing down the $45bn sector and unable to find a home, despite Chinese tariffs now removed – and the winemakers have made an astonishing call on how to address this critical problem, calling on vines to be ripped from the ground and the sector shrunk by up to one third.

Facing a global oversupply of wine just a time when consumers are reining in their spending, Australia’s First Families of Wine have taken the unprecedented step of calling on the government to fund the ripping out of vines in inland and other regional red grape producing areas to deliver a “permanent restructuring of supply and capacity”.

Robert Hill-Smith of Yalumba, this year celebrating their 175th year in Barossa’s Eden Valley, believes some tough calls need to be made.

“This current state of play is not a market cycle waiting for self-correction, it requires permanent restructuring of supply and capacity”.

To ensure long term sustainability, the sad reality is that inland and other regional red grape producing vineyards need to be removed and the industry needs to be drastically downsized by twenty-five to thirty per cent, Australia’s First Families of Wine said in a statement on Thursday.

Robert Hill-Smith of Yalumba is calling on the government to fund the ripping out of vines to help ease the wine oversupply crisis. Picture: Matt Turner

Australia’s First Families of Wine chairman and chief executive of d’Arenberg in South Australia’s McLaren Vale, Chester Osborn, said the crisis was as dire as 40 years ago when the tough decision was made to rip vines out of the ground.

“Many winery owners are communicating that this period is the most challenging period they have ever faced. Even more challenging than the mid-1980s when the now infamous vine pull scheme was introduced,” Mr Osborn said.

He said the most concerning symptom was an enormous surplus of unsold bulk red wine, with Wine Australia recently reporting that red wine stock levels are currently at 2.77 times current annual sales forecast.

Already some winemakers are acting to remove excess surplus from the market. Last month Accolade Wines, the nation’s second largest winemaker, made an offer to buy out red winegrape growers in the troubled Riverland region, in a move to push down contracted volumes and beat a new and viable path for both the company and its growers.

The company, which owns brands including Hardys, Banrock Station, St Hallett, Grant Burge and Petaluma, wants to restructure its largest grape supply contract, between it and the CCW Cooperative which represents almost 600 growers in the Riverland.

The family-owned wineries group welcomed the recent announcement by the Chinese government that crippling tariffs would be removed, but was quick to point out that while the impact of Chinese tariffs on Australian wine had been widely reported, the problem is much larger.

“The current surplus is approximately ten times the amount of wine sold to China at its precovid peak. Furthermore, the market has changed. Wine consumption in China is estimated at about half its pre-covid levels, and the absence of Australian imports has seen the void filled by other international winemakers such as South America and South Africa.

“Under current conditions, it will take many years to clear the industry’s red wine surplus. China will not solve the problem,” Mr Osborn said.

“In time, structural change and the necessary support to promote our wines globally can alleviate the significant issues we face and return to a sustainable future for an important Australian industry.”

Australia’s First Families of Wine, whose members also include Brown Brothers, Howard Park, Jim Barry Wines and Tyrrell’s Wines, has called on the federal government to provide assistance, in the form of supporting an environmentally friendly exit from the industry for grape growers that need it.

This assistance could take the form of covering the cost of removal and destruction of treated pine posts, dripper tube and wire.

Alistair Purbrick, whose family owns central Victorian winery Tahbilk, said immediate support was required.

“Whilst we positively acknowledge the creation of the One Grape & Wine Sector Plan, we urge (industry group) Australian Grape & Wine to now quickly create the short- and medium-term strategic activity plans which are required to ensure positive financial impacts to our industry.”

The family-owned wineries have also called on the government to provide funding for marketing campaigns to help sell Australian wine overseas, especially in the US which is a huge market, valued at around $63.7bn, but that has been conspicuously missing from marketing and advertising campaigns.

Chester Osborn, with the clock out the front of the d’Arenberg Cube, McLaren Vale, says the US needs to be better marketed to by the Australian wine sector. Picture: Matt Turner

“Recent visits by members confirm that our absence from the US market is conspicuous and harming sales. The harsh truth is most of the industry are not making enough money to travel and promote their wines” said Osborn.

Government supported marketing initiatives during the 1990 saw Australian wine producers travel the length and breadth of the US extolling the virtues of Australian wine on mass, he said.

“What followed was a period of sustained success in the market. Indeed, the early 2000s was an exciting time for Australian wines, exporting around $960m of Australian wine a year in 2007.”

The wine grouping has asked for a $150m investment by government to subsidise marketing and travel to enable Australian wineries to effectively promote their products in key international markets such as the US. It is also calling for the reinstatement of the Export Market Development Grant and removing the eight-year claim limit for wineries for expenses related to trade shows and marketing.

Originally published as Winemakers call for vines to be ripped out as sector in crisis from grape oversupply, inflation and cost of living