Australian wine industry headed for a major correction

The crisis engulfing Australia’s wine industry shows little signs of abating as many growers endure a third vintage of prices below their cost of production.

Australia’s wine industry is heading for a major correction as growers face a third year of grape prices well below the cost of production, overflowing tanks of red wine and little relief from global freight costs.

The persistent nature of the slump in wine grape prices that began when China introduced punitive tariffs on Australian wine in 2020 has forced hundreds of growers to abandon the industry.

Riverina Wine Grape Marketing Board chief executive Jeremy Cass said the cracks really began to show this year.

“It’s been three really tough years, we’ve lost 3000ha of grapes from the region and 50 growers and that number continues to climb,” Mr Cass said.

“Growers come in and they’re in utter despair, they don’t know which way to turn, they’re selling permanent water just to pay the bills. It’s a recipe for disaster. The way it’s going we could be in for a major correction.”

The industry’s research and development body Wine Australia said deliberate decisions by winegrape growers and wine businesses, driven by low prices, stock overhangs and reduced global demand for wine, has led to the 2024 vintage coming in well below average, with a crush of 1.43m tonnes, 300,0000 tonnes below the 10-year average of 1.73m.

It said more than two years’ of red wine remains in tanks, which is weighing heavily on winegrape prices.

And while many hoped China’s reopening in March after lifting its tariffs would be the panacea the industry was after, global wine imports to mainland China have fallen by two-thirds since 2017, “so it is unlikely that Australian wine exports will return to their previous levels in the near future”, Wine Australia said in its latest market bulletin.

Managing director of De Bortoli Wines, Darren De Bortoli, says the Riverina has been particularly affected by the slump in red wine grape prices.

De Bortoli Wines managing director Darren De Bortoli said it was promising total Australian wine sales exceeded production, but conditions were very tough and the stock overhang would be difficult to sell with consumer preferences moving away from red wine and persistent supply chain disruptions affecting freight.

“Like most people we’ve had to pull out vines, we’ve grafted vines, we’ve removed crop. Which is all very expensive. We’ve done a lot of the heavy lifting in terms of restructuring,” Mr De Bortoli said.

The Riverland, Riverina and Murray Darling regions have been identified as the hardest hit by the oversupply of red wine, with growers in the inland regions offered prices for their grapes as low as $120 a tonne for the third year in a row, which is well below the cost of production of $350 a tonne.

online artwork dec 18 vineyard sales

Prominent wine and trade economist Kym Anderson, who has written extensively on the crisis engulfing Australia’s wine industry, said the devaluation of the Australian dollar and domestic and export demand for Australian wine from the late 1980s, and tax concessions initiated in the 1990s, contributed to the nearly three-fold expansion in the nation’s winegrape bearing area between 1995 and the peak in 2008.

This flurry of plantings has contributed to today’s glut and he sees domestic promotion and a significant ramping up of spending on advertising overseas as one of the only ways out.

“Wouldn’t it be nice if Taylor Swift held up a glass of Australian wine,” Dr Anderson said.

“Casella has done well with their private advertising (at the US Super Bowl), they’re the only wine company to have done that and it’s been hugely successful.”