Australia: Bulk wine inventories “generally in balance to tight supply”

Mercredi 08 février 2017 par Sharon Nagel

Australia: Bulk wine inventories “generally in balance to tight supply”
As the southern hemisphere harvest gets underway, Vitisphere asked Jim Moularadellis, director of Australian bulk wine specialist Austwine which deals with approximately 500,000 hectolitres of bulk wine transactions annually, to provide a run-down of current trends in the bulk wine market and prospects for this year’s harvest in Australia.

How is this year’s crop shaping up in Australia, in terms of size and quality? 

It is average size and very good quality due to a very mild summer so far.  But most winemakers have not started crushing yet.


What was the impact of the November storms on both quantity and quality?

It is very hard to tell but some commentators are saying a 5% reduction in quantity. I am not sure yet about the quality, although the extended ripening period augers well for a high quality 2017 vintage.


How are bulk wine inventories currently running?

They are generally in balance to tight supply. There is certainly less abundant supply than last year, which had less abundant supply than the year before.


You predicted supply challenges last year. Have they materialised and if so, which categories of wines are affected? 

To a reasonable extent, yes they have. Commercial/entry-level Shiraz, Cabernet Sauvignon, Merlot, Sauvignon Blanc and Pinot Gris are short to very short. Dryland Chardonnay is long and dryland reds are in balance.


What do you expect to be the major trends in terms of pricing this year?

I expect to see upward pricing pressure on commercial/entry-level Shiraz, Cabernet Sauvignon, Merlot, Sauvignon Blanc and Pinot Gris, stable pricing for dryland reds and downward pricing pressure on dryland Chardonnay.


Vineyard area in Australia has fallen to 2001 levels.  Is the decline still ongoing?

Anecdotally, vineyard removals have now slowed down significantly, but only very recently.


As the industry gets back on track, do you expect to see a trend reversal in removals/plantings?  

Yes I do, if prices keep improving.


Also, do you expect to see a decrease in bulk wine exports as a result of an improved supply situation?  

Yes, in the medium term, if prices keep improving.


What happens to brands like Yellow Tail, whose success is largely based on capitalising on oversupply, in the event of tight supplies? 

I don’t really agree with the claim that this particular brand’s success is a result of capitalising on oversupply.  It was the result of many things but I don’t think oversupply was one of those factors:  Yellowtail always paid a fair price for grapes and wine.



What positions have been taken so far by buyers on the forthcoming harvest?

They have been various. Some buyers are looking forward to lock in medium and longer term supply. Others seem content to buy only what they need in the very short term. Each buyer has different needs, opportunities and pressure points that they are managing.


Many suppliers at the WBWE in November claimed buyers are increasingly using just-in-time strategies for sourcing. Is this something you are also seeing in Australia? 

No, not really.  If anything we are seeing the opposite for Australian wine at this time, since at least some buyers are moving toward securing longer supply terms in light of the reduced abundance of wine from Australia at present.



China has become the leading destination for Australian exports by value. If it weren’t for China would there have been a turnaround in Australia’s fortunes, i.e. would vineyard removals have been sufficient? 

Certainly China has been important to the recent turnaround in Australia’s wine fortunes and without China our recent export growth would have been diminished and hence the point of balance in supply and demand would have been otherwise delayed. There is no doubt about that. The removal of vineyards is, in most cases, an economic tragedy, and I think we have been very flippant in suggesting that too much of this variety or too much of that appellation has been planted. In Australia, the market is usually left to sort this out and as messy and as painful as it is, it usually delivers a better result than government intervention. One of the reasons why so many vineyards were planted here was a result of very generous tax depreciation allowances for new vineyards in the 1990’s and early 2000’s. A decade earlier, in the late 1980’s, the government was paying growers to remove vineyards! Government intervention such as this has been going on since Roman times, so I don’t think it is going to end anytime soon! But despite the regulatory settings, there are a lot of Australian winemakers that have been working diligently and quietly without fanfare to innovate and continually improve their market offerings during the last 10-15 years, during which time the economics for Australian wine have been extremely difficult. These activities are very hard to measure, and the turnaround in fortunes is very recent, but I think this is as a result of a lot of work by a lot of people over the past 10-15 years. 


Growth in China has been driven by premium wines. What direction do you see exports to China taking next?  

That is a difficult question!  In the short term I would expect a continuation of this trend, but beyond that it is very difficult to predict.


There have been media reports of Chinese investments in Australian vineyards – are these just a flash-in-the-pan or indicative of a significant and developing trend? 

I think it is a developing trend, since there seems to be interest from China in a variety of Australian assets across a variety of agricultural sectors.


How would you describe the global bulk wine market currently, both for Australian wines and in general?  

I would say it is highly competitive and highly price sensitive with competition from wines that are becoming more and more highly substitutable.


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