Contrast and compare

“Wine is a fast moving consumer good, just like washing powder”

ou have stated that the origins of oversupply in Australia date back to the 1990s and that industry leaders have failed to address the issue until now. Should all of the blame for the crisis be levelled at industry leadership?

No, all of the blame for the crisis cannot be levelled at industry leadership – there are numerous contributing factors. However, leadership went missing when tax breaks fuelled a vineyard planting frenzy which rapidly outpaced the industry’s own strategic plans for vineyard growth to meet the spike in export demand in the mid-1990s. No one from the leadership can explain why the representative bodies failed to send strong signals that the new plantings were way in excess of demand and take action to put the brakes on it. Cynics say that an oversupply of grapes is to the advantage of wine producers as it sent grape prices plummeting and the powerful influence of the big wine producers at the leadership level is behind the lack of action on the over-planting.

You also said that the wine industry has been “glacial in its response to its problems”, unlike other industries. Is this purely an Australian response or is it inherent to the wine industry?

As, I have said, I suspect that an oversupply of grapes benefitted the wine production sector of the industry by keeping a lid on grape prices – in fact reducing grape prices significantly. I am sure this was a factor in the industry’s slow response. I really can’t say if this applies to other countries. The wine industry (in Australia at least) regards itself as one industry but in reality it is two industries masquerading as one. I cannot for instance imagine the baking and flour sectors combining with the wheat growers to act as one entity. One supplies to the other’s demand and it is natural that the manufacturer wants to pay the lowest price he can to the grower.

Are there industries that you think could and should serve as an example of how to overcome the wine industry crisis?

Yes, in Australia the dairy, forestry, fishing and citrus industries are good examples where a collegiate effort has turned their fortunes around. This has been achieved sometimes with government assistance but also with significant cost and sacrifice by the industry itself.

You posit that the industry has long disparaged commercial wines in favour of premium wines. Premiumisation is a recognised global trend so why do you feel they should be viewed on an equal footing with premium wines?

Because the world drinks commercial wine. The reality is that most people drink commercial wine. Go to the supermarket and look in the wine section and measure the space allocated to premium wine compare to that occupied by commercial wine. Fishermen fish where the fish are, winemakers need to make wine people want to drink and can afford. Sure it is a competitive sector but it is also the biggest sector by a country mile. For most people wine is a beverage to drink with a meal or to drink socially. It is no more than that – a fast moving consumer good, just like washing powder. There is no place to feel inferior to a premium wine producer – after all it takes great skill to make a commercial wine brand in volumes of millions of litres of such quality that your consumer buys it every week and is loyal to the brand. A consumer who can afford to buy a $AU70 bottle of Chardonnay today is more likely to try another brand next week. The commercial sector is the engine room of most wine industries and should be respected and given equal footing.

Two completely different models of wine industry management – one operating as a free market, the other as a controlled system – have produced the same results of oversupply and crisis. Is this a demand issue, or are there other reasons why both models should prove ineffectual in achieving balance?

I believe that wine grape oversupply – and of course the wine over supply – is a difficult factor to manage. It’s a failure of industry leadership. For instance in Australia there is no national vineyard register. There is no reliable data on how many hectares of which variety and where it is planted. A resource of a national vineyard register would be an invaluable tool in managing supply and demand. You cannot manage that which you cannot measure.

The wine industry is subjected, like other industries, to cycles. What will the way out of the current crisis look like in Australia?

The Australian grape supply is about 30 percent above current market requirements. Clearly, there has to be a reduction in the amount of vineyard planted. Some of this exit is underway in the main commercial wine grape production regions. However, there is significant over-planting in some of the so called premium regions and unless action to exit occurs there, it will be a long, slow process to get back to an acceptable supply:demand ratio… Government assistance will be required for growers who voluntarily exit the industry.

Lastly, you recently wrote, “Never waste a good crisis”. What are the lessons that should be learnt?

I do not for a moment think it is exclusive to the wine industry only but two words sum up the lessons that should be learned from this period – Complacency and Apathy. Too many people are complacent and not vigilant to changing industry and market conditions. They believe that “someone” will be looking after them – when in fact that “someone” may not be looking after them at all. Apathy prevails in most industries and as a result quite often some of the best and brightest do not get involved in industry affairs, preferring to be concerned only with their own enterprises. Unfortunately, this can result in inadequate leadership, strategies and policies.