Asian markets crucial for viability of Australian producers
IFIRST broached the proposals for far-reaching changes to European Union viticultural policy towards the end of last year. One of the core propositions put on the table by then newly appointed EU agriculture commissioner Mariann Fischer Boel was that 400,000ha of vines should be removed, with areas such as the Entre-deux-Mers region of Bordeaux and various parts of southern France obvious targets.
Predictably, the scheme met furious opposition from grape growers, who argued there was no oversupply of grapes, simply a lack of demand.
Equally predictably, French growers were the most militant, although Spain is the largest producer of wine fit only for distillation.
Finding a solution is complicated by the huge fragmentation of the industry and hence the lack of credible spokespeople. Moreover, any meaningful changes will cause substantial short-term pain. Such is the rock; the hard place is that the longer the dam blocks the ever-growing lake, the more catastrophic will be the consequences when (as is inevitable) the dam wall ultimately breaks.
The solution, if it can be called that, is to separate the grape-growing side of the industry from the winemaking side and to subsidise the growers on a per-hectare basis, as is done for many agribusinesses across the EU. The wineries would be left to fend for themselves, except for one large twist to the tale.
Instead of providing funds for the removal of 400,000ha, only half would go and the half of the funds liberated would be spent on a marketing blitz in the US, Canada and Asia, but not in the EU. The irony is that the French and Spanish governments are successfully striving to reduce the consumption of wine in their countries, while spending billions of euros supporting those who make it.
All this sends a big warning signal to Australia. Most obviously, France is going to attack our most important markets with gusto and, in the medium term, with better wines. But there is also an intersection with Australia’s recently released New Directions strategy, which calls for far greater emphasis to be placed on our higher-priced regional wines (higher than Yellowtail, Wolf Blass Red Label and so on).
The world’s leading specialist in food and agribusiness banking is Dutch-based Rabobank, and one of its key advisers is Arend Heijbroek, who recently made (another) two-week visit to Australia for discussions and consultations.
Says Heijbroek: ‘‘( New Directions) is a very well researched, thought-out and presented strategy, undoubtedly correct for Australia. The challenge will come in translating words into deeds. The problem is that every other major exporting country has the same aim: to trade up and secure better margins.’’
He points to consumer research showing that the only Australian region to have recognition in the US is the Barossa Valley. Not that we are alone in this. In that soul and money-destroying market, Britain, research quoted in OffLicenceNews on August 24 shows that only 66 per cent of regular wine drinkers knew Cotes du Rhone wines were from France and only 29 per cent linked Chateauneuf-du-Pape with the Rhone Valley.
South Africa, says Heijbroek, has the same problems as Australia: a strong currency militating against exports, and insufficient domestic market to take up the slack. Chile, on the other hand, is a consistent supplier of mid-range wines and has unlimited highquality water. Conch y Toro, the country’s largest winemaker, is building large-volume, strongly branded products. Argentina, having recovered from its currency collapse, is rapidly increasing its exports at half the price of Australia’s. In this crowded pool, is Asia the answer? ‘‘ Up to a year ago, the Chinese market was very opportunistic but there are now serious traders in the market for the long term,’’ says Heijbroek. ‘‘ But Japan, China and India are all very brand conscious, with an in-built bias in favour of France. The key in all three countries is the emergence of professional women and wealthy wives: they prefer the elegant alternative of wine as opposed to the masculine consumption of beer and spirits.’’
China and Japan are two of Australia’s most important trade partners. We have to leverage that advantage to include wine in the mix.