Fruitful result on cards for vineyards

FOR Chester Osborn, fourth generation winemaker at celebrated McLaren Vale winery d’Arenberg, the thawing of relations between Canberra and Beijing promises a big prize – the possible reopening of his once largest and most profitable export market.

Mr Osborn has a simple description of the trade battles that destroyed the China market for Aussie wine and took it from a $1.3bn a year export winner to almost zero.

“It was a bit of a bummer, really,” Osborn told News Corp as he reflected on trade tensions that saw 200 per centplus tariffs imposed on Australian wine from late 2020.

“China was only 11 per cent of our volume, but 20 per cent of dollar turnover and 30 per cent of our profits,” he said.

But far from being embittered by the tariffs that have shut out his d’Arenberg label from hundreds of thousands of its fans in China, the cheery Mr Osborn would be back in a heartbeat to place his wine on restaurant wine lists.

“It’s really crystal ball stuff. I’ve got friends who say yes it’s going to come back. I say, ‘well, I didn’t know you had an input into Xi Jinping’s thinking’ because I don’t know what he’s going to do.

“But we would go back, it would be unlikely he (Xi) would put another tax on wine again unless we stuffed up but if tariffs came down we would be there for sure and we still have our agents there.”

From his McLaren Vale vineyard, well known for its five-level d’Arenberg Cube hospitality tower, Osborn is chasing exciting new markets in Asia to take up some of the wine that would have been destined for China.

“Japan, Korea, Taiwan, Singapore and particularly Korea has been very good for us, and we actually sell to 90 countries,” he said.

The US also remains a huge prize for d’Arenberg, which through Covid-19 lockdowns was a strong export market for the winemaker, but with pandemic restrictions easing and hospitality venues opening up again, has seen a step back in sales.

“America after Covid went backwards. So during Covid we sold more wine in the first year or two of Covid which was actually a very good time for us. But of course, that’s all changed now more or less and so sales have dropped back a little bit.

“And that’s because Australian wine is actually pretty big in the bottle shops and not as big in restaurants; there it is more French and Italian wines that are bigger in restaurants in the US and around the world so when Covid was around it helped Australia quite a bit.”

Latest accounts for the family-owned d’Arenberg lodged with the corporate regulator show for fiscal 2022 sales were flat at $23.4m with earnings shaved by higher depreciation and rising input costs to make a small profit of $70,000. That’s down sharply from around $10.5m last year.

This month d’Arenberg lost its former patriarch and wine industry statesman, Francis d’Arenberg Osborn – affectionately known as d’Arry – the third-generation winemaker who passed away at the age of 95 and who within his lifetime oversaw more than 70 consecutive vintages.

Mr Osborn said d’Arenberg experienced low yielding vintages in 2019 and 2020, and it bought around half its grapes to help meet demand, which came at an inflated cost to the business.

The higher cost of grapes also helped ratchet up costs in 2022 and along with lower yields also slimmed down earnings for the winemaker.

He said d’Arenberg had put up prices for its wines before Covid-19 struck in 2020, but as the pandemic soon struck “no one gave a damn”.

Mr Osborn said the federal government can do more to spruik Australia’s wine.

“There’s absolutely no doubt the government could have done more in promoting wine overseas for Australia. If we don’t get China back, there’s going to be an enormous amount of vineyards that have to be pulled out.

“And actually the cost of planting those vineyards, if it’s 10 per cent of all of the vineyards in Australia, it’s basically about a billion dollars of assets will be pulled out. And then if we increase the demand overseas again, then it’s a cost of a billion dollars to replant them.

“With a $50m investment the government could promote Australian wine in America, particularly because that’s the biggest market in the world, and we know Australia had a foothold there.”

Mr Osborn believes the existing Export Market Development grant could help winemakers.

“But with the grant if you have used it before you can’t use it again and nearly everyone has used it.”