Facing a wine glut that may become a 40 million-case surplus, Australian vintners are starting to say out loud what they have only been whispering. It’s time to pull out those extra vines, some leading vintners are suggesting, and the industry needs to make some hard choices to get it done.
The biggest winemaker in the country, Casella Wines, which produces the largest-selling Australian brand, Yellow Tail, was quoted in all the major newspapers in Oz over the weekend: “There are just going to have to be growers that will have to remove vineyards," managing director John Casella said. "Whether that’s individual growers or portions of their vineyards, it’s up to the industry.”
Yellow Tail announced record revenues in 2009, but half the net profit. Last week, Peter Lehmann, which deals with hundreds of Barossa Valley growers, announced lower revenues and a 40 percent drop in profits. Lehmann estimated that 88,000 acres of vines would have to come out to restore the balance of supply and demand. Those are the lucky wines. They are not absorbing losses. Others are.
You notice that no one is asking the government to step in. The last time that happened, in the 1980s, the law of unintended consequences nearly crippled the Australian wine industry. The “vine pull scheme,” as it was known officially, paid growers not to farm their vineyards for a specified period of time. The presumption was that growers would remove their vines if they could not earn revenue for them. Some did yank out their vines, including thousands of acres of unprofitable old vines that the industry dearly wishes existed today.
Fortunately, many just let the vineyards go unpruned and unharvested until the term of the scheme elapsed. Then they cleaned up the overgrown vines, many of which are contributing to some of the country's greatest wines today.
Australia is in this predicament in part because of its success in the late 1990s and early part of the 2000s. For a while, it was so easy to sell Australian wine, any Australian wine, that grapes were in demand no matter where they came from. Unfortunately, many investment companies planted big vineyards on not-so-great land. Those should be the first vineyards to go, but I don’t know how the industry can get that to happen without paying off the investors.
One problem is that the vineyards that produce the best grapes are often less profitable than lousy vineyards that put out big yields. Do the arithmetic. Ten tons at $750 a ton gets you more than three tons at $2,000 a ton, and it’s a lot less work.
Those lousy vineyards are one big reason so much inexpensive Australian wine has been so disappointing in recent years. How to get rid of them, without losing the better vineyards in the process, is the tough question.
Kctucker — Escondido, CA — January 11, 2010 9:13pm ET
Steve Dow — Beavercreek, OH — January 11, 2010 10:01pm ET
Eric Heinz — Philadelphia — January 12, 2010 12:27pm ET
Harvey Steiman — San Francisco, CA — January 12, 2010 1:20pm ET
Pacific Rim Winemakers — Portland, OR — January 12, 2010 2:26pm ET
Steve Kirchner — huntington beach, ca — January 12, 2010 4:21pm ET
Harvey Steiman — San Francisco, CA — January 12, 2010 4:37pm ET
Don Rauba — Schaumburg, IL — January 12, 2010 5:25pm ET
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