Daily Wine News

««« return to Daily Wine News index


Grapes: the tide turns as producers seek flexibility

Jeni Port

Between 1997 and 1999, an unprecedented 40,000 hectares of grapevines were thrust into the soil across the nation, increasing the wine industry’s output by 40% in one short frenzied spurt of hyper-activity.

Previously, it had taken more than 30 years to grow the industry by the same amount. And still planting didn’t let up when we entered the noughties. Well, today it’s pay-back time.

Wine producers, stunned by a serious over-supply problem in 2006, are reassessing what some now regard as an unhealthy reliance on fruit from their own vineyards. They want — indeed, need — flexibility in their sourcing and for that they are looking to the only person who can help, the independent winegrower.

There’s even a refreshing sign that producers and growers are relying on one another, especially as we enter the great unknown of climate change.

You saw something verging on cooperation this vintage when water – or the lack of it — threatened to expose the industry’s vulnerable underbelly.

Early forecasts predicted a dangerously drought-affected harvest. Water-starved growers in the Murray Valley and Riverland dug deeper into their bankers’ pockets and paid for supplementary water. The average loan was $60,000, while a few borrowed as much as $125,000.

Producers too, did their bit. Brown Brothers was one maker who paid for its growers’ supplementary water. For a moment, producer and grower were in the same boat. Each had a strong interest in producing a crop. Livelihoods were at stake.

The cynic might (should) point out that it was only the 2006 vintage when producers, under the crushing weight of a 300,000-tonne surplus, removed hundreds of winegrowers from their books. In one spectacularly bad PR exercise, McGuigan Simeon (now Australian Vintage Limited) dropped 80 of its Murray Valley winegrowers just eight weeks before the ’06 vintage.

For other growers, the company reportedly offered prices as low as $100 a tonne for fruit that cost $300 a tonne to grow.

Traditionally, when wine companies find themselves with too many grapes it’s always been the grower they let go. So, can this new found sense of industry co-operation last?

One grower, one of our largest, believes a fast-moving, flexible industry that responds to the needs of the international marketplace has to stem on a new producer-grower relationship.

Ron Collins of Blaxland Vineyards – which manages 1700 hectares of vineyards across South Australia, Victoria and New South Wales — says the shift is away from big companies developing their own vineyards.

He supplies fruit to all the major Australian wine players and estimates that today they might source fruit from 30% of their own vineyards with the rest coming from contracted growers. “They still like to control their premium fruit for their top brands,” he adds.

The 2007 National Winegrape Crush and Price Report has 79% of specialist white grapes and 77% of red grapes purchased by wineries during the ’07 harvest. It was a similar story in ’06.

The Foster’s Wine Group definitely fits the Ron Collins’ mould. Our biggest wine producer has less vineyards today – under 16,000 hectares — which is almost 2% less than when it bought Southcorp in 2005.

A spokesman says the company relies on between 25–30% of its own vineyards, a fact that won’t be changing soon because CEO Trevor O’Hoy has gone on the record as wanting to concentrate financial resources on building “supply chain flexibility,” not expanding vineyards.

Foster’s is also dropping out of cask wine production in a big way (last year it reduced production by a whopping 800,000 cases) in order to concentrate on higher-end products. Other cask wine producers are expected to follow suit (the exception will be production of the still-profitable three-litre cask).

This, argues Ron Collins, is just what he and other growers can capitalise on. To his mind the grower is becoming a wine marketer, of sorts.

“We bring our senior marketing people and show them what we have,” he says, of the regular industry visits and tastings at his vineyards. “Most growers only deal with winemakers but we want to talk to the marketers. They see our Mourvedre or Malbec and they say: ‘Hey, we can use that!’”

In an ocean of Chardonnay and Shiraz, Collins also has an eye on the next big thing in wine. Blaxland Vineyards grows new-wave Spanish varieties Albarino and Tempranillo as well as the Italian Sagrantino and Aglianico. A tour of UK supermarket shelves last year alerted Collins to a growing demand for the Italian grape Montepulciano, so that’s going into the ground too.

At last year’s Outlook conference he heard Tesco’s director of beer, wine and spirits, Dan Jago, talk about the UK market’s need for less alcohol and more variety from Australian wines. Says Collins: “that’s what we want to work on.”

The industry is also clearly trying to move away from its reliance on cheap fruit from warm irrigated wine regions. There is no profit and no joy in trying to compete at lower price points in international markets. The imbalance in supply and demand that exists between warm and cooler regions has to be corrected and again, that’s where growers can help.

But in between a flexible, marketing savvy industry that responds quickly to consumer needs and raises the bar pricewise there stands a potential impediment. It’s called global warming.

The 2007 National Winegrape Crush and Price Report noted drily that there is “significant uncertainty” regarding future grape supply. Climate change is playing havoc with growers across the nation. Most no longer remember what a “normal” vintage looks like.

Producers may want to rely less on warm regions (indeed, they may have little choice as some water-starved growers leave the industry) but the occurrence of drought, frost, bushfires and extreme heatwaves – a taste of the 2008 vintage — makes it hard for them to know just what regions they can rely on.

Planning for 2009 could also be substantially jeopardised due to the parlous financial state many warm region growers in the Murray Valley and Riverland find themselves in.

Mike Stone, boss of the Murray Valley Winegrowers warns that local banks have made it clear they will not give loans to growers for supplementary water in 2009.

He recently sent out a questionnaire asking his 1000 members how much they would be prepared to spend on supplementary water for the 2009 vintage. He suspects the worse.

“Most won’t have the means to do it,” he says matter-of-factly.

Perhaps this is where some of that new producer-grower co-operation will come in handy… for everyone’s sake.

This article first appeared in the May issue of Australian & New Zealand Grapegrower & Winemaker — the best-value wine industry trade publication available and the biggest-selling magazine in Australasia.

Do you subscribe? Get your news first, home delivered. Visit www.winebiz.com.au



Roberts Real Estate


Bayer Teldor

Curtin University


WID 2016