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As the Australian wine industry grapples with the problems of over-production and grower unrest, Chris Losh reflects on over-ambitious forecasts made during the boom years and the options facing shell-shocked farmers and wineries in these tough times.

A quick quiz question for you: which wine region is typified by strikes, demonstrations, a stand-off between growers and wineries and fruit left rotting on the vine? Easy, you might think: the South of France, right? Wrong. This is the Australian wine industry in 2006.

Big companies are taking less fruit than before (Hardy's has just announced a cut of 10% for this vintage) and, with an estimated 1bn litres of unsold wine sitting in tanks down under, companies are paying less for it. A figure of A$200 a tonne has been mentioned, for which it wouldn't even be worth starting up the picking-machine. Unsurprisingly, with fewer contracts about and less money being paid for those that are, growers are feeling the pinch.

But reading about a grower's travails in isolation is far easier than hearing it from his own lips. Last week, I attended a seminar in London aimed at examining whether Australia had generally been good or bad for the wine industry, how much it had brought its current woes on itself, and what could be done about them. As is the way of these things, few conclusions were reached, but there was one powerful moment when a winery owner, having listened with growing agitation to discussions about the right and wrong way to convince consumers to spend more on Australian wine, could finally stand it no longer.

"Promoting regionality may be the way forward in the future," he said, "but there are people going broke today." It was a sentiment straight from the coalface to the men in suits.

The journalist chairing the discussion suggested that smaller players would need to get bought or they'd go bust - words of "comfort" which may have been accurate, but were lucky not to earn him a knuckle sandwich from someone representing a proud industry that has not taken well to economic hardship.

And that's the big difference between Australia and the South of France. Both may be in trouble, but whereas the South of France has been an economic basket case for decades but refuses to face up to it, Australia's problems are far more recent; the result of over-optimism that the industry has painfully had to admit was enormously naïve.

It's not much more than five years ago that Australia ruled the wine world. At the end of the 1990s, it seemed that the only limit to how much money you could make from wine down under was how many vines you could plant on your land, and I'm sure I'm not the only person who can remember staggeringly bullish Aussie sales forecasts that predicted prolonged double-digit growth everywhere from Japan to Germany.

Some of us raised an eyebrow at the time, only to be brushed aside by a tidal wave of Ocker optimism. But now that tidal wave has run out of momentum, and turned into a sticky lake of undrunk Cabernet, Chardonnay and Shiraz. And, moreover, it's a lake which isn't going to go away quickly. The best-case scenario I've heard is that the glut will last for another three years, plenty of time for a whole lot more growers and wineries to go bust.

Of course, even in times of crisis there are winners and losers. Hoovering up cheap, uncontracted fruit and packaging it well has given Yellowtail a ridiculously successful multi-million case brand, especially in the US, where its sweetness has gone down well.

Not that our seminar's chairman journalist was impressed. "Whatever you do, don't follow the Yellowtail route," he implored the assembled growers, before uttering a few choice words about the quality of the wine.

Now, I'm no great fan of Yellowtail either, but I rather suspect it isn't aimed at wine professionals or connoisseurs. In any case, whatever the purists' concerns about the style of the wines, it's undeniably successful and has managed to bring non-wine drinkers into the category, while also soaking up some of the glut wine down under and keeping strapped growers from going to the wall.

So I want to leave you as I started, with another question. Is it better to go nobly bust or make a cheaper wine and survive? Answers on a postcard, please. And if it's got an Australian stamp on it, I think I know which way you'll be voting.

Sectors: Wine

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