Tension is afoot in the Australian wine industry

Tension is afoot in the Australian wine industry

Recently back from a trip to Australia, Chris Losh has found time to grab a shower, stick a wash on, and describe for us what he sees as a challenging time all round for the country's wine producers.

These are difficult times to be in charge of directing the Australian wine industry. So it’s perhaps not surprising that, over the last few months, the Australian Wine and Brandy Corporation (AWBC) has lost a couple of its key players.

First, in early-September, Lisa McGovern, head of Wines of Australia in the country’s biggest export market, the UK, left after barely 18 months in the job. Then, a fortnight later, the AWBC’s overall general manager for market development, Paul Henry, handed his notice in, too.

McGovern’s role is proving to be a particularly difficult post to fill. Her replacement will be, by my reckoning, the fourth new face in the job in six years. While, to lose a senior figure like Henry at such a difficult time is far from ideal.

It’s all a long way from the soaraway days of the 1990s, when double- and triple-digit growth were the norm and Australian wines steamrollered their way into retail outlets across northern Europe with a cheerful, iconoclastic brashness that left European producers at once baffled and terrified.

Now, grapes hang unharvested, vineyards lie untended and the country’s image, where once it was magnificent, is tawdry – the result of a rush to plant vines that has left the country with an annual oversupply of getting on for half a million tonnes of grapes.

The timing of this tsunami of surplus wine could hardly have been worse for the long-term development of Australian wine. Just as a generation of new wine consumers were ready (with some cajoling) to be moved upmarket within the comforting embrace of the Australian brands they trusted, so the category imploded, with rafts of faux temporary ‘brands’ and eye-watering promotional offers.

Australia, for most supermarket shoppers, is no longer cool or aspirational, just cheap. And, much of the good work laying the foundations in the 1980s and 1990s has been undone. Moreover, the country’s famous unity has started to crumble under the pressure to shift volumes, with tension between the ‘big four’ who make up 85% of Australia’s wine production, and the smaller producers, and tension, too, among the big four themselves.

The pressure has been exacerbated by the lop-sided nature of the Australian business model. Unlike European wine regions, which have built a broad distribution base over centuries, using on-trade and independent merchants, adding supermarkets relatively recently, Australia (like all New World countries) has achieved its stellar levels of growth through hitching itself firmly to the aisles of the multiples.

This narrowness of distribution has given the country little option but to take whatever bitter medicine the supermarkets hand out or go and seek new markets – not easy at a time of recession. And, although Aussies I’ve spoken to remain optimistic about Asia, the Far East is littered with the bleached bones of desperate drinks salesmen.

The last few years have seen a belated (and not always consistently applied) attempt by Wines of Australia to promote the upper end of Australian wine to the on-trade and independent merchants, largely through pushing the concept of regionality.

It’s a brave move for several reasons. Firstly, because the vast majority of wine drinkers have shown little interest in coming to terms with European wine regions, so there’s no particular reason why Australia should be any different.

Secondly because it is more or less 180 degrees opposed to the ‘regionality and terroir is all nonsense’ ethos that made Australia successful in the first place.

And thirdly (and perhaps most significantly) because the regionality approach has little support in the boardrooms of Pernod Ricard, Constellation, Fosters and McGuigan, who ask, understandably, just what their huge inter-regional brands are getting from talk about soils in the Yarra Valley.

And, yet, for all that it’s brave, the focus on regionality is correct. Australia needs a rather more inspiring message than ‘we have lots of cheap wine’, particularly if it is to make any headway in the on-trade. After all, focusing on the top 5% or 10% of wines doesn’t seem to have done the Bordelais too much harm.

Besides, there’s a school of thought that wine consumers in the supermarkets are so raddled by promotion-addiction that they are, for the moment, more or less impossible to educate in any case, and that it’s better to leave this group to its own devices and to focus generic energy on an area where it might, at least, have some impact.

The key is not so much whether it’s right to implement the strategy in the first place, as whether it will be possible to stick with it in the face of grumblings from powerful forces with oceans of wine to sell, who feel that the country would be better served by a more mass-market approach.

I should imagine that it’s tension between the short-term need to shift wine and the medium- to long-term good of the Australian wine industry that has made life so tough for those in charge of the country’s generic advancement for the last ten years.

Attempting to square that circle will certainly be the biggest challenge for whoever next takes over in the hot seats in Adelaide and London.