From the Glass of Tim Burvill

Many articles have been written about the current oversupply issues the Australian Wine Industry is facing at the moment so I contacted RockBare wine maker Tim Burvill to see if he could give us a 'grass roots' perspective on this situation. Tim was kind enough to drag himself away from a poolside McLaren Vale Chardonnay and share his views.

The issues of the AWI have been well documented by the mainstream media over the past 12 months.  So, without going into too much detail, we have a situation where the annual grape harvest (in 2010 it is predicted to be 1.8 million tonnes or 140 million dozen) is about 30% above requirements.  The area of grapevines planted in Australia doubled between 1997 to 2007 to 164,000 hectares, and such a massive increase in plantings has lead to a predictable surplus.  Compounding the problem has been the over-dependence of the AWI on a few large players which got bigger and bigger every few years as mergers and acquisitions took place (and might I add, most at completely over-inflated prices).  Throw in a global financial crisis, an appreciating Australian dollar, huge write-downs on the recent acquisitions,  and coupled with the inability of these large Australian wine corporations to be able to effectively market a sell large and diverse wine brand portfolio's, and we find our self in our present position. 

It will be very interesting to see how all of this plays out.  Grape growers are the ones really bearing the brunt of the industry's problems.  Since the large wineries, which were taking the majority of the crop previously, have opted out of the grape market, most grape growers coming out of contract are struggling to find a home for their fruit.  This in turn is resulting in very low fruit prices being offered by these out-of-contract grower.  How long will these growers be able to sustain growing crops in which they lose money on?  We will undoubtedly see vineyard pulled out, particularly in the newer grape growing regions that lack strong brands competing for their fruit.

The other sector of the industry hurting is the small wineries which were reliant on selling a container or two of wine to the USA and UK every year.  These sales for the most part have ground to a halt, and causing cash-flow and over-stock issues.  This is further exacerbating the low grape prices, as these smaller wineries which for the most part played in the high-priced fruit sector, also opt out of the grape market whilst they concentrate on selling through the stock in their warehouse.

 All sounds pretty grim doesn't it?  Well, it's not all doom and gloom.  In fact, some Australian wine companies have never had it better.  Wineries with strong brands, and solid finances are finding their market share increasing.  Yes, you read correctly, increasing.   We are are seeing a period of strong brands cementing their position in the market, and improving their footprint as they ride above the price-discount melee occurring below them.  Indeed, quality fruit has never been cheaper, nor have growers ever been more inclined to grow and crop their fruit as the wineries wish them to.  A New World Order is being created in the AWI at present.  For the most part, 2nd, 3rd, 4th and 5th generation family owned wine companies are the ones charging ahead.  They have seen all of this before (crashes in the industry) and for the most part are well prepared.  They still offer the consumer a product with integrity- from who owns it, to who makes it, and that their brand cannot be found being trashed in the big supermarkets.   Also on the rise are the wineries who have partnered with importers/distributors on their brand.  These type of relationships give both the winery and the sales partner the confidence to invest additional time, focus and marketing dollars to the brand.  I think it will be very rare moving forward for any new brands to be solely owned from vineyard to the brand.  The capital requirement and risk is simply too high to make it a viable in the ultra competitive world wine market.

 One thing can be certain as we charge into the 2010 harvest.  By the end of this year, we will be operating in a very different market to the one we started the year in.

 Cheers

Tim

If you have an opinion on the subject please feel free to post it here and if you have anything you would like wine makers to answer please feel free to ask.

Dean