Thursday, July 21, 2005

Tough Times Down Under

I previously described the decline in Australia's wine industry and it appears that the situation is getting worse. According to this article in The Australian, the oversupply of grapes and finished wine led many growers to not pick their grapes this year, even in a premium region like Barossa! This is as bad, or perhaps worse than the California wine industry's low point in 2002-2003. It is further impacted, however, by the continued consolidation in the Aussie supplier market (BRL-Hardy, Southcorp, and Lehmann have all been recently acquired) and the continued decline in the value per case of Aussie exports (driven by the consolidation and the success of Yellow Tail and Black Swan).

Australia's heavy reliance on its export markets makes the situation even worse. The still-low US dollar makes Aussie wines more expensive (or hurts margins for those who hold prices stable) and the UK market continues to be a bloodbath with chain stores treating suppliers like the proverbial red-headed stepchildren.

It would be a shame if a country with the quality and pride inherent in Australia's wines were to simply shrink into a producer of commodity based wines. Last weekend, I had a wonderful Rhone blend for Rusden, the 2002 "Driftsand", a blend of Grenache, Mataro (Mourvedre), and Shiraz. There are many more wines like this in Oz, but I fear we may be seeing fewer and fewer of them in our stores.


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