Climate Change, Chinese Embargo and Covid: Hard Times for the Australian Wine Industry

The last two years have been a great challenge for the Australian wine industry. Jeni Port gives an overview of recent developments and possible solutions.

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Ox Hardy, Koonunga (Photo: Kieron Lomax)
Ox Hardy, Koonunga (Photo: Kieron Lomax)

 

  • Effects of climate change are showing in forest fires and other natural disaster. In some regions, little wine has been harvested.  
  • The loss of Australia’s largest wine market China in 2021 and the Covid restrictions have further worsened the situation.
  • Trade agreements should facilitate the access to new markets, but won’t solve the problem.
  • More diverse marketing channels and grape varieties are necessary, as well as a (faster) move to more sustainability.

 

Destruction Caused by Forest Fires and Other Natural Disaster

In 2020, Sarah Collingwood, saw her family winery’s entire crop of premium grapes lost to smoke taint. Billowing plumes of smoke from nearby bushfires rolled into her Four Winds vineyard – and her neighbours’ vineyards - at Murrumbateman in Australia’s Canberra wine region, swirling, playing with grapes and tagging volatile phenols to their skins. Little, if any, wine was made across the region that vintage.

January this year, just months before harvest, and more destruction, vines throughout Murrumbateman were pummelled by thunderstorms and hail, stripping leaves, fruit and canes.  

Writing via email from her Murrumbateman home where she is in isolation due to COVID, Sarah Collingwood is blunt. “There is no doubt that we are feeling the extreme weather events increasing in frequency,” she wrote. “We have lost the entire Four Winds Vineyard crop only twice in 24 years, but both of these occurrences have been in the last three years.

“The more that we can do as an industry to slow or prevent climate change is essential.”

 

Sarah and John Collingwood, Winds Vineyard
Sarah and John Collingwood, Winds Vineyard

Effects of Climate Change

Any joy in owning a vineyard and making wine in Australia has been sorely tested in recent years. Climate change tops the list of challenges not only for winemakers but the country. In the driest inhabitable continent on earth, water security continues to be of real concern together with increasing extreme weather events.

At the time of writing, parts of northern New South Wales had suffered a one-in-five-hundred-year flood –  for the second time in one month.

From climate change on down, the list of challenges is long.
 

Chinese Embargo and Covid

The loss of Australia’s largest wine market, China, in 2021 is a major headache to producers, one that will last for years. Red grapes, which fuelled sales in China, are now in over-supply, gumming up inventories or being left on the ground, a problem that could take four to five years to resolve.

At the same time, COVID has taken many wineries to the financial edge, a mix of international and national border closures, disruptions to shipping, major city Lock Downs, the exodus of overseas vineyard/vintage workers, and a general malaise and lack of consumer confidence have all taken their toll.
 

Someone to Blame? Ways out of the Catastrophe

Fingers are being pointed, blame is being attributed as the industry tries to make sense of just what went so wrong . . . and right.

Hard Work to Be Done

“If the Australian wine industry is to be seen as serious as it wishes to be by the rest of the world,” notes McLaren Vale winemaker, Dudley Brown at Inkwell Wines, “it will have to do the hard and serious work required in addressing its most obvious weaknesses and shortcomings rather than just counting gold medals at wine shows and setting low targets for its members.”

Alister Purbrick at Tahbilk

 

Alister Purbrick, the retiring CEO at the Tahbilk Wine Group, puts it another way:
 

“Our industry is in the middle of a perfect storm. Nearly everything that can go wrong has.”

Demand for Australian wine in China was rapid, aided in part by Chinese-Australians who raided the bulk wine market and became producers of wine overnight, sending container load after container to extended business networks in China. Then there were wine companies who worked hard to develop ties in China building it into an AU$1.2 billion market.

China looms large over this less than rosy picture.

Too Many Eggs in One Basket

The industry is now being accused of relying too much on China. I have heard stories of some producers selling up to 80% of their production in China. “I think it’s great that we lost the Chinese market,” says David Lloyd of Eldridge Estate on the Mornington Peninsula. “From my observations it was never going to be anything like a silver bullet and too many thought it was an easy option.”

Some winemakers remain hopeful that the Chinese government will revoke its excessive tariffs imposed in 2021 on Australian wine after makers were accused of dumping wine. It set the scene for an ugly trade dispute that is far from over.

“The industry was spectacularly successful there (in China), and it’s a shame that the geopolitical landscape got in the way,” adds Jonathon Hesketh of the Hesketh Wine Company.
 

New and Old Markets

Eyes now look to new emerging markets as well as old ones, notably the U.S. where some successful marketing forays were conducted pre-COVID.

India seems particularly attractive, but it is a small market with some restrictions.

India is being talked of as being particularly attractive following the signing this month of the Australia-India Economic Co-operation and Trade Agreement which will see “preferential tariff treatment” given to Australian wines.

Australian wine holds a 42% share by value of India’s imported wine segment, way ahead of France and Italy, but it has to be remembered that the Indian wine market is tiny, by global standards, with a total value of US$150m, less than a third of which are imports. And it is quite complicated.

India, like China, is not going to be a silver bullet.

Barratt Chardonnay (Photo: Kieron Lomax)
Barratt Chardonnay (Photo: Kieron Lomax)

Re-evaluation of Tastes

There is a strong argument that any re-evaluation of Australia’s main export markets should also be conducted in conjunction with a re-evaluation of changing tastes and expectations of consumers in those markets. And that should also apply to consumers on the ground in Australia.

Fruit forward, high alcohol, bold, mass-produced wines from warm and hot regions are no longer going to cut it. And the dominance of shiraz is now under question given the existing wine glut and changing palates.
 

Are Winemakers Listening? Lessons to Learn

Most concede that on a number of big picture levels – climate change, consumer tastes, sustainability – it makes sense to use this COVID, post-China time wisely.

Working Smarter

“We have a few hard years ahead where we will need to evolve our approach environmentally, marketing Australia’s industry credentials and working smarter,” writes Kilikanoon general manager, Travis Fuller, in an email from his home in the Clare Valley where he is recovering from COVID. Days after writing, he learnt that the Australian Government had banned the export of Australian wine to Russia in protest of its invasion of the Ukraine. The Russian market was worth AU$5million to Fuller’s company over five years.

Hard times ahead, indeed.

Alternative Grape Varieties

But it’s not all bad news. The enthusiastic take up of alternative or appropriate grape varieties in Australian vineyards, usually Mediterranean varieties that retain their acidity in hot, dry conditions, has been a boon on a number of levels.

Grapes such as Fiano, Vermentino, Pinot Grigio (Australia’s third most planted white grape), Sangiovese, Montepulciano are appealing to tired palates. They also require less water and are being grown in regions such as McLaren Vale, the King Valley, Heathcote and the Riverland where they produce wines of true quality.

Sustainability: Carbonate Neutral Before 2050

In striving for a sustainable future, Australian wine producers are looking to meet emissions targets faster than their national government, which is committed to a 2050 zero emissions deadline.

“Action is urgent.”

“Action is urgent,” writes Mitchell Taylor of Taylor Wines based in the Clare Valley, recovering at home after contacting COVID.  “We have just got certification with the Sustainable Winegrowing Australia program with Wine Australia which is a good start in measuring our footprint.”

Sustainable energy sources such as solar panels and wind turbines make a lot of sense in a country like Australia. The biggest hurdle, however, will be transport and delivery costs. It’s a big continent.
 

Outlook: New Playbook for Everything

Sixth generation winemaker, Corrina Wright at Oliver’s Taranga in McLaren Vale probably best sums up the prevailing mood as the Australian wine industry lurches from one bad news cycle to another – some of its own making and some outside its control – and attempts to deal with a post-COVID, post-China, climate changing world.

“It’s almost writing a new playbook for everything,” she says. “The way we all interact, our business models, how we travel, what we care about – so much change. I can see positives and negatives but will focus on the positive.”

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