The truth behind the latest wine export figures

On the feast day of St Vincent, patron of vintners, Whitey contemplates some sobering export numbers from Wine Australia.

Jan 22, 2016, updated Jan 22, 2016

Today, January 22, being the Feast Day of the patron saint of vintners, Vincent of Saragossa, it’s a nice thing to contemplate the Wine Australia export numbers just released.

Wine Australia CEO Andreas Clark triumphantly announced: “Pleasingly, our latest Export Report shows that the value of Australian wine exports grew in each of the top 15 export markets in the year ended 31 December 2015.”

The report shows that the value of Australian wine exports jumped 14 per cent to $2.1 billion in 2015, reaching its highest value since October 2007.

This is the second consecutive report to show such an increase.

Clark continued: “This export growth should be warmly welcomed by the Australian grapegrowing and winemaking community as it is largely a result of their hard work.”

Wrong. The majority of the grapegrowing and winemaking community has not suddenly discovered how to do anything better. Nor how to work harder. Most of them still make McDonald’s quality. The reason for this growth is largely because of the tumbling Aussie dollar, which Clark coyly avoids mentioning. It was similarly low in October 2007.

Call me an economic conservative, but I reckon any business plan that depends upon its native currency being undervalued is not quite the full quid.

Sure, with a dollar that’s taken a 40 per cent plunge, people stay in Australia and drink local because they can no longer afford to traipse around Old Yurp or Amurkha, and our wine looks better to those offshore buyers because it’s suddenly cheap again so they buy more.

But that little issue aside, the makers who have added the most significance to the export hike, through hard work and reacting sensibly to world demands for finer wines of lower alcohol, are those tiny majority who make serious premium wine and charge sensibly for it.

The biggest increase in value, percentage wise, was in the smallest-volume sector: expensive bottled wine: those with a “free on board” (FOB) value over $10 per litre. The report shows these increasing by 35 per cent to a record $480 million. They now make up 23 per cent of the value of Australia’s wine exports.

The value of exported wine with an FOB of between $10 and $14.99 grew 24 per cent; $15 to $19.99 grew 55 per cent; $20 to $29.99 grew 22 per cent, and $30 to 49.99 grew 16 per cent.

The single biggest increase was in the $50–$99.99 bracket, which surged 59 per cent. This boom slows down over $100 to $199.99, a bracket which grew 40 per cent, while the elite $200+ bracket swelled by 23 per cent.

“Bottled wine has been the key driver of the export success. Bottled exports increased by 17 per cent to $1.6 billion and the average value increased by 7 per cent to $5.20 per litre. This is the highest value since 2003 on a calendar-year basis,” Clark said.

Similarly telling is where all this wine actually went. Buoyed by China’s easing of its clampdown on extravagant expenditure, along with a new optimism around the recent trade agreements, the value of exports to China increased by 66 per cent to $370 million, while the Hong Kong number increased 22 per cent to $132 million.

The US, still burnt by Australia’s tendency to tip super-charged alcoholic gloop into its discount bins, showed a small revival of 4 per cent to $443 million.

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Australia’s biggest market by volume, however, increased by only 0.2 per cent to $376 million.

This just happens to be where our cheapest plonk goes in bulk at the tiniest margins: shipping containers, each one stuffed with a huge bladder pack full of highly-irrigated booze for packaging at a pinch in the United Kingdom, the heart of the dead British Empire.

If it was serious, Wine Australia would present a breakdown of which of the smart, hard-working, premium wine producers are responsible for the boom in top-quality wine. This writer, just for example, would like to know how much of that is the work of Penfolds, and more significantly, its chief winemaker Peter Gago, who works harder than anybody I know wearing out passports as much as shoe leather. And who, not coincidentally, happens to supervise the making of a great deal of wine of extremely high quality.

The boom in this lofty sector also vindicates SA Premier Jay Weatherill’s determined drive, with Agriculture Minister Leon Bignell, to concentrate on top-quality, top-profit food and wine exports.

But it leaves them with the source of that giant goonbag business to address:  the Murray-Darling. Speaking broadly, the only wine folks in that huge, water-guzzling Basin who make any money are the smartest, toughest refinery owners with good mates in the UK.

The further one goes upstream along that irrigated extravagance, the less likely are its growers to make one cent of profit.

Last year’s report from the Winemakers’ Federation of Australia revealed that if you start at the bottom of the Murray, at Langhorne Creek, 77 per cent of the fruit grown is sold at a loss, and the average yield per hectare since 2006 is 9.2 tonnes. As the tonnage grown reflects the amount of water pumped, the Riverland saw a 92 per cent loss at 20 t/ha. 

At Murray-Darling-Swan Hill, it’s 88 per cent loss at 19.4 t/ha. The Riverina, home of that adored and touted export miracle, Yellowtail, scores a 97 per cent loss at 14.9 t/ha.

Which leads me back to St Vincent, and this being his feast day.

Captain Matthew Flinders named our Gulf St Vincent after his admiralty sponsor, the Rt Hon John Jervis, 1st Earl St Vincent, who’d won the title for his good work with Lord Nelson, butchering the Spanish at the Battle of Cape St Vincent in 1797.

While I sit here munching these challenging numbers, wondering like grapegrowers everywhere about today’s moist humidity, lack of drying breezes, and the possibility of mildew and botrytis, I think of Vince also being the patron of vinegar-makers. And his little homily:

If St. Vincent’s Day be fine,
‘Twill be a perfect year for wine.


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