The Australian (Riverland) Red Wine Glut: A Crisis or an Opportunity?

As wine importer, I have been following the developments of the Australian wine industry with great interest and concern. The recent news of a red wine oversupply crisis in the nation’s biggest wine region, the Riverland, has raised some serious questions about the future of the industry and the quality of the wines.

The Riverland, along with the Murray Valley and the Riverina, produces grapes for almost every Australian-produced wine bottle or cask. However, the region has been hit hard by the trade ban with China, the loss of domestic and international markets due to the pandemic, and the historical imbalance between supply and demand.

According to former wine industry leader Paul Clancy, the root cause of the oversupply problem dates to the 1990s, when tax concession schemes encouraged over-planting of vineyards, especially red wine grapes. By 2015, red wine grapes accounted for 64 per cent of all vines in Australia, and by August last year, the country had amassed a wine glut of more than 2 billion litres.

This situation has led to a collapse in grape prices, with some growers receiving as low as $200 per tonne for shiraz and cabernet grapes, well below the cost of production. Many growers are considering exiting the industry or pulling out their vines, while others are calling for a moratorium on planting new vines or a mandatory code of conduct to improve the relationship between wineries and growers.

As a wine consumer, I am worried about the impact of the oversupply crisis on the quality and diversity of Australian wines. The Riverland is known as a bulk wine producing region, with vines yielding an average of 20 tonnes of grapes per hectare. This means that the grapes are often over-cropped, diluted, and lacking in flavour and complexity. The low prices also discourage growers from investing in better vineyard management, innovation, and sustainability.

Large format wine storage tanks

As a wine importer, I am concerned about the reputation and competitiveness of Australian wines in the global market. The oversupply crisis has created a perception that Australian wines are cheap, mass-produced, and homogeneous. This undermines the efforts of many winemakers and regions that are striving to produce premium, distinctive, and expressive wines that reflect the terroir and the climate of Australia.

However, I also see the oversupply crisis as an opportunity for the Australian wine industry to rethink its strategy and direction. The crisis has exposed the need for more balance, diversity, and differentiation in the industry, as well as more collaboration, communication, and transparency between the stakeholders.

I believe that the Australian wine industry has the potential to overcome the oversupply crisis and emerge stronger and more resilient. The industry has a rich history, a diverse geography, a talented workforce, and a loyal consumer base. The industry also has a wealth of resources, research, and innovation to support its development and growth.

I hope that the oversupply crisis will serve as a catalyst for the industry to embrace change, adapt to the challenges, and seize the opportunities. I hope that the industry will focus on producing wines that are not only profitable, but also sustainable, authentic, and enjoyable. I hope that the industry will celebrate its diversity, showcase its quality, and share its stories with the world.

Key Statistics from the Department of Agriculture, Fisheries and Forestry (DAFF) Australia

• According to the DAFF, the value of wine grape production in Australia is forecast to fall by 2% to $926 million in 2024–25, due to declining demand for wine and high existing stocks¹.
• The oversupply crisis of red wine grapes has been exacerbated by the trade ban with China, which was previously the largest export market for Australian wine. DAFF forecasts that the value of wine exports will fall by 3% to $1.8 billion in 2024–25¹.
• The red wine glut is partly a result of tax concession schemes from the 1990s that encouraged over-planting of vineyards. By 2015, red wine grapes accounted for 64% of all vines in Australia¹.
• The Riverland region in South Australia, which contributes grapes to almost every Australian-produced wine bottle or cask, has been the hardest hit by the oversupply issue. Riverland Wine, a representative body for grape growers, says 40% of the region’s shiraz and cabernet grapes are not contracted².
• Some growers in the Riverland are calling for a moratorium on planting vines to solve the oversupply crisis. They are also supporting a mandatory wine grape code of conduct to improve the relationship between wineries and growers².
• One of South Australia’s largest family-owned, estate-grown wine producers, Byrne Vineyards, is restructuring its business model to have more control over the supply chain. The company plans to put more of its own grapes into glasses to improve the profitability of the business².

Reference

¹: Wine - DAFF

²: Nothing to celebrate, as a glut of red wine threatens the viability of Australian growers

Riverland grape growers call for moratorium on vine plantings to ease red wine oversupply crisis - ABC News