The much discussed 2008 Australian grape harvest, which in the end turned out to be the fourth largest on record, has left the industry with an interesting dilemma. This is the view of Australian Wine and Brandy Corporation's general manager market development.
Englishman Paul Henry, who is a well known and popular figure in the UK wine trade, told Drinks International when he was in London recently, that while the 1.83 million tonnes is good news and much against earlier predictions, it came at a cost.
While it did manage to rain during the 2007/08 vintage, the principal reason why the harvest came in so well, was because the federal government intervened and made 30% more water available to wine grape producers.
With retailers lining up to capitalise on Australia's largesse and resume selling its wines at rock bottom prices, Henry asks: "Has Australia overpaid for the 2008 harvest?"
Henry, who is one of the more thoughtful people in the wine industry hence his position as one of its most powerful figures, is concerned that growers and producers have paid for the water allocation is their production costs are incrementally higher. Therefore if the industry is to make a reasonable profit out of last year's harvest, it must resist retailers' downward pressure on prices.
"We are just pondering on ultimately what is going to be the impact of the added, unexpected, volume. "
Henry is also concerned about the condition of its two key export markets. The UK and US account for 68% of Australia's wine exports. The former he describes as "flat lining" and latter is "in crisis". "The current trading conditions are not assisting our value building ambitions, said Henry obliquely. Nevertheless, he said that sales to China had not only rocketed but moved significantly from bulk to bottled. Therefore more premium priced.
Ending on a more optimistic note, Henry commented that Australia's major plantings in the 1990s were now bearing fruit in that the vines were in "rude health" and reaching optimum maturity which bodes well for the Australia's short and medium term viticulture.
He pointed to California which was hit by phylloxera in the 1980s. Wine growers, helped by UC Davis (University of California, Davis one of the world's foremost centres of excellence for viticulture), were forced to replant with better quality and more terroir-appropriate rootstocks. When Australia came to replant, it has benefited from another ten to fifteen years' knowledge and experience.