Australia Between the Red Wine Crisis and the Destruction of Vineyards

 Wine is facing hard times, in particular, red wine. A decidedly difficult period in a general sense – for some time, in fact, consumer consensus has decreased – particularly for Australian consumers. Land of great wines, Australia is famous throughout the world above all for its reds, although other styles of wines are also produced in the great land of kangaroos. It is the reds, however, that mainly dominate consumer preferences, both in the domestic and export markets. In the land of kangaroos – in fact – most of the vineyards are mainly cultivated with the red Syrah, Cabernet Sauvignon and Merlot varieties which, together, represent the most important share of wine production. Among the whites, Chardonnay is the variety attracting the main interest of winemakers. The undisputed glory of Australia is Syrah, here and elsewhere known as Shiraz and it is with this name we find it on Australian bottle labels.

 In the world of wine, and not only in Australia, there has been a worrying phenomenon for some time representing a serious obstacle for producers, who are called upon to deal with a problem that, apparently, has never occurred in such an important extent. In fact, it is known that many wineries are called to manage an excess of unsold wine which, in addition to taking up precious logistical space, also weighs on company budgets. The situation becomes even more critical with the arrival of the new harvest, a condition which forces the grapes to be harvested in order to make the new wine, which requires space for storage, thus increasing costs which inevitably further burden the missed profit from the previous year. According to what was released by the International Organization of Vine and Wine (OIV), in 2023 overall production exceeded real market demand by +10%. Unsold wine, therefore, which remains stored in the producers' cellars.

 This condition has led to an overall drop in prices, thus putting producers' profits and, therefore, their very “survival”, at risk. Apparently, this condition has become extremely serious in Australia, where producers have been suffering for some years the consequences of the Chinese government's decision to impose very high duties on Australian wine. As is known – in fact – this is a decision introduced by the Chinese government last March 2020 as a consequence of a “diplomatic crisis” with Australia due to events related to the Covid-19 pandemic. This measure, inevitably, caused Australian wine to literally disappear from the Chinese market. According to economic estimates, the value of Australian wine exports to China – which represents the main market for Australia – has suffered a drastic collapse, going from 662 million dollars to just 6.6 million in the last year.

 Australia has therefore been forced to face a huge excess of unsold wine, putting the entire sector in crisis. Australian producers have sought new markets in Europe and America, however, the current downward trend in consumption in these areas of the world has not allowed them to address, at least in part, this crisis. To this it must also be added that in Australia – just like elsewhere – domestic wine consumption has decreased. According to estimates released by the government, as of last July 2023, more than two billion liters of wine were stored in Australian cellars, equivalent to approximately two years of production. A huge quantity that forced Australian producers to sell off excess wine to discount supermarket chains. Furthermore, if we add that the costs of fertilizers and fuel for agricultural machinery have increased in the meantime, in addition to the drastic drop in the price of grapes and wines, viticulture in Australia is turning into an unprofitable activity.

 The consequences of all these particular conditions are decidedly serious on the future of viticulture and enology in Australia, so much so that many producers – in this period – are proceeding with the uprooting of the vineyards. The winemakers, no longer considering the cultivation of vines or the production of wine to be profitable, are converting their land to other crops. This is enormous damage, especially if we consider that this sad fate is also reserved for vineyards in full production, therefore with more than ten years of life, including the destruction of vineyards started several decades ago. A drastic and unfortunate measure – many will remember – also recently adopted in France, in particular, in Bordeaux, caused for exactly the same reason: lower market demand and a drop in consumption. Apparently, however, the situation in Australia is decidedly more critical.

 According to recent estimates, it is believed that, to rebalance the excess caused by the enormous stocks of wine in Australian wineries, it is necessary to eradicate 20,000 hectares of vineyards. A colossal area, therefore. France and Australia are obviously not the only ones to find themselves in this situation, since the issue of surplus wine stocked in cellars is a problem which is common in practically every wine-making country in the world. Including California, where – it seems – they are trying to manage what has been defined as “the worst imbalance between supply and demand in the last thirty years”. The Australian government has been looking for a solution to the crisis that is affecting the country's wine sector for some time, however it seems there is no simple solutions to what is – in all respects – a decidedly serious and complex problem. One of the solutions being worked on is to re-establish trade relations with China, a diplomatic effort between institutions and governments, hoped for by many.

 According to recent news, it in fact seems China is willing to remove the very high tariff imposed on Australian wines, an event which could happen within a few months. Last October, the Chinese government has in fact declared to be now open to re-evaluate the imposition of duties, an operation that would allow Australia to resume the export of wine – and other products – to China. This would mean the resumption of trade relations, considering, not least, that China represents one of Australia's primary reference markets. It is estimated, in fact, that a third of Australian exports are directed towards China and, with the hoped-for abolition of duties, the wine sector could, at the very least, hope for a significant recovery. The provision would favor the disposal of part of the enormous excess production which currently weighs on Australian wineries, however not that of ready-to-consume wine and which will hardly be able to be marketed, except at negligible prices.

 Regardless of the decisions and diplomatic actions between the two governments, should China decide to remove the very heavy tariffs imposed on Australian wine, it is still rather unlikely that the market and production of wine in Australia will return to pre-2020 levels. Australia – just like what it is currently happening in any other wine-growing country in the world – will inevitably have to deal with the revision of production levels. Wine consumption has changed, or rather, decreased, with a significant impact on the wine economies of all producing countries. Furthermore, this is particularly crucial for Australia, considering the country's prevalent red wine production, a style that – in recent times – is progressively falling out of favor with consumers. The world of wine is changing and it is not a phenomenon linked to the simple preference of styles over others: this has always happened and will continue to happen in the future. Furthermore, the fact of having surpluses of unsold wines in the cellars – and not only in Australia – certainly does not help in making predictions for the future vintages, as well as for the management of the current critical situation.