News

July 15, 2008

Wine Goes Sour In Australia

By Our Agri Expert In Oz

It was once the great Australian wine boom. Now it’s the great Australian wine crush. For casual observers the switch from euphoria to despair seems to have happened overnight, and could not have come at an odder time given the worldwide trend to higher prices for most agricultural products. For people in the Australian wine industry it has been a five year nightmare. For investors it’s a warning that agriculture is different, for many reasons, starting with variations in weather patterns, and moving on to changing consumer tastes, global competition, mispriced products, and currency fluctuations caused by events completely out of the control of producers. Since 2003, Australia’s wine industry has copped the lot.

The damage is so profound that it is leading to a wholesale shake-up in how the wine industry functions. Cheap and cheerful is out. Up-market is the future, partly a function of the country’s mining boom pushing the dollar so high that many Australian wines cannot compete with rival products from other “new world” countries such as Chile, Argentina, and Mexico. Tesco’s Wine Club might still be advertising Hardy’s “stamp” wines at £26.73 for a case of six, but the profit margin for the wine...