IT is a watershed year for the Australian wine industry. After two decades of astounding growth, the boom has burst.
The Australian reports that too many wine grapes -- perhaps 25 per cent too many -- are being grown and there are too many small wineries competing for crowded bottleshop shelves.
The good news for consumers is that another year of bargain-priced Australian wine lies ahead. But under the cheap prices lies the pain of significant restructuring and countless broken dreams.
John Grant, the president of Constellation Wines, says there is a surplus of wine that's equivalent to one year's domestic demand.
Constellation Wines, formerly Hardy Wine Company, runs a national operation, producing about 20 per cent of Australia's wine.
"We're looking at cutting back 18 per cent, which is the equivalent of what the overall Australian wine industry needs to cut back," Grant says. "Our view is that the demand for Australian-produced wine globally is at about 1.5 million tonnes equivalent and, at the moment, supply is running clearly above that mark."
Since 2004, with the exception of the drought year 2007, production has exceeded 1.8 million tonnes, The Australian reports.
Most think this autumn will see another 1.8 million plus tonnes of wine grapes ripening on the vine.
This time last year, the forecast was for a severely drought-reduced harvest of about 1.2 million tonnes.
Hardy Wines, worried about a shortfall, underwrote growers. The water market kicked into action and growers bought irrigation water and grew 1.83 million tonnes.
Grant says they paid, on average, 46 per cent more for warm-climate grapes than they did in 2006, "and we've not been able to pass along that 46 per cent cost increase".
"In fact ... we're under increasing pressure to reduce prices in the marketplace."
Read more on The Australian online.
