The oversupply statement – firm words, no real action?

A statement to the wine industry by the Winemakers’ Federation of Australia, Wine Grape Growers’ Australia, the Australian Wine and Brandy Corporation and the Grape and Wine Research and Development Corporation

Released today: Have a read here

I’ve had only a cursory read, so can’t make any decisive comments as yet, but it did seem to be a response that was firmly worded and absolutely open about the problems the Australian wine industry is facing. The focus on uneconomical grapes and their gradings was most interesting, giving an insight perhaps into how bad the situation is.

This paragraph in particular is the most accurate description of the problems I have seen:

Globally we have been forced to trade in the low-value / low-margin market to sell excess wine, yet our costs are too high for us to be viable in that market in the long term – we cannot match the cost structures of some competitors (including a subsidised Europe) at very low price points. Just as damaging is the image being created that Australia is only a low-cost producer, making it difficult for our premium wines to gain recognition and market traction. Domestically, excess supplies have allowed supermarkets to move from customers to competitors by launching their own low-price products, without the need to invest in capital infrastructure or the long-term health of the industry.The challenge I would level at the authors of this report – the four main industry bodies – is that whilst the wording is strong and accurate, the countermeasures are far more meek, and reek of the political difficulties in getting all four bodies to agree with each other. Blood will need to be let before any results will be seen.

Still, I like this unified response indicating that our industry, so long hooked on the drunken lure of volume and market presence, has now taken the first step on the addiction recovery trail by jointly admitting that we have a problem.

Now the real work starts: recovering and totally restructuring the industry for the future.