Price slump hits Australian grape growers

By Boyd Champness

AFTER a decade of grape shortages and escalating export demand the wine boon appears to be over for Australias grape growers.

Prices for some red grape varieties have fallen by as much as 50% as wine companies move to take advantage of a projected oversupply.

With farmers throughout South Australia, Victoria and New South Wales converting large tracts of land – formerly used to run livestock – into vineyards, the bonanza had to come to end at some stage.

For example, the average price per tonne for Merlot last year was A$988.

But this year the Wine Grapes Marketing Board has been forced to scrap its minimum price for the first time – following pressure from wine companies.

Instead it has set an indicator price of between A$600-$900/t for Merlot. Other varieties have experienced a similar fate.

The hot, inland irrigated areas such as the Riverina and Murray Valley have been particularly hard hit.

Between 1992-97 grape prices rose almost unabated – in some cases as much as 100% – as Australia developed new markets such as the United Kingdom.

But does the latest price squeeze mean cheaper wine for Australias overseas customers such as the UK? Yes and no.

Australian Wine Export Council international manager Jonathon Scott told The Weekly Times that the industry all but vacated its position in the 3-4 segment in the UK in the early 1990s due to rising grape prices and increased demand.

“If retail price points can again be achieved within three to four Pounds, then you will see a lot more Australian wine sold,” he told the newspaper.

However, customers expecting to see the price of existing export brands fall may be disappointed.

The industry believes that dropping the price of well-known brands will damage their profile and therefore harm sales.

In addition, a lot of companies such as Orlando Wyndham, which produces the highly successful Jacobs Creek label, would not dream of dropping their prices when they are struggling to keep up with demand.

BRL Hardy operations and technical director Angus Kennedy told The Weekly Times that many companies had developed new brands two to three years ago in anticipation of lower grape prices.

Instead of dropping the prices of existing brands, it was far more likely that new, cheaper brands would be developed to sell at lower prices, he said.