The Australian wine industry continues to adapt at a great pace. James Halliday shares his thoughts on our place in the greater wine world.
Having recently returned from China – a place I visit regularly – I am more certain than ever that Australia has found itself in an unprecedented place in the wine world. The last boom (1995-2007) saw exports hit an all-time high of 798 million litres generating $2.989 billion; the last bust (2008-2014) slashed volume to 694 million litres worth $1.808 billion. Seemingly insatiable demand for grapes saw absurd prices for Riverland chardonnay, and frenetic plantings and a sadly misplaced feeling of security. Overnight, so it seemed, shortage became surplus, and initially favourable exchange rates were shredded as the dollar reached (and for a period, exceeded) parity with the US.
The focus on volume led winemakers to reduce the cost of goods (wine and packaging) in a largely unsuccessful attempt to keep pace with falling wine prices in the UK and intense competition in the US, then our two big markets. The domestic market was left with the challenge of soaking up oversupply, giving Coles and Woolworths a golden opportunity to increase turnover exponentially and drive down retail prices – great for consumers in the short term.
But things beyond the control of the majors started to change, now (if not yet fully) at the tipping point. The old saying ‘success breeds success’ was proved once again. Winemakers began to feel good about themselves, aided by a string of good to very good vintages from 2012 to 2017 (with the exception of the low yield in 2014).
In a long discussion with Brian Croser AO, he argued that Australian wine has been way underestimated in the fine wine markets around the world. “This has had two effects,” he said. “First, we found it was very difficult to sell fine wine, so there was less volume and less value. The second was a generation of winemakers starved of funds and incentives for reinvestment in improvement of the breed, to use Len Evans' expression.
“We've got all the raw ingredients,” Brian said. “We've got great kids coming out of university, we've got wonderful vineyards, and a range of high-quality terroirs unequalled by any other country. ‘Terroir’ is now used as a word right around the industry without shame or resentment by the branded commodity producers. That's feeding back into innovation.” He concluded by saying that in another decade, he believes we will be on track to being a major competitor in fine wine with France.
Before I come to the elephant in the room, what have been the drivers of this new-found confidence? First, chardonnays of world class have been consistently made for a decade or more, prompting unstinting praise from Jancis Robinson MW (the Queen Bee of international wine writers, jancisrobinson.com) and from the hitherto caustic observer Andrew Jefford, a sublime writer (his The New France is full of unique insights).
The Len Evans Tutorial pits Australian chardonnays against the cream of White Burgundies every year in several blind tasting formats and always catches out a sommelier or two. And only a few days before writing this, I attended the annual White Burgundy tasting heroically staged every year featuring the most recent vintage of note. This year it was for the 2014s, a stellar vintage for White Burgundy, with 18 premier crus and 18 grand crus, with six Australian chardonnays like lambs for the slaughter – except they weren't, standing proud once revealed. The cost of the Burgundies ($466) is eye watering, those of Australia ($57) a pittance by comparison.
As for that elephant in the room: China. Since 2000, China has moved from being an importer of relatively small amounts of Bordeaux (improbably adding Chile to its shopping basket courtesy of an early Free Trade Agreement), to the point where China is Australia's biggest market (by value). It swept past the US in the 12 months to March this year by virtue of an incredible 43 per cent growth rate compared to 6 per cent growth by the US.
Peter Gago AC received the highest award Australia can give to its citizens in this year’s Queen's Birthday Honours, and by extension was the spearhead for China's love of Australian shiraz, and that of the Barossa Valley in particular. The award might equally have come from Treasury Wine Estates' shareholders. In fractionally more prosaic terms, Australia is in second place with 26 per cent of the market behind France with 44 per cent, Chile in third place with 9.6 per cent. Peel the layers back a little and you find that in the '16 calendar year, the French average price per litre was US $5.08 compared to Australia's US $5.45, with a growth rate of 53 per cent to France's 14 per cent, and Chile's decline of 5 per cent.
Coming back to Australia's exports (by value) for the 12 months to March this year, China imported $568m (up 43%), to US $470m (up 6%), the UK $342m (down 8%), Canada $193m (up 3%) and Hong Kong $119m (down 8%). Shiraz accounted for $539m, cabernet sauvignon $289mi and chardonnay $180m. Total exports were $2.3 billion, the volume 769 million litres.
China is still an immature market bursting with opportunities. Snippets from my recent trip included an interview with 15 Chinese wine writers (translation axiomatic, but you wonder how necessary), 14 of whom were female; the highly professional way the TopWine Trade Fair in Beijing was staged and run, putting to shame my last few encounters with the London Wine Trade Fair; the sense of genuine excitement about wine by the millennials, the increase in the number of Australian exporters at the two trade fairs, at which I gave masterclasses, compared to the decline in the number of French operated stands.
But there is so much still to be done, so many opportunities on offer. First and foremost is the white wine market. China's market is wildly skewed to red wine (88 per cent of its purchases) despite the greater suitability of white wines with many of its mainly regional cuisines, and the heat of summer in most places. Next, and each time I use this statistic, I have to double-check it: there are now more than 100 cities with a population of over one million people.
The west coast of Australia, led by Margaret River through to the Great Southern, then Blackwood Valley, Geographe, Manjimup and Pemberton are on the same time zone as Beijing, Hong Kong and Singapore. Margaret River has it all: great beaches and surfing on one hand, and Australia's best cabernets and cabernet blends on the other; Great Southern with exceptional cabernet sauvignon and shiraz. All the regions are rural, with the clear blue skies so loved by Chinese tourists.
Finally, cutting edge viticulture aided by Selectiv® harvesters are doing a better job of sorting good grapes from bad than hand picking, at a fraction of the cost. In the winery, peristaltic pumps (they can move live goldfish from A to B) and crossflow filtration are reasons why the quality of Australian wines is better than ever before.
This article first appeared in Issue 36 of Halliday Magazine.