Wine problems bring sour taste to Aust, growers

Press, 19 February 1986, Page 25

Wine problems bring sour taste to Aust, growers

By

KATE HANNON

NZPA-AAP correspondent Adelaide The next time you open a bottle of Australia wine, do not be surprised if it tastes of all the vitriol caused by an industry going bad. Over production, oversupply and interest rates of 20 per cent for some wineries are crippling the industry nationally and devaluing the wines, .many of which are regarded as the world’s best. Over-production of wine grapes has forced many South Australian growers to sell their excess grapes to wineries in Victoria for well below the base price of $l9O a tonne set by the South Australian Government. The national president of the Australian Grape Producers’ Association, Mr Leo Pech, believes the new pricing system introduced last year by the South Australian Government has unbalanced the whole industry. The new system requires wineries in South Australia to pay growers 25 per cent of the negotiated price for a grape variety by the tonne in four instalments during the year.

Mr Pech said some well known varieties were being sold at the base price of $l9O a tonne instead of the prices negotiated between growers and winemakers. There was a marked difference between the negotiated price and the base price, Mr Pech said. For Chardonnay grapes, one company has negotiated a price of $420 a tonne; cabernet Sauvignon have been negotiated at $350 a tonne, with Rhine Riesling at $2BO a tonne. "However, some wineries buying Eden Valley Riesling, which is the premium of the premiums, are offering $l9O a

tonne, which I think is an absolute disgrace," Mr Pech said.

In the past, Mr Pech said, wineries had paid up to $6OO a tonne for Eden Valley Riesling. “Under the former system, where prices were clearly stated on true value for the individual variety, the grower could calculate exactly how his cash flow was going to be in the future.”

However, the manager of the Australian Wine and Brandy Producers’ Federation, Mr Geoff Nettelbeck, said the problems facing the industry went much deeper than the new pricing system. Legislation introduced by successive Federal Governments since 1970 had hampered the industry’s growth and wellbeing, he said. In 1973, a concession under section 31a of the Taxation Act which provided benefits to wine companies to hold stocks of wine had been repealed. This, Mr Nettelbeck said, changed winemakers’ buying patterns for wine grape juice, causing a surplus for growers. Increases in excise on brandy and fortified wines had reduced the 80 per cent share of the. Australian wine market held by fortified wines 20 years ago to 11.8 per cent of the market in 1985. Mr Nettelbeck said the Federal Government must see the wine industry other than from the point of view of how much sales tax revenue could be gained. “It is a multiplying problem and Australia is not unlike any overseas wine producing country in which there are just too many vineyards and too many grapes at the moment,” Mr Nettelbeck said.

Tastes and preferences of wine among Australians had changed drama-

tically since 1975. In 1975, red wine sales in Australia were 37 million litres for the year, white wine sales trailing not far behind at 34 million litres.

Ten years later, red wine sales have climbed back up to 37 million litres sold last year, while 203 million litres of white wine were sold.

“The dramatic change in the taste patterns of consumers has also brought about a major change in the demand for grapes of certain varieties,” he said. “A number of factors have brought about this problem as well as the legislated prices controlling varieties of grapes in South Australia and in the Sunraysia area of New South Wales and Victoria. “Since 1970 there have been 11 or 12 official inquiries into the wine industry and they have all come out talking about the same problems but done nothing.”

Mr Nettelbeck said the local industry was finding it difficult to match competition from increasing numbers of imported wines seeking to beat the European Economic Community wine surplus. Imported bottled wines took about 17 per cent of the local market, and imported fortified wines constituted about 4 per cent of the local market. However, the industry was still buoyant. Sales of Australian wines within Australia in the 12 months to October, 1985, were $B5 million, and sales of spirits $5OO million.

“We would like an appreciation by the Federal Government of the position of the wine industry and of the grapegrowing section,” Mr Nettelbeck said.

“We would like them to understand the complexities and problems facing the industry and to, for God’s sake, leave us alone.

“It is not just a problem that has occurred in the last 12 months, it has been a creeping cancer that has come on.” Mr Nettelbeck said natural market forces unhampered by pricing legislation would be the only way to regain the balance of supply and demand of the 19605.

The industry generally was considered to be too diverse to be monitored effectively by legislation, he said.

The huge wine grape surplus in 1986 is reflected in the drop in grape prices in the Southern Vales, Barossa Valley, Clare and Langhomes Creek in South Australia of 14 per cent on 1985 prices. In the Riverland in South Australia, prices will be 11 per cent down on last year’s; those in Victoria will remain on a par with 19855. Prices in New South Wales, which are set by the Murrumbidgee Irrigation Area committee, would be about 7 per cent less this year. In South Australia, the problems were magnified with a drop in the state’s domination of Australian wine production. In the 19605, South Australia produced more than 70 per cent of Australia’s wines, but this had dropped to 57 per cent by the 1980 s. The managing director of South Australia-based Angove’s Wines’ Mr John Angove, said South Australia was gradually “exporting” the industry out of the state. “The South Australia wine grape pricing laws, which apply only to private winemakers in this state, are crippling grape production here,” Mr Angove said. His winery had considered setting up a crushing plant and chilling facility in Victoria and shipping grape juice back to South Australia to overcome the discrimination between South Australian producers and those in other states. Some wineries had already moved grape juicing to outside South Australia because of the State Government legislated pricing systems which applied to private winemakers but not to winemaking co-operatives. Recently, the giant Lindemans groups cut its activity in the Barossa Valley. The Stanley Wine Company, once of Clare north of Adelaide, has established winemaking facilities outside South Australia.

“Increasingly, major wine companies are finding sources of grape juice

and wine from outside the South Australian borders, and they are being encouraged to do so by State Government pricing policies.”

Mr Pech said most growers opposed the grape base pricing system because stocks were already very high, and lower prices would not reduce the surplus. “We have been sold out, and I believe that time will prove that this is one of the most disasterous points in the history of the industry," Mr Pech said. “The system we have had in the past that has given us stability and security has been removed." Mr Pech said he believed the oversupply and the pricing system would cost the industry more than $2O million a year nationally and it would continue to drag the industry down until a balance between supply and demand was achieved. However, Mr Angove said the pricing system was a critical problem this year but this had taken 15 years to develop. "Suddenly the day of reckoning has arrived,” Mr Angove said. Because of the more than 2200 winegrape growers in South Australia and many thousands more elsewhere in Australia Mr Pech said, at least 25 per cent of growers would have to leave the industry by 1990 before any natural balance of supply and demand could be achieved. To help towards that end, the Federal Government has set up a vine pull scheme under which growers would be offered compensation payments of up to $50,000 to pull out their vines.

However, Mr Pech said, not enough time and money had been made avbailable to allow the scheme to be a success.

"Viniculture technology is such that huge increases in production per acre can be achieved. Even if they don’t leave the industry completely, it will still be a help.” Mr Angove said that although the future of the wine grape grower was not bright, this year’s problem could only be the tip of the iceberg in an industry going sour.