Kym Anderson, a leading expert who met at UC Davis two weeks ago to discuss the continuing Australian wine crisis, spoke about the problems in Australia at the symposium on “Outlook and Issues for the World Wine Market” and he assessed that the “challenges” Australia faces are pretty grim: Big oversupply, falling grape prices, more and more quality grapes sold off at fire-sale prices in the bulk market (40% this year compared to 15% in the past).
The best selling white wine type in Australia is not from Australia any more — it is Marlborough Sauvignon Blanc. Even the Australians are tired of “Brand Australia” Chardonnay.
Professor Anderson looked for a light at the end of the tunnel and was able to point to some potential sources of relief: Maybe water reforms could be implemented. Maybe R&D (Research and Development) to help the industry deal with climate change would produce results. Maybe the new export strategy to promote Australia’s regional diversity and wine families would catch on. Maybe the China market will open wider and drink up the surplus.
However, when the good news is this bad, the bad news must be really bad.
Bad News, Bad News
Sure enough more bad news arrived shortly thereafter in the form of a Wine Spectator article, “Aussie Wine Company Faces Angry Creditors”, concerning the financial problems of The Grateful Palate group, which exports many hot brands to the US market including the unlikely-named Luchador Shiraz, shown in the original article.
Trouble is brewing in Australia. The Grateful Palate’s Australian affiliates, which produce wine under labels such as Bitch Grenache, Evil Cabernet Sauvignon and Marquis Philips for American importer Dan Philips, are in receivership and face the danger of possible bankruptcy. Growers and other creditors for the South Australia-based affiliates of the company received notice on June 18. Many growers, already facing tough times, worry that they will never get paid for fruit they sold Philips.
Philips, the company’s founder and owner, confirmed that he is in negotiations with his top creditor, Dutch lender Rabobank, but declined further comment. The bank initiated the action to put Grateful Palate International Pty Ltd and several related Australian companies into receivership. The most prominent is R Wines, a partnership with winemaker Chris Ringland, but 3 Rings, a joint venture involving Philips, Ringland and grower David Hickinbotham, is also part of it.
This is bad news, of course, but bad news is no longer a surprise to those of us who are following the Australian wine scene. Perhaps it is really good news of a sort — an indication that the necessary industry shakeout is gaining speed.
Darker or Brighter?
The same situation applies to the Foster’s de-merger situation. Foster’s, the Australian beer giant, bought into the wine business at the top of the market, paying an estimated USD 7 billion for an international portfolio about 50 top brands, including Penfolds, Wolf Blass and Beringer. The investment may be worth as little as USD1.5 billion in today’s market.
Foster’s beer business is an attractive target for global giants like SABMiller, but not with the wine portfolio attached. So Foster’s announced a de-merger to allow the beer group to move ahead independently of the wine group. What will happen to the wine business? Who will buy these assets in today’s depressed environment?
When this question was posed to an Australian winemaker several weeks ago the answer came back quickly: China! Everyone in Australia is paranoid about the Chinese buying up our natural resources, and so we are convinced that they will buy up Foster’s wine business, too.
Interesting idea. No multinational wine firm (Constellation Brands? Gallo?) would want to go bigger right now. But maybe a Chinese firm that wants to break into the global markets would take the bait. Might make sense. Maybe.
Source: http://wineeconomist.com/
Tags: Australia, Mike Veseth, Wine Economist
