AUSTRALIA'S First Families of Wine (AFFW) has called for the government to introduce key initiatives to address critical challenges facing the Australian wine sector.
Initiatives it says were “notably absent” in the 2024-25 Federal Budget.
AFFW is made up of Brown Brothers, Campbells, d’Arenberg, Henschke, Howard Park, Jim Barry Wines, Tahbilk, Taylors, Tyrrell’s Wines and Yalumba.
The group said that a combination of global wine oversupply, high interest rates, rising operational costs due to high inflation, previously imposed Chinese tariffs, environmental challenges, and a market supressed by cost-of-living pressures, both domestically and in critical export markets, have “wreaked havoc” on the industry.
Chester Osborn, chairman of AFFW, and CEO of d’Arenberg in South Australia, said the industry was currently facing a crisis.
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“Many winery owners are communicating that this period is the most challenging period they have ever faced,” said Osborn. “Even more challenging than the mid-1980s when the now infamous vine pull scheme was introduced,” Mr Osborn said.
While the AFFW welcomed the recent announcement by the Chinese government that the tariffs have been removed, the group was quick to point out that while the impact of Chinese tariffs on Australian wine has been widely reported, the problem is much larger.
“The most concerning symptom is an enormous surplus of unsold bulk red wine,” the organisation said.
AFFW also referenced Wine Australia’s figures, which report that red wine stock levels are currently at 2.77 times current annual sales forecast.
“The current surplus is about 10 times the amount of wine sold to China at its pre-covid peak.
"Furthermore, the market has changed. Wine consumption in China is estimated at about half its pre-covid levels and the absence of Australian imports has seen the void filled by other international winemakers such as South America and South Africa.
“Undercurrent conditions it will take many years to clear the industries red wine surplus.
"China will not solve the problem.
“The solution is far from simple and requires action on both the supply and the demand side of the equation.”
Robert Hill-Smith of Yalumba said he believes some tough calls need to be made.
“This current state of play is not a market cycle waiting for self-correction, it requires permanent restructuring of supply and capacity,” he said.
“To ensure long term sustainability, the sad reality is that inland and other regional red grape producing vineyards need to be removed and the industry needs to be drastically downsized by 25-30 per cent.”
AFFW is calling on the Federal Government to provide assistance in the form of supporting an “environmentally friendly” exit from the industry for grapegrowers that need it.
The group suggests this assistance could take the form of covering the cost of removal and destruction of treated pine posts, dripper tubes and wires.
AFFW suggested that “much of this could have been avoided” if government action had been taken sooner to support the industry in promoting itself internationally.
“The cost of which would be a fraction of what will be lost, but the true cost doesn’t end there,” Mr Osborn said.
“While the value of the assets would be in the billions, vineyards are not commodities.
"The real investment is the time, patience and sheer hard work that goes into developing and maintaining them, that is what the industry stands to lose.”
On the demand side, AFFW said it believes the quality and pedigree of premium Australian wine is still desirable in overseas markets but in the current climate, the costs attached to marketing and promoting internationally are a “very real barrier” for struggling wine producers.
Alistair Purbrick of Tahbilk said immediate support is required.
“While we positively acknowledge the creation of the One Grape & Wine Sector Plan, we urge AGW to now quickly create the short and medium-term strategic activity plans which are required to ensure positive financial impacts to our industry,” Mr Purbrick said.
AFFW is seeking government support in the form of grants and subsidies in order to restore and develop critical export markets, which it said will go some way towards alleviating the current over supply and lay an important foundation for future success.
In 2019, the Australian wine industry generated $45.5 billion for the Australian economy.
Much of that value is to regional employment and local economies around the nation, contributing 163,790 direct and indirect, full and part-time jobs in the same year.
