A solid performance by the ‘glistening entrails’

Wine Australia recently released details of grape and wine production from the 2020 vintage. By any measure, the Riverland Wine Industry Indicators should make all Riverlanders proud.

At the turn of the century this industry was thrust into a 15-year period of oversupply. It was a result of flawed tax policy introduced to stimulate supply in the mid-nineties. It worked. Investors were beguiled into parting with spare cash to experience the ‘romance’ of owning a few hectares of Chardonnay or Shiraz. Production was lifted to crazy levels, mostly in coastal regions, well beyond the Riverland. The word ‘unsustainable’ was brushed aside. By the year 2000 there were enough vines planted to satisfy demand for decades to come. The snag was that this ‘investment incentive’ remained in place until October 2004, four years beyond its use-by date.

Close scrutiny of the data in this table reveals the negative economic impact of that flawed tax policy on this regional community. The decline in regional grape income was dramatic. Farmgate grape payments in the year 2002 totalled $255M. Eight years later it was just $75M, a decline of $180M. The 2002 income was an aberration. It was never sustainable but nor was the 2010 income. It’s a wonder any growers survived. Regrettably, we don’t have data to measure the decline in income from wine sales, but it was equally chilling. The downward pressure on Riverland wine prices, buried many producers in a decade of debt.

Snag number 2: there were no escape routes other than to ‘walk’. The only market for vineyards and wineries was the fire-sale market. The past 15 years are strewn with plenty of that evidence. The lesson for all commers, is that policy is too important to ignore. Sure, it’s dry and mostly unrewarding but leaving it for others to worry about is sloppy. Keeping a watchful eye on policy, be it tax policy, water policy, biosecurity or foreign trade policy won’t eradicate mistakes, but it will improve the probability of harm minimisation.

In coming weeks, this column will highlight more of the astonishing stories of resilience and prosperity, emerging from that era of industry wreckage.

In about 2007, a well-known industry commentator, from a nearby city, was flying out to London on his annual mid-year pilgrimage to the London Wine Show. As he peered down from the comfort of his Qantas seat, he smirked and chuckled. Soon after, he wrote in his column about how he had flown over “the glistening entrails of the Riverland wine industry”. If he is ever able to make the journey again, he may well be surprised that the slaughter-yard is once again, the wind beneath the wings of the wine industry… and his comfortable seat.

A detailed comparison with other regions is available on the Riverland Wine website.

The Riverland and South Australian Winegrape Crush survey reports are available to download on the Vinehealth Australia website.

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