California is not the next Australia
Lots of talk over the last 48 hours about that new report out of Australia predicting a disastrous tipping point for the country’s wine industry.
Winebiz.com, an Aussie online publication, wrote about the report on Nov. 10. Among other things, the report stated bluntly that 20% of existing grapevines Down Under are “surplus,” “bailouts are not an option,” the country is producing “20–40 million cases a year more than it is selling,” and the actual “viability” of the industry is at stake. What is needed, the report concluded, is an “adjustment process” of undefined dimensions.
The next day, Paul Gregutt blogged apocalyptically about the report and, with his title “Fair Warning!”, cautioned the American wine industry that we might become “the next Australia” if we — the 50 States — refuse to “consort as a national wine industry” as opposed to acting “regionally and locally” (i.e. as individual States and regions within States).
Also yesterday, the economist Mike Veseth — whose infrequently updated blog always is worth a read — weighed in, taking a more wait-and-see attitude. “It will be interesting to see,” he wrote, “if the Australian producers are more decisive and if they can find a way to pull themselves back from the tipping point.”
The question, as I see it is, where is the American wine industry heading? Is that light up ahead the end of the tunnel, or, as in Australia, an oncoming train? To begin with, while Australia has an actual national wine industry, the U.S. does not. We have 50 statewide wine industries, and even within States, regions (i.e. AVAs) compete against one another, sub-AVAs (St. Helena, Oakville) go toe-to-toe, and then, of course, individual wineries do battle on the playing fields of the competitive market. So Paul is correct when he notes that the thousands of wineries in America do not “consort as a national wine industry.” Nor are they going to.
What might a united wine industry do anyway, even if it could figure out a way to associate? Not much more, in my view, than the fractured industry we have now. And when you think about it, that sundry wine industry hasn’t done too badly. Without focused leadership, we’ve made America a wine drinking country in a relatively short time, and made wine the alcoholic beverage of choice for aspirational adults. That’s a pretty good accomplishment.
Here in California, I’m pretty optimistic that things aren’t heading into the dumpster. I can’t prove it, but I don’t think we’re in the same dismal boat as Australia. Part of Australia’s problem was that they presented themselves to the world as cheap Shiraz, an image that worked for a time but has now come back to haunt them. And, to the extent the Aussies believe that China and other Asian markets will be their salvation, I say, Asians are as aspirational as Americans and want to be perceived as drinking good wine, not plonk. California has the advantage that — whatever you may think of its wines — the state manufactured for itself the image of prestige and high quality (thanks, in large part, to Robert Mondavi). Therefore, California wines will remain viable and, even more, desirable, both in this country and overseas, as long as individual wineries don’t price themselves out of the market. And that will not happen, I firmly predict. Prices already have fallen and are continuing to fall. The market is adjusting to new realities. I don’t know about the wine industries of Wisconsin, Alabama or Nevada, but the California wine industry — battered and weary — will emerge from this nightmare in solid shape.