The first step is admitting you have a problem. On Tuesday, that is exactly what Australian wine producers did: "It is widely acknowledged that the Australian wine industry is enduring its toughest period in two decades," read a statement by the Winemakers' Federation of Australia, Wine Grape Growers' Australia, the Australian Wine and Brandy Corp. and the Grape and Wine Research and Development Corp.
Wine producers Constellation Brands Inc. (NYSE:STZ) and Foster's Group Ltd. hardly needed to be told how bad things are. Constellation Brands said earlier in November that it was in talks with
several parties about its Aussie and U.K. operations, and it might combine
the business with local producer Australian Vintage Ltd. Foster's shopped its wine business in 2008 and in February said it would try to improve the unit while divesting some vineyards.
Part of the problem is a massive surplus. Australia produces 20 million to 40 million cases each year that it can't unload -- nearly equal to how much it sells annually to the U.K., its second-largest market -- and as a result, it has accumulated a surplus of 100 million cases. In the statement, trade groups warned that the stockpile will double in two years at current rates.
"The primary focus must be on helping businesses and regions to strategically and honestly assess their current and likely future position then make appropriate decisions," the group stated. That likely means tough decisions for underperforming vineyards and wineries. "Some may need to leave the industry; others may need to change what they produce and how they do it."
No doubt, something needs to change. -
Chris Nolter Read the trade groups' statement on Australia's wine woesRead about Foster's wine review Read Constellation Brands' Australian wine dilemma
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