Australia's Wine Industry in Crisis. Seriously.

By Derek Thompson

Once upon a time, when you thought Australia, you thought beer. Certainly Marge Simpson had trouble ordering something in Australia that didn't begin with B-E in this classic Simpsons clip. But today Australia is drowning under the surplus of a fruitier fermentation. Yes, Aussies are actually having a "wine crisis."

Australia has an accumulated surplus of 100 million cases of wine that will double in the next two years if current trends continue, according to the report. The annual surplus is huge - equal to all UK export sales and there is no clear prospect of finding additional demand, either domestic or foreign, to fill this gap. ...

In fact, wine exports have fallen by 8 million cases or more than 20 percent in the last two years, according to the statement, with the largest declines in the high value wines that Aussie winemakers hoped would be their future.

Inexpensive and bulk wine sales have grown, but at prices that are unsustainably low.

A part of my mind is cheekily thinking of better ledes -- "Sure brings a whole new meaning to drowning in the red" (Surplus, not deficit, but you know...); "Leave it to Australia to have an alcohol bubble"; "Something-something financial hangover something-something" -- but Australia's wine glut is a serious mess. Wine Economist says this isn't a cyclical surplus that will pass with rising global demand or a cold season. It's a deeply structural over-investment in vines that will require painful scaling back. Seventeen percent of vineyard capacity has been deemed uneconomic.

When France and Spain faced a similar crisis three years ago, they turned nearly a billion bottles into disinfectant and fuel. It is a sad today for the world when Shiraz grapevines are Australian for "oil well."

This article available online at:

http://www.theatlantic.com/business/archive/2009/11/australias-wine-industry-in-crisis-seriously/30103/