Estimates from the International Organisation of Vine and Wine (OIV) indicate that global wine production surpassed demand by 10% in 2023.
This worldwide surplus of wine has resulted in declining prices, posing a threat to wine producers all over the world’s livelihoods.
Due to a diplomatic disagreement between Canberra and Beijing, Australian wine producers were on shaky ground, as the Chinese market for Australian wine had vanished.
Before punitive tariffs destroyed the demand, China was Australia’s biggest export market for wines in 2020.
Producers have shifted their attention to other markets, but a drop in consumption in Europe and North America has made it challenging for them to dispose of surplus inventory.
According to IWSR data, wine consumption dropped by 4.5% in the UK, 2.7% in the US, and 2% in France in 2023. At the same time, domestic wine consumption in Australia also declined by 1.7%.
The most recent official statistics reveal that Australia had over 2 billion litres of wine in storage in mid-2023. This volume is roughly equivalent to two years’ worth of wine production.
Some of the surplus wine in storage is becoming unfit for consumption, forcing manufacturers to sell their inventories at significant discounts.
Across the nation, farmers are industriously destroying millions of vines, planning to replant with different crops.
James Cremasco, from a line of four generations of Riverina growers, commented to Reuters while observing the uprooting of vines originally planted by his grandfather, “We can only sustain growing a crop while making a loss for so long.”
He went on to disclose that several of his red grape yields were sold for slightly over A$100 (£52) per tonne the previous year. Wine Australia reports that in 2020, Riverina’s red grapes sold for A$659 per tonne, but they have now plummeted to an average price of merely A$304 (£157) within the area.
Simultaneously, in the midst of a new high inflation era, fuel and fertiliser costs are escalating, unsettling the wine industry’s fragile economic structure, state IWSR market analysts.
Major producers such as Treasury Wine Estates are refining their approaches and putting more emphasis on premium wines, which continue to sell well.
Nonetheless, vintners in extensive regions like Riverina in New South Wales, known for manufacturing affordable bulk table wines, have discovered that the business is not sustainable anymore.
Says Andrew Calabria, a third-generation winemaker in Riverina, it indeed seems like the closing of a chapter. His father, Bill, stated that wineries are almost giving away their surplus stocks to make space for the upcoming vintage. In the region, producers are replacing vineyards with fruit and nut trees.
Tony Townsend, another producer, disclosed to Bloomberg that he eradicated half of his 14ha vineyard the previous year, although the grapevines were in excellent condition.
He speculated that merely harvesting them would have led to a loss of around A$35,000 (£18,000), due to the drastic drop in grape prices.
The consumption of wine around the world reached its peak at 25 billion litres in 2007, and has been on a continuous decline since. As per the data from the OIV, it fell under 23 billion litres in 2022, with the IWSR predicting a further decrease of 1% in 2023.
This problem is by no means limited to Australia. California is dealing with ‘one of the most severe demand-supply imbalances seen in 30 years,’ stated by the Lodi Winegrape Commission.
On the other hand, the French government is investing €200m (£171.5m) to destroy surplus wine, aiming to bolster prices and aid struggling producers.
KPMG estimates that 20,000ha of vines will need to be destroyed in Australia in order to end the oversupply issues.