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Cheap wine and Chinese growth: SA winemakers see threats and opportunities

Business

A shift to cheaper wine and pantry stockpiling are pushing the state’s winemakers through one of their toughest years.

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As cellar doors finally re-open this weekend, restaurants again pop corks and signs of life appear in the giant Chinese export market, industry stalwarts believe the trend is likely to reshape the way winemakers do businesses.

“March was a strong month because of the pantry buying, and April too,” says Nick Waterman, president of the South Australian Wine Industry Association.

“(But there’s been a shift to cheaper wines), one two-litre cask product – Winesmiths – saw a huge spike in sales in the short term. It was thought that was just something because of lockdown, but it’s continued.

“In May, premium wine sales just fell off a cliff. Where the real pain is going to be is in the premium end, from $20 a bottle up.”

Waterman is also Yalumba Wine Company’s managing director and is working closely with the state’s winemakers to work through the devastation wrought by COVID-19.

He tells of the Chinese market in January shutting down overnight, a market that accounts for 42 per cent or $1.2 billion a year of Australian wine exports.

“Late in December the industry started to get some inkling and by the end of January the advice from importers inside the market was that they didn’t foresee any orders,” Waterman said.

Given South Australia makes up 61 per cent of that Australian export market to China and that the shutdown happened at the most lucrative wine-selling time in Chinese New Year, the state’s industry has taken a massive hit.

Add that to bushfires, drought and cellar door closures under the state’s own COVID-19 restrictions – and it all equates to a perfect storm of lost revenue.

The association is keen to win back business.

Last week, it ran a China export webinar with the state’s Department of Trade and Industry, drawing in leading wine importers to steer its members in the right direction.

Wu Ling is head of food and beverage for China’s powerful TMall.com online retail site, backed by Alibaba, which is connected to more than 10 million merchants and two billion consumers.

She shared positive news about China’s wine market opening up again but told of changed habits during COVID-19 lockdowns where more customers are buying online but in smaller, cheaper packages.

“And as more people are buying online the one making the decision is the housewife,” she said.

Waterman acknowledged the change but warned the industry needed to hold its nerve in the China export market that has tripled in size in the past four years and was now three times larger than the United States.

It is one market where the state has managed to surge ahead with its premium wines as opposed to more traditional markets in the United Kingdom, Europe and the United States.

Now, he said, was the time to stand firm on price points. While more traditional markets are heading into recession, Waterman believes China is most likely to weather the impact of COVID-19 best.

“At the moment in China we have the highest, most premium price per litre,” he said.

“What we can’t do is panic and say the market in Australia, the UK, US and Europe has contracted, let’s go and chase China and drop our prices, we have to hold onto our position we have secured there.”

The very reason why that position has been secured – in China seeing Australia as being clean, green and safe – could only be boosted by the state’s lauded approach to managing the virus.

Waterman warned that South Australia made more money in higher-end bottles, punching above its weight in premium wine production with high numbers of more boutique operators.

But this high percentage of smaller wineries also means their owners have been hammered in lost cellar door sales.

“Reopening the cellar doors is huge it’s fair to say, of the 2,500 wineries in Australia, at least 1000 probably rely on the cellar door for the majority of their profits,” Waterman said.

“We’re talking about wineries that might produce 1000 or 5000 cases and they might be selling half that volume through the cellar door.”

Many have been relying heavily on building online relationships with customers during lockdowns to shift wine.

There have been online tastings and live chats with national or international customers – along with the association’s export webinars.

The Barossa launched Facebook live virtual happy hours with its winemakers while in McLaren Vale, fruit grower Mark “Macca” McCarthy’s created a wine and gin online series – “Bath-time Bevies with Macca”.

Despite the online efforts, this weekend’s re-opening of the state’s more than 200 cellar doors is being greeted with relief and wineries are rapidly adapting to new regulations.

Co-owner of Kimbolton Wines in Langhorne Creek Nicole Clark lists staff temperature checks, laminated wine tasting sheets for easy cleaning and gourmet toasted sandwiches and individual cheese platters to ensure no sharing of food among her changes.

“When we got the news that we could reopen, we were so excited. We’ve been itching to see some visitors again,” Clark said.

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This article is supported by the Judith Neilson Institute for Journalism and Ideas.

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