Cellarbrations, a wine shop in the inner Sydney suburb of Newtown, sells Moët & Chandon Brut Impérial, a popular French Champagne produced by LVMH Moët Hennessy Louis Vuitton, for A$49.99 ($52.61) a bottle in six-bottle cases. Wine House, a Melbourne-based online store, is selling LVMH’s Chandon Green Point Cuvée 1995, a sparkling wine produced in Australia’s Yarra Valley, for A$52. Much to the dismay of Australia’s wine industry, its days of offering lower-priced alternatives to French vintages are fading.
With the Australian dollar at record levels against the euro, Aussie vintners are caught in a double-bind: Exports have been slammed as the cost of Australian wine has risen overseas, while oenophiles back home are embracing European bottles that suddenly are bargains. Imported wine has rarely been more affordable, with prices for some labels dropping 30 percent. “It’s absolutely fantastic,” says Jeremy Oliver, a Melbourne-based wine critic. “If you have A$100 ($105) in your pocket, that will get you a top bottle of Australian cabernet or shiraz. Today it also buys you a pretty serious Bordeaux, a very good Italian from any region, or a sensational Spanish red.”
Australia, the world’s largest wine exporter by volume outside of Europe, saw the value of its exports decline to the lowest level in a decade in 2011, falling 10 percent from a year earlier, to A$1.89 billion, according to government export agency Wine Australia. At Melbourne-based Treasury Wine Estates, the world’s second-biggest publicly traded vintner and owner of the Lindeman’s and Penfolds brands, sales in the U.S., its largest market, fell 15 percent, to A$803 million, in the year through last June. The currency hit is more pronounced in Europe, where the euro fell 8.9 percent over the past three months to make it the worst-performing major currency against the Australian dollar, com-pared with a 2.2 percent decline for the greenback.
“It’s not just the strength of the [Australian] dollar, it’s the economic climate in Europe,” says John Ellis, founder and chief winemaker of Hanging Rock Winery, who stopped sales to Europe two years ago to focus on the Asian market. “Consumers by and large have been trading down, which has left us in a noncompetitive position in Europe. We’ve basically abandoned that as a market.”
That’s quite a turnabout. Driven by signature brands such as Yellow Tail and Jacob’s Creek and support from influential critics such as Robert Parker, Australia’s exports rose more than fourfold in the 10 years to 2007, when they peaked at 786 million liters. Australia overtook France as Britain’s top supplier of imported wine in 2005 and for a brief time in 2008 was the front-runner in the U.S.
Then things turned. Competition had for years been increasing from other emerging wine areas such as Argentina, Chile, and South Africa when a domestic glut in Australia put too much low-quality product on the market. In 2009 bush fires swept through the wine country of Victoria state, incinerating vineyards and tainting grapes with smoke. Exports have dropped 11 percent in the past four years, to 703 million liters in 2011.
The high price of labor and land and the small-scale nature of middle-market wineries in Australia also make it hard to compete with imports, says Oliver. “You can get seriously interesting, diverse wines from Europe, South America, and South Africa for A$25 a blow retail,” he says. “In Australia today the small guys trying to do the equivalent are finding it very hard to get anything in the bottle for under A$45.”
Since 2007, Australia’s wine import volumes have risen 95 percent. French wine imports have risen 58 percent. Every six weeks, for instance, importer John Baker ships in a refrigerated container carrying about 10,800 bottles of French wine to his 270-square-meter (2,900-square-foot) refrigerated warehouse in the Sydney suburb of Artarmon. That’s double the import volume of five years before at his business, Bordeaux Shippers. The Aussie dollar is worth €.81 now, compared with €.54 when he started in 2003.
“I’ve been selling a 2001 vintage Château Tour du Haut Moulin, that’s a 10-year-old wine from Bordeaux, and it’s A$39 retail; that wine really should be A$80,” he says. The price of whites from Château Magneau, a winery in France’s Graves region, has fallen 30 percent over the past two years, he says.
Franck Moreau, sommelier for Sydney’s Merivale restaurant group, says imported wines now make up half its offerings, up from 30 percent. Says Moreau: “The value with the dollar is so good, and the Champagne is very good at the moment.”