Articles / NewsRabobank
James Halliday, October 20, 2007Published Weekend Australian
Dutch-based Rabobank is the world's leading specialist in food and agribusiness banking. One of its key advisors is Arend Heijbroke, who recently made (another) two-week visit to Australia for discussions and consultations, and I took the opportunity to catch up with him.
I first broached the proposals for far-reaching changes to EU viticultural policy put on the table by then newly appointed EU Minister Marian Fischer-Boel towards the end of last year. One of the core propositions was that 400 000 hectares of vines should be removed, with areas such as the Entre-Deux-Mers region of Bordeaux and various parts of southern France obvious targets.
Predictably, the scheme met with furious opposition from grapegrowers who argued there was no oversupply of grapes, simply a lack of demand! Equally predictably, French growers were the most militant, even though Spain is the largest producer of wine fit only for distillation.
Finding a solution is complicated by the huge fragmentation of the industry, hence the lack of credible spokespersons. Moreover, any meaningful changes will cause substantial short-term pain. Such is the rock; the hard place is that the longer the dam blocks the ever-growing lake, the more catastrophic will be the consequences when (as is inevitable) the dam wall ultimately breaks.
The solution - if it can be called that - is to decouple the grapegrowing side of the industry from the winemaking side, and to subsidise the growers on a per hectare basis as is done for many agribusinesses across the EU. The wineries would be left to fend for themselves, except for one major twist to the tale.
Instead of providing funds for the removal of 400 000 hectares, only half would go, and the half of the total funds thus liberated would be spent on a major marketing blitz in the United States, Canada and Asia - but not in the EU. The irony is that both the French and Spanish governments are successfully striving to reduce the consumption of wine in their countries, while spending billions of euros to support those making it.
All this sends a big warning light to Australia. Most obviously, France is going to attack our most important markets with gusto, and - in the medium term - with better wines. But there is also an intersection with Australia's recently released 'New Directions' strategy, which calls for far greater emphasis to be placed on our higher-priced regional wines (higher than Yellowtail, Wolf Blass Red Label, etc).
Says Heijbroke, 'This is a very well researched, thought out and presented strategy, undoubtedly correct for Australia. The challenge will come in translating words into deeds; the problem is that every other major exporting country has the same aim to trade-up and secure better margins.'
He points to consumer research that shows the only Australian region to have recognition in the United States is the Barossa Valley. Not that we are alone in this. In that soul-and-money-destroying market, the UK, research quoted in Off Licence News of August 24 shows that only 66% of regular wine drinkers knew Cotes du Rhone wines were from France, and only 29% linked Chateauneuf-du-Pape with the Rhone Valley.
South Africa, says Heijbroke, has the same problems as Australia, a strong currency militating against exports, and insufficient domestic market to take up the slack. Chile, on the other hand, is a consistent supplier of mid-range wines and unlimited, high quality, water. Conch y Toro, the country's largest winemaker, is building large volume, strongly branded, products. Argentina, having recovered from its currency collapse, is rapidly increasing its exports at half the price of those of Australia.
In this crowded pool, is Asia the answer? 'Up to a year ago, the Chinese market was very opportunistic, but there are now serious traders in the market for the long term. But Japan, China and India are all very brand conscious, with an in-built bias in favour of France. The key in all three countries is the emergence of professional women and wealthy wives; they prefer the elegant alternative of wine as opposed to the masculine consumption of beer and spirits’ says Heijbroke.
China and Japan are two of Australia's most important trade partners. We have to leverage that advantage to include wine in the mix.
Dutch-based Rabobank is the world's leading specialist in food and agribusiness banking. One of its key advisors is Arend Heijbroke, who recently made (another) two-week visit to Australia for discussions and consultations, and I took the opportunity to catch up with him.
I first broached the proposals for far-reaching changes to EU viticultural policy put on the table by then newly appointed EU Minister Marian Fischer-Boel towards the end of last year. One of the core propositions was that 400 000 hectares of vines should be removed, with areas such as the Entre-Deux-Mers region of Bordeaux and various parts of southern France obvious targets.
Predictably, the scheme met with furious opposition from grapegrowers who argued there was no oversupply of grapes, simply a lack of demand! Equally predictably, French growers were the most militant, even though Spain is the largest producer of wine fit only for distillation.
Finding a solution is complicated by the huge fragmentation of the industry, hence the lack of credible spokespersons. Moreover, any meaningful changes will cause substantial short-term pain. Such is the rock; the hard place is that the longer the dam blocks the ever-growing lake, the more catastrophic will be the consequences when (as is inevitable) the dam wall ultimately breaks.
The solution - if it can be called that - is to decouple the grapegrowing side of the industry from the winemaking side, and to subsidise the growers on a per hectare basis as is done for many agribusinesses across the EU. The wineries would be left to fend for themselves, except for one major twist to the tale.
Instead of providing funds for the removal of 400 000 hectares, only half would go, and the half of the total funds thus liberated would be spent on a major marketing blitz in the United States, Canada and Asia - but not in the EU. The irony is that both the French and Spanish governments are successfully striving to reduce the consumption of wine in their countries, while spending billions of euros to support those making it.
All this sends a big warning light to Australia. Most obviously, France is going to attack our most important markets with gusto, and - in the medium term - with better wines. But there is also an intersection with Australia's recently released 'New Directions' strategy, which calls for far greater emphasis to be placed on our higher-priced regional wines (higher than Yellowtail, Wolf Blass Red Label, etc).
Says Heijbroke, 'This is a very well researched, thought out and presented strategy, undoubtedly correct for Australia. The challenge will come in translating words into deeds; the problem is that every other major exporting country has the same aim to trade-up and secure better margins.'
He points to consumer research that shows the only Australian region to have recognition in the United States is the Barossa Valley. Not that we are alone in this. In that soul-and-money-destroying market, the UK, research quoted in Off Licence News of August 24 shows that only 66% of regular wine drinkers knew Cotes du Rhone wines were from France, and only 29% linked Chateauneuf-du-Pape with the Rhone Valley.
South Africa, says Heijbroke, has the same problems as Australia, a strong currency militating against exports, and insufficient domestic market to take up the slack. Chile, on the other hand, is a consistent supplier of mid-range wines and unlimited, high quality, water. Conch y Toro, the country's largest winemaker, is building large volume, strongly branded, products. Argentina, having recovered from its currency collapse, is rapidly increasing its exports at half the price of those of Australia.
In this crowded pool, is Asia the answer? 'Up to a year ago, the Chinese market was very opportunistic, but there are now serious traders in the market for the long term. But Japan, China and India are all very brand conscious, with an in-built bias in favour of France. The key in all three countries is the emergence of professional women and wealthy wives; they prefer the elegant alternative of wine as opposed to the masculine consumption of beer and spirits’ says Heijbroke.
China and Japan are two of Australia's most important trade partners. We have to leverage that advantage to include wine in the mix.
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Wirra Wirra wines
The 2007 International Wine Challenge attracted 9358 entries from around the world, with a protracted judging process by 465 winemakers, merchants and writers from all countries (including over forty Masters of Wine). Wirra Wirra emerged as International Red Winemaker of the year, winemaker Samantha (Sam) Connew dashing from a distinguished winery in Spain (where she is doing vintage) to receive the award in front of 800 guests attending the awards dinner. The 2004 Angelus Cabernet Sauvignon (sold overseas under the cheeky name 'Dead Ringer' in the wake of objections from France's Chateau l'Angelus) received three trophies, and was the springboard for the award. It and RSW Shiraz are at the top of the McLaren Vale tree, but any wine with the Wirra Wirra label (red or white) can be relied on to over-deliver at its price. Buy a bottle of its 2007 Lost Watch Riesling ($16.50, 94 points), 2007 Hiding Champion Sauvignon Blanc ($19.99, 94 points) or 2007 Scrubby Rise Sauvignon Blanc Semillon Viognier ($15, 90 points) and you will see. Moreover, its red wines are, if anything, even better. Wirra Wirra is a prime example of the wineries that can turn new directions from aspiration to reality.
www.wirrawirra.com
Wirra Wirra wines
The 2007 International Wine Challenge attracted 9358 entries from around the world, with a protracted judging process by 465 winemakers, merchants and writers from all countries (including over forty Masters of Wine). Wirra Wirra emerged as International Red Winemaker of the year, winemaker Samantha (Sam) Connew dashing from a distinguished winery in Spain (where she is doing vintage) to receive the award in front of 800 guests attending the awards dinner. The 2004 Angelus Cabernet Sauvignon (sold overseas under the cheeky name 'Dead Ringer' in the wake of objections from France's Chateau l'Angelus) received three trophies, and was the springboard for the award. It and RSW Shiraz are at the top of the McLaren Vale tree, but any wine with the Wirra Wirra label (red or white) can be relied on to over-deliver at its price. Buy a bottle of its 2007 Lost Watch Riesling ($16.50, 94 points), 2007 Hiding Champion Sauvignon Blanc ($19.99, 94 points) or 2007 Scrubby Rise Sauvignon Blanc Semillon Viognier ($15, 90 points) and you will see. Moreover, its red wines are, if anything, even better. Wirra Wirra is a prime example of the wineries that can turn new directions from aspiration to reality.
www.wirrawirra.com
