There's too much wine in the world, and grape growers are going broke and pulling out vines. Wine production has now outstripped consumption with health-conscious young people hitting the bottle a lot less than their parents' generation.
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00:00 Young people are drinking less, but not just young people.
00:04 Moderation of alcohol, including wine, but other alcoholic beverages,
00:09 has been on the decline.
00:11 And that trend has been before COVID even.
00:14 So, also caused by, particularly with wine, more competition
00:20 with things like RTDs or seltzers.
00:23 We're seeing that seltzers and RTDs are more popular
00:26 with the younger generation.
00:28 But also a lot of competition from spirits.
00:30 So, things like celebrity-backed tequila brands
00:33 have also seen a lot of competition in this space.
00:37 As well as cost inflation and that cost-of-living crisis
00:40 impacting young consumers' ability to go out and spend money.
00:45 So, it's the under-30s that are the core to this.
00:48 Is it that they're perhaps more health-conscious as well?
00:51 Yeah, we're definitely seeing that young people are more health-conscious.
00:56 And that really is leading into why they're consuming things like RTDs.
01:00 Because they're being advertised as no sugar or low-calorie.
01:05 And so, they're very appealing to the younger generation
01:08 who are concerned about their health when they're drinking.
01:11 I think it would be fair to say as well that wine is an acquired taste.
01:16 I mean, anybody who drinks it when they're young
01:18 probably makes a funny face when they first taste it.
01:21 But so, it's an acquired taste.
01:22 Whereas these drinks that the younger people, the under-30s are drinking,
01:27 are very specifically targeted to their taste.
01:30 Yeah, definitely. There's lots of different varieties of wine.
01:33 And so, we are seeing differing styles changing and that demand changing.
01:37 So, the biggest producer...producing...
01:40 ..sorry, variety in Australia is Shiraz.
01:44 And that's a red wine that's a very heavy style.
01:47 But we're seeing that the popularity of Shiraz
01:50 is declining in favour of more lighter styles.
01:52 So, white wines, rosé, sparkling wine as well.
01:56 Yeah. Is it the case as well that it has become very popular
02:00 over the last decade to have boutique wineries?
02:03 You know, they have popped up all over Australia and New Zealand as well.
02:08 And actually, we're just producing too much now.
02:11 So, we do have an oversupply issue in Australia.
02:14 That's more led from the bulk wine segment.
02:17 But on the more specific, more niche category,
02:22 we are seeing that that is a more positive story.
02:25 So, yeah, they've seen some growth there.
02:28 And consumers in Australia,
02:30 the domestic consumption has remained quite stable,
02:33 accounting for lower per capita consumption but rising population.
02:38 And we should also mention as well that there was the glitch
02:41 of China not taking any wine imports for a couple of years.
02:45 So, that has affected the beers.
02:47 Yeah, that had a massive impact on Australia's exports.
02:50 They produce...
02:52 They're a major export destination for Australian wine.
02:55 In that same year that they had... that they put on the tariff,
02:59 we had our record wine-producing year.
03:02 So, it was lots of supply,
03:04 and then suddenly our biggest demand,
03:06 the big demand area, wasn't there anymore.
03:09 Is the wine industry trying to do something
03:12 about the under-30s not drinking wine?
03:15 I mean, the bottles are cool for their, you know,
03:18 bottles of vodka or bottles of alcohol pops,
03:20 but wine bottles are particular...
03:24 ..tend to be... I mean, there obviously are exceptions,
03:26 but quite straight and simple and ordinary.
03:29 Yeah, so, there's definitely more innovation in packaging.
03:32 That's one area that younger consumers
03:36 are more willing to change what they're buying from.
03:39 So, there is potential there.
03:42 But there is a lot of innovation in the category that's happening,
03:46 and that will take some time.
03:48 What sort of stories are you hearing from wine producers,
03:52 those that feel that they can't continue
03:54 and those that are literally pulling out their vines?
03:58 Yeah, we're seeing that because the wine prices and grape prices
04:01 are so low that we're going to have to see some reduction in area.
04:05 About 8% of the total vineyard area in Australia
04:09 is expected to decline in the next five years,
04:12 driven by those low prices being uncompetitive.
04:15 Yeah, right. So, the price of wine is low,
04:19 at an historic low, is it?
04:21 I mean, particularly in Australia,
04:23 I think across Europe and places like South Africa,
04:26 wines are more expensive.
04:27 Yeah, so, wine grapes are really what's driven lower.
04:31 Red wine grapes in the bulk regions
04:34 are about 54% lower than their peak in 2020.
04:38 So, quite significant cost pressure for growers,
04:42 and as well as that, more globally,
04:45 production and consumption have been out of balance
04:49 for quite some time.
04:50 So, production for the past decade
04:52 has been above consumption for the past 10 years,
04:56 and that's really significant.
04:57 So, Pia, what of the future?
04:58 Is it possible to estimate how much of our wine crop will lose?
05:03 Yeah, so, we're expecting that we'll see an 8% decline in acreage,
05:07 and then also production will decline because of that.
05:11 And a push, I guess, from the industry
05:14 for a change in people's drinking habits
05:16 to try and increase the amount of wine being drunk.
05:19 Yeah, well, there's definitely a lot of work being done
05:21 to grow export markets,
05:23 because there's a lot of other destinations
05:26 that would appreciate trying Australian wine.
05:28 Certainly is. Alright, Pia, really interesting to talk to you.
05:30 Thanks for coming in. Thank you.
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