Within the wine trade we have known for some time that there was going to be a big problem with the 2007 harvest in Australia. The main bulk wine production area has been suffering its most severe drought in living memory and even though these vineyards are irrigated, water restrictions have been put in place. Secondly, the whole area was hit by severe frosts at a crucial time in the growing cycle and this greatly reduced the potential crop. Combined with taint from bushfires, life has not been easy for Australian grape growers.
The impact of these factors have been devastating and the harvest is said to be 30% of 2006 levels. Australia produced around 1,350 million litres and this will reduce by around 400 million litres - that is a lot less wine! However, we need to put Australian production into a world context. Although approximately 25% of wine bought in UK supermarkets is Australian, in terms of total wine production Australia is only no. 6 in the world, way behind France and Italy with 5,470 million and 4,907 million litres respectively.
Secondly, Australia has been guilty of over-producing for the last few years and has had a struggle to sell everything that it has been making. There is still a lot of 2006 wine around, although the quality of it is highly variable. Still, a shortfall of this magnitude means there will be an impact across the market and there will need to be changes to address this.
For UK wine buyers, myself included, the challenge will be to maintain the quality of entry level Australian wine without disrupting the pricing too much. As I have previously discussed, Badgers Creek Red, White and Rosé are extremely popular wines within Aldi and the implications on sales if the retail price has to be increased from £3.29 could be enormous. I have, however, briefed my supplier that the priority over the coming months is to maintain quality and if we need to pay more to the growers than previous years then we must do that. As the year unfolds we will then need to make commercial decisions on pricing depending on how the market moves. It is my belief that you will see far less deep discounting from Australian brands or that they will move prices upwards and discount from a higher base. Supermarkets’ own label brands should follow this upwards trend.
Fortunately for me, I have been able to secure long-term agreements with my supplier of Bushlands Reserve Chardonnay and Bushlands Reserve Shiraz, both of which sell at £3.99. Since their launch in November 2005 these two wines have grown and grown and are my two best-selling £3.99 wines. As they are from the Hunter Valley they have not been as badly affected by the conditions as some other regions and yields have been satisfactory. I know my supplier could probably get a better price for his grapes elsewhere but we are both trying to work together to develop a stable long-term business. At this very moment this same supplier is bottling a premium estate-grown Shiraz on our behalf which should hit the shelves in early July. At £4.99 it will be our highest specification Australian wine and will further enhance ALDI’s reputation as a place to buy your wines, however much you wish to pay.
So the impact of Australia’s poor harvest will probably mean that customers will pay a little bit more for their favourite Australian wine and will need to be careful when buying deep promotions on brands they are not familiar with, as this is where the last remnants of the 2006 harvest will end up. But if you don’t want to pay any more for a bottle of good quality wine there will still be France, Italy, Spain, Chile, Argentina and South Africa to choose from.