No takers for wine? Why farmers in Australia, France are destroying vineyards

If you are a wine connoisseur, you’d think there is no such thing as too much wine. But the ground reality is far different. Turns out, the world has excess wine and farmers are destroying vineyards they have tended to for decades.

Australia is the worst hit. Its growers are destroying millions of grape veins and tens of millions more will have to be pulled out. Overproduction is a concern; it has crushed the prices of grapes and is now threatening the livelihoods of growers and winemakers. But this is not only restricted to Australia.

Australian growers are destroying vineyards

There is a fall in wine consumption worldwide. The demand is shrinking the fastest for the cheaper reds, which are Australia’s biggest products. In mid-2023, the world’s fifth largest exporter of wine had more than two billion litres, or about two years’ worth of production, in storage the most recent figures show, according to a report in Reuters.

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Some of the wine is spoiling and owners are rushing to dispose of it at any price. Others are left with no choice but the destroy the vines.

Last year, Australian grape owner Tony Townsend destroyed half his 14-hectare vineyard. The fields are healthy but he believes he would have lost about A$35,000 (Rs 19 lakh) to harvest them.

“I enjoyed being in the wine industry, but it was just economically unviable to continue this way,” Townsend was quoted as saying by Bloomberg. He lives in Riverland, a region in South Australia that produces about a third of the nation’s crush.

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A fourth-generation grower James Cremasco, who has vineyards near the southeastern town of Griffith, echoes similar views. “There’s only so long we can go on growing a crop and losing money on it,” he told Reuters, as he watched clanking yellow excavators strip out rows of vines his grandfather planted.

The decline started in 2020. A convergence of COVID-fueled cost increases and Chinese tariffs has pushed up supply and depressed prices in the country, reports Bloomberg.

About two-thirds of Australia’s wine grapes are grown in irrigated inland areas such as Griffith. But they are now struggling as the demand drops and unpicked grapes remain shrivelled on vines.

“It feels like an era is ending,” said Andrew Calabria, a third-generation vineyard owner and wine-maker at Calabria Wines. “It’s hard for growers to look out the back window and see a pile of dirt instead of vines that have been there as long as they’ve known.”

Nearby, the remains of 1.1 million vines that once comprised one of Australia’s largest vineyards are piled in heaps of gnarled and twisted wood.

Red wine hit, prices of grapes fall

Red wine has suffered the most. In regions like Griffith, prices of the grapes fell to an average of A$304 (Rs 16,647) a tonne last year, the lowest in decades and down from A$659 (Rs 36,085) in 2020, data from industry body Wine Australia show, reports Reuters.

To balance the market and lift prices, up to a quarter of the vines in areas such as Griffith must be pulled up, said Jeremy Cass, head of Riverina Winegrape Growers, a farmers’ group.

That would destroy more than 20 million vines across 12,000 hectares (30,000 acres), Reuters calculations based on Wine Australia data show, or about eight per cent of Australia’s total area under vine.

However, many growers are still reluctant to pull up vines. They are losing money but there is hope that markets will turn around.

The government has forecast lower prices again this year. It said that it recognises the significant challenges facing growers and is committed to supporting the sector, though many believe it can do more.

From California to Bordeaux: Growing troubles for farmers

However, Australia is not alone in its suffering.

California is currently experiencing “one of the worst imbalances in demand and supply we’ve seen in 30 years”, Stuart Spencer, executive director of the Lodi Winegrape Commission in the Central Valley was quoted as saying by Bloomberg.

In Spain, there is an oversupply of Rioja reds, according to Jose Luis Benitez, director-general at industry group Federacion Espanola del Vino. However, the demand for white is high, the report says.

Farmers “are going to have problems down the line in one to two years because you can’t transform reds into whites”, he told Bloomberg.

Last year, the French government announced that it would set aside €200 million (Rs 1,810 crore) to fund the destruction of surplus wine production in an attempt to support struggling producers and shore up prices. It promised to send the wine to be converted into ethanol.

Several major wine-producing regions in France, particularly the Bordeaux area, have been affected. A fall in demand for wine has led to over-production, a sharp fall in prices, and major financial difficulties for up to one in three winemakers in the Bordeaux region, according to the local farmers’ association, AFP reported last year.

Chile is also another major wine producer, struggling with oversupply.

The change in consumption habits

Health concerns are prompting consumers worldwide to drink less alcohol and when they do drink wine, they pick pricier bottles.

More people are drinking lower-alcohol sparkling, rose or white wines instead of reds, said Christophe Chateau, spokesman for the Bordeaux Wine Council. Gen Z consumers are also consuming less alcohol, fuelling a boom in non-alcoholic drinks, reports Bloomberg.

Apart from a change in consumption habits, there are other issues including the cost of living crisis in several nations and the after-effects of COVID-19.

Costs for inputs like fuel and fertiliser have gone up because of the war in Ukraine, and insurance premiums are increasing due to climate change, Richard Halstead, chief operating officer of consumer insights at alcoholic beverage research company IWSR, was quoted as saying by Bloomberg.

“The recent sharp increases in input costs have destabilised wine’s very delicate economic model,” he said.

There are also geopolitical factors at play. When China blocked imports during a political dispute in 2020, Australia lost its biggest wine export market by value. And unlike Europe, it offers farmers no financial aid to help them destroy vines and excess wine.

Even though China is expected to allow imports again this month, that will not mop up the glut, as demand there has fallen much more rapidly than elsewhere, reports Reuters.

Wine growing is an industry steeped in tradition. It’s also decades of work and hence responding to changes quickly is not an option. The grapes cannot be easily repurposed or sold.

Yet growers are trying to cope. Bill Calabria of Australia’s Calabria Wines, said that wineries were “all but giving it away” to make room for the incoming vintage.

Cremasco hopes for greater profits from the prune trees he is planting in his grubbed-up acreage, while GoFARM, a corporation, is putting in more than 600 hectares (1,500 acres) of almonds nearby, also replacing vines.

“There’ll be no next generation of family grape growers,” Cremasco added. “It’ll be all big corporates, and all the local young guys will be working for them.”

There might be fewer wine drinkers as well. With the focus on premium brands at a time when people have tight budgets, how will a new generation of wine drinkers be born?

“If there are not cheap, economic, reliable wine brands to go to, you will just leave wine and just go into ready-to-drink cocktails or beer or cheap spirit brands,” Spiros Malandrakis, industry manager of alcoholic drinks at Euromonitor International told Bloomberg.

The future of wine then looks bleak. What a downer.

With inputs from agencies