Global wine production exceeded demand by 10% in 2023, according to estimates from the International Organisation of Vine and Wine (OIV).
That has led to a worldwide wine glut, pushing down prices and threatening the livelihoods of wine producers across the globe.
Australian producers were already struggling after a diplomatic row between Canberra and Beijing wiped out the market for Australian wine in China.
It was the country’s largest export market before Beijing imposed punitive tariffs on Australian wine in 2020, destroying demand in one fell swoop.
Producers switched their focus to other markets, but declining consumption in Europe and North America has made it difficult for them to shift excess stock.
IWSR figures show that wine consumption decreased by 4.5% in the UK, 2.7% in the USA and 2% in France in 2023. Meanwhile, Australia’s domestic wine consumption also fell by 1.7%.
The latest government figures show that Australia had more than 2 billion litres of wine in storage in mid-2023. That is equivalent to approximately two years’ worth of production.
Some of the excess wine held in storage is spoiling, forcing producers to sell their stocks at sharp discounts.
Meanwhile, farmers across the country are busy destroying millions of vines, as they plan to grow other crops instead.
‘There’s only so long we can go on growing a crop and losing money on it,’ James Cremasco, a fourth-generation grower in the Riverina, told Reuters, as he watched excavators rip up vines planted by his grandfather.
He revealed that some of his red grapes sold for little more than A$100 (£52) per tonne last year. In 2020, red grapes from Riverina sold for A$659 per tonne, according to Wine Australia, but they have now fallen to just A$304 (£157) on average in the region.
At the same time, fuel and fertiliser costs are rising in a new era of high inflation, which has destabilised the wine’s delicate economic model, according to market analysts at IWSR.
Large producers such as Treasury Wine Estates are refining their strategies and focusing more on expensive wines, which are still selling well.
However, growers in vast areas like the Riverina in New South Wales, which has specialised in producing inexpensive bulk table wines, are now finding that the trade is no longer viable.
Andrew Calabria, a third-generation winemaker in the Riverina, said that it feels like the end of an era. His father, Bill, added that wineries are ‘all but giving away’ their excess stocks to make room for the next vintage. Producers in the region are planting fruit trees and nut trees where vines once grew.
Another producer, Tony Townsend, told Bloomberg that he destroyed half of his 14ha vineyard last year, despite the vines being perfectly healthy.
He estimated that he would have lost A$35,000 (£18,000) by simply harvesting them, as grape prices have collapsed.
Global wine consumption peaked at 25 billion litres in 2007, but it has been in terminal decline since then. Figures from the OIV show that it dipped below 23 billion litres in 2022, and IWSR forecasted another 1% decline in 2023.
The issue is by no means confined to Australia. California is struggling with ‘one of the worst imbalances in demand and supply we’ve seen in 30 years,’ according to the Lodi Winegrape Commission.
Meanwhile, the French government is spending €200m (£171.5m) destroying surplus wine in a bid to shore up prices and support struggling producers.
KPMG estimates that 20,000ha of vines will need to be destroyed in Australia in order to end the oversupply issues.
